UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C.  20549
                                     
                                 FORM 20-F
                      FISCAL 1997 ENDED JUNE 30, 1997
                                     
   ___
   ___  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
        THE SECURITIES EXCHANGE ACT OF 1934

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

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

                      Commission file number 0-27998
                                     
               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
          (Exact name of Registrant as specified in its charter)

                             Manitoba, Canada
              (Jurisdiction of incorporation or organization)
                                     
        251 Saulteaux Crescent, Winnipeg, Manitoba  Canada  R3J 3C7
                 (Address of principal executive offices)
                                     
     Securities to be registered pursuant to Section 12(b) of the Act:
                                   None
                                     
     Securities to be registered pursuant to Section 12(g) of the Act:
                     Common Shares, without par value
                             (Title of Class)
                                     
     Securities for which there is a reporting obligation pursuant to
     Section 15(d) of the Act:                                    None
                                     
     Indicate the number of outstanding shares of each of the issuer's
     classes of capital or common stock as of the close of the  period
     covered by the annual report.                          11,070,415
                                     
     Indicate  by check mark whether the registrant (1) has filed  all
     reports  required  to  be filed by Section 12  or  15(d)  of  the
     Securities  Exchange Act of 1934 during the preceding  12  months
     (or  for such shorter period that the registrant was required  to
     file  such  reports),  and (2) has been subject  to  such  filing
     requirements for the past ninety days.           Yes xxx   No ___
                                     
     Indicate  by  check  mark  which  financial  statement  item  the
     registrant has elected to follow:       Item 17 XXX   Item 18 ___

                               Page 1 of 99
<PAGE>
<TABLE>
                       Index to Exhibits on Page 77
               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
                             TABLE OF CONTENTS
<S>       <C>                                              <C>        
                                                           Page
Item 1.   Description of Business.........................    3
Item 2.   Description of Property.........................   25
Item 3.   Legal Proceedings...............................   28
Item 4.   Control of Registrant...........................   29
Item 5.   Nature of Trading Market........................   31
Item 6.   Exchange Controls and Other Limitation
          Affecting Security Holders......................   33
Item 7.   Taxation........................................   34
Item 8.   Selected Financial Data.........................   42
Item 9.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations...   44
Item 10.  Directors and Officers of the Registrant........   62
Item 11.  Compensation of Directors and Officers..........   64
Item 12.  Options to Purchase Securities from Registrant
          or Subsidiaries.................................   66
Item 13.  Interest of Management in Certain Transactions..   70

                            PART II
Item 14.  Description of Securities to be Registered......   72

                           PART III
Item 15.  Defaults Upon Senior Securities.................   75
Item 16.  Changes in Securities and Changes in Security
          for Registered Securities.......................   75

                            PART IV
Item 17.  Financial Statements............................   75
Item 18.  Financial Statements
Item 19.  Financial Statements and Exhibits...............   76
</TABLE>
<PAGE>
                                  PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Introduction
The  Company is an automated medical products manufacturer, whose principal
business  is  the assembly and packaging of disposable kits and  trays  for
medical  and  surgical  procedures, such  as  patient  care  trays,  custom
procedure  kits, diagnostic trays and homecare kits.  Through  two  of  its
subsidiaries,  National Care Products Ltd. ("NCP") and National  Healthcare
Manufacturing  Corporation, U.S. ("NHMC US"), the Company is also  involved
in  manufacturing liquid products for use in the Company's kits and  trays,
and for distribution to healthcare institutions throughout North America.

The  Company's  head office and manufacturing facility is located  at:  251
Saulteaux Crescent, Winnipeg, Manitoba, Canada  R3J 3C7.

The  contact  person  is  Mahmood  (Mac)  Shahsavar,  President,  CEO,  and
Director.  The telephone number is (204) 885-5555; and the facsimile number
is (204) 885-5588.

The  Company  maintains  an  administrative and investor  relations  office
located at:
409 Granville Street, Suite #1455, Vancouver, British Columbia, Canada  V6C
1T2.   The  contact  person  is  Morteza  Seyed  Torabian,  Executive  Vice
President  and Director.  The telephone number is (604) 689-8581;  and  the
facsimile number is (604) 689-8337.

The  Company  has an unlimited number of Class A common shares without  par
value  authorized; and as of 6/30/97, the end of the Company's most  recent
fiscal  year,  there  were  11,070,415 common shares  outstanding.   As  of
11/30/97, there were 12,474,331 common shares outstanding.

Effective  May  15,  1995, the Company's common  shares  were  split  on  a
571.4286:1 basis.  All discussion in this Annual Report refer to post-split
stock unless otherwise indicated.

The  Company's  consolidated financial statements are  stated  in  Canadian
Dollars  (CDN$)  and  are  prepared in accordance with  Canadian  Generally
Accepted  Accounting Principles (GAAP), the application of  which,  in  the
case  of  the  Company, conforms in all material respects for  the  periods
presented  with  US  GAAP  except as noted in footnotes  to  the  financial
statements.

Herein, all references to "$" and "CDN$" refer to Canadian Dollars and  all
references to "US$" refer to United States Dollars.

The  information  in this Annual Report is current as of  11/30/97,  unless
otherwise indicated.
The  Company was incorporated on August 23, 1993 under The Corporations Act
(Manitoba)  by registration of its Articles of Incorporation.  The  Company
was  extra-provincially registered in the Province of British  Columbia  on
December 9, 1994.

<PAGE>

The Company is a reporting Company in the Provinces of British Columbia and
Manitoba.  The Company's common shares have been listed for trading on  the
senior  board of the Vancouver Stock Exchange since January 15, 1996  under
the  trading symbol "NHM".  The common shares have also been quoted on  the
Small  Capital  Market  of the National Association of  Securities  Dealers
Automated  Quotation  system ("NASDAQ") since August  14,  1996  under  the
symbol "NHMCF".

The  Company  owns  100% of the issued and outstanding shares  of  National
Healthcare  Manufacturing Corporation, U.S. ("NHMC US"), a private  company
incorporated  on  October  25,  1994 under the  Business  Corporations  Act
(Delaware).   NHMC  US  was established for the purpose  of  entering  into
certain  lease  arrangements  (see  ITEM  #1,  "Business  of  the  Company,
Operations,  Equipment")  and to carry on the  medical  products  packaging
operations  of the Company in the USA. (see ITEM #1, "Business of  Company,
Operations, General").

The  Company  owns 100% of the issued and outstanding shares of  Associated
Healthcare  Sales  Ltd.  ("AH Sales"), a private  company  incorporated  on
October 4, 1994 under The Corporations Act (Manitoba).  AH Sales is a  non-
operating subsidiary of the Company.

The Company owns 100% of the issued and outstanding shares of National Care
Products Ltd. ("NCP"), a private company incorporated on May 6, 1996  under
The  Corporations  Act  (Manitoba).  NCP operates the  business  previously
operated by Arjo Canada Inc. as its Liquid Division (see ITEM #1, "Business
of  the  Company,  Acquisitions and Dispositions, Liquid Division  of  Arjo
Canada Inc.").

The  Company  owns  50%  of  the issued and outstanding  voting  shares  of
National Healthcare Logistics, LLC, a Limited Liability Company ("NHLC"), a
private  company  incorporated on March 26, 1997 under the  Nevada  Limited
Liability Company Act.  The remaining 50% of NHLC's voting shares is  owned
by  Joe Smith and Duane Jorgenson, each as to 25%.  NHLC was established to
offer   material  management  and  alternative  distribution  channels   to
integrated hospital groups in the USA.
Initial Public Offering
The  Company's initial public offering on the Vancouver Stock Exchange  was
pursuant  to  a  prospectus with an effective date  of  11/30/95,  only  to
investors  in  the  Canadian provinces of British  Columbia  and  Manitoba,
issuing   1,150,000  common  shares,  raising  $2,070,000  (after   agent's
commissions).

Private Placements
In  July  1996,  the  Company completed the private  placement  of  905,000
  Special  Warrants  at $3.00 per Special  Warrant.  Each  Special  Warrant
entitled the holder to receive, without additional cost or action, a common
share and a share purchase warrant.  The Special Warrants were converted on
8/1/97.

In  January 1997, the Company completed the private placement of  1,600,000
Special  Warrants  at  $6.00  per Special Warrant.   Each  Special  Warrant
entitled the holder, without additional cost or action, a common share  and
one  share  purchase warrant entitling the holder to purchase at  $7.00  an
additional common share.  91,000 Special Warrants were converted on 8/5/97.
The  remaining  Special Warrants are expected to be converted  in  December
1997.

<PAGE>

In  October  1997, the Company issued Convertible Notes in  the  amount  of
US$5,000,000.  The Convertible Notes bear cumulative dividends at the  rate
of 6% per year, payable in cash or in common shares.  The Convertible Notes
entitle  the  holders  to acquire, without additional payment,  Convertible
Debentures  in  the aggregate amount of US$5,000,000 and  an  aggregate  of
250,000  CN  Warrants.   The Convertible Debentures  are  convertible  into
common  shares at a conversion price equal to the lower of (a)  US$2.33  or
(b)  85%  of the closing price of the Company's common shares on NASDAQ  on
the conversion date.
In  this Annual Report, unless otherwise specified, all dollar amounts  are
expressed  in Canadian Dollars (CDN$).  The Government of Canada permits  a
floating  exchange  rate  to determine the value  of  the  Canadian  Dollar
against the US Dollar (US$).

Table No. 1 sets forth the rate of exchange for the Canadian Dollar at  the
end  of  each  of  the five most recent fiscal years ended June  30th,  the
average  rates for the year, and the range of high and low rates  for  each
year.

For purposes of this table, the rate of exchange means the noon buying rate
in New York City for cable transfers in foreign currencies as certified for
customs  purposes by the Federal Reserve Bank of New York.  The table  sets
forth the number of Canadian Dollars required under that formula to buy one
U.S.  Dollar.  The average rate means the average of the exchange rates  on
the last day of each month during the period.

                                Table No. 1
                  U.S. Dollar/Canadian Dollar

                                 Average    High     Low    Close
Fiscal Year Ended 6/30/97           1.37    1.40     1.33    1.38
Fiscal Year Ended 6/30/96           1.36    1.38     1.33    1.36
Fiscal Year Ended 6/30/95           1.38    1.42     1.34    1.37
Fiscal Year Ended 6/30/94           1.34    1.40     1.28    1.38

The current rate of exchange was 1.44 on November 30, 1997.
BUSINESS OF THE COMPANY

Description of Business and General Development
The  Company is an automated medical products manufacturer, whose principal
business  is  the assembly and packaging of disposable kits and  trays  for
medical  and  surgical  procedures, such  as  patient  care  trays,  custom
procedure  kits,  diagnostic trays and homecare kits  (see  the  subheading
"Products").  The market for the Company's products is comprised  of  users
of  medical  and  surgical  device products such as  hospitals,  outpatient
surgery  centres,  dental and medical clinics, retirement  homes,  homecare
providers  and multi-level care facilities.  The Company has  marketed  its
kit  and  tray  products to various healthcare facilities throughout  North
America,  through  an independent sales team and independent  distributors.
(See the subheading "Market and Competition".)

Prior  to  the  use of custom procedure kits, a healthcare  facility  would
order from a number of sources and maintain a substantial inventory of each
individual  sterile  product  used  in the  procedures  performed  at  that
facility.  Each surgical procedure would require a lengthy set-up  time  in
which  all  products required for the surgical procedure would be  manually
selected  and organized by hospital staff.  In addition to placing  demands
on  hospital  personnel,  this procedure had  a  greater  risk  of  product
contamination  and  waste.  Custom procedure kits increase  efficiency  and
productivity  by  consolidating  the products  used  in  a  given  surgical
procedure into a single package.  Pre-assembled kits eliminate the  opening
of  many  different packages of sterile materials and reduce  the  risk  of
contamination.   They  also  reduce the demand on  hospital  personnel  and
facilities  associated  with  the ordering and  maintaining  of  inventory.
Custom  procedure kits are particularly beneficial to facilities that  have
limited  storage  space  and  limited  investment  in  infrastructure   and
personnel.   The  use  of  custom procedure kits  also  allows  for  easier
identification of costs associated with specific procedures.

<PAGE>

The  Company has acquired the Liquid Division of Arjo Canada Inc.  ("Arjo")
which manufactures liquid medical products, such as disinfectants, shampoos
and  skin creams, to the Company's range of products (see "Business of  the
Company  -  Acquisitions and Dispositions - Liquid Division of Arjo  Canada
Inc.")   The  Company has also acquired the on-going business  and  certain
assets  of  Huntington Laboratories Gam-Med Division, Inc.  which  packages
antimicrobial  products  in patented disposable plastic  dispensers.   (See
ITEM   #1,   "Business  of  the  Company,  Acquisitions  and  Dispositions,
Huntington Laboratories Gam-Med Division, Inc.").

The  Company  received final approval in September 1997 for its acquisition
of  the exclusive right for Mertex and Mertex-Plus.  These technologically-
advanced  fabrics  are  used to manufacture re-usable  surgical  gowns  and
drapes   and  provide  protection  against  bodily  fluids  and   bacterial
contamination  within an operating room environment.  Having  received  FDA
and ISO clearances, these fabrics are endorsed and are currently being used
in a number of hospitals in North America and Europe.

Althin  Medical A.B. of Sweden and Mediset GMBH of Germany have  also  been
appointed  for  sales  and  marketing of  these  unique  gowns  and  drapes
throughout Germany and Scandinavian countries.

National  Healthcare Logistics, LLC, a Limited Liability  Company  ("NHLC")
was created in April 1997 by the Company as an equal partner with two well-
respected U.S. authorities in materials management and medical distribution
systems.  The Company owns 150 Class A voting shares of NHLC purchased at a
price  of US$1.00 each and 750 Class C preferred non-voting shares of  NHLC
purchased  at a price of US$1,500 each.  The Company intends to  contribute
additional share capital to purchase a further 750 Class C preferred shares
of  NHLC.   NHLC  is  in the service business managing the  purchasing  and
distribution activities for multiple numbers of hospitals utilizing a  "hub
and  spoke" distribution system.  The hub and spoke distribution system  is
the  start  of the art in supply chain management for integrating  hospital
systems.   This concept has been developed by Duane Jorgenson, one  of  the
principals  of  NHLC,  who  is  a  highly regarded  authority  in  material
management  logistics.  Mr. Jorgenson has also developed and implemented  a
number  of  stockless inventory systems for hospitals throughout  the  USA.
The  formation  of NHLC provides the Company with an entry to "alternative"
distribution  channels,  a fast growing segment  of  the  medical  products
distribution   market.   This  directly  benefits  the  Company   and   its
subsidiaries  by  providing them with an excellent  opportunity  to  market
their  products  directly  to  end user hospitals  through  hub  and  spoke
distribution systems managed by NHLC.  In August 1997, NHLC entered into  a
10-year agreement with Sysco Corporation, through which NHLC will bring  in
supply management contracts for various integrated hospital systems,  based
on  hub  and  spoke distribution, while Sysco Corporation will provide  the
capital for setting up the hubs and provide inventory and distribution.

The  Company  markets  all  its  products  to  hospitals,  long  term  care
facilities   and   homecare   providers  in  Canada   through   independent
distributors.  The Company uses an independent sales team and its  interest
in  NHLC  to market its products in the United States and Europe.   Through
its   50%  interest  in  the  recently-founded  NHLC,  a  medical  products
purchasing  and  distribution company, the Company is further  establishing
its  U.S.  market presence.  Also, as part of its marketing  strategy,  the
Company  intends  to  introduce  the "NCP"  (standing  for  "National  Care
Products") brand name.

<PAGE>

The  Company has signed a definite agreement to purchase 100% of privately-
held  Medi  Guard Inc., one of Canada's leading manufacturers of  celluose-
based  disposable protective products for medical use.  Completion of  this
acquisition is subject to Vancouver Stock Exchange approval.

The  Company was inactive from incorporation until June 1994 when it  began
raising  capital  for  the  acquisition and modification  of  its  Winnipeg
facility for the packaging of medical supplies for the healthcare industry.
To date, the Company has accomplished the following:

    in  October  1994, secured in excess of $10 million in lease  financing
     for  three robotic multi-component packaging assembly lines (see  ITEM
     #1, "Business of the Company, Operations, Equipment");

    in  November  and December 1994 entered into agreements with  both  the
     Government  of  Manitoba  and  Government  of  Canada  for   financial
     assistance of up to $4,611,852 (certain conditions apply, see ITEM #9,
     "Management's  Discussion  and Analysis  of  Financial  Condition  and
     Results of Operations");

    in  December  1994,  acquired a 71,000 square foot manufacturing  plant
     sited on approximately 3.396 acres of land (the "Property") located in
     Winnipeg, Manitoba (see ITEM #1, "Management's Discussion and Analysis
     of  Financial  Condition and Results of Operations,  Acquisitions  and
     Dispositions, Property");

    modified  the  Winnipeg  manufacturing plant and upgraded  its  utility
     systems to meet production requirements;

    purchased  the  necessary machinery and warehousing equipment  to  meet
     operation  requirements  (see  ITEM  #1,  "Business  of  the  Company,
     Operations, Production Line Assembly Equipment");

    in  May  1995,  acquired  the  exclusive North  American  and  European
     licenses  to  use certain robotic technology to assemble, package  and
     market  trays, packs and custom procedure kits in the Continental  USA
     and  Canada  (see  ITEM #9, "Management's Discussion and  Analysis  of
     Financial  Condition  and  Results  of  Operations,  Acquisitions  and
     Dispositions, Robotic Technology License Agreement");

    in  July 1995 officially opened its Winnipeg manufacturing facility and
     in  September  1995  shipped its first order of  kits  and  trays  for
     sterilization.

    obtained  a listing as a 'senior board company' on the Vancouver  Stock
     Exchange on January 15, 1996;

    obtained U.S. Food and Drug Administration ("FDA") designation  of  the
     Company's  Winnipeg  manufacturing facility as a 'Class  10,000  clean
     room'  (see  ITEM #1, "Business of the Company, Operations, Regulatory
     Process");

    obtained  registration  in  the USA with the  Securities  and  Exchange
     Commission under Section 12g of the 1934 Act;

    in  August  1996,  commenced trading on the NASDAQ  Small  Cap  Market,
     under symbol NHMCF;

    in  September  1996,  completed an upgrade  to  its  robotic  packaging
     technology  and developed new feeder assemblies for the  placement  of
     various medical tray and kit components;

    in  September  1996, acquired the Liquid Division of Arjo  Canada  Inc.
     (see  ITEM  #9,  Management's Discussion  and  Analysis  of  Financial
     Condition  and  Results of Operations, Acquisitions and  Dispositions,
     Liquid Division of Arjo Canada Inc.");

<PAGE>

    in   January  1997,  completed  the  Special  Warrant  ("SW")   Private
     Placement;

    in  February 1997, acquired the on-going business and certain assets of
     Huntington  Laboratories Gam-Med Division, Inc.,  including  a  15,253
     square foot manufacturing facility located in Antioch, Illinois,  USA.
     (see  ITEM  #9,  Management's Discussion  and  Analysis  of  Financial
     Condition  and  Results of Operations, Acquisitions and  Dispositions,
     Huntington Laboratories Gam-Med Division, Inc.");

    in  March  1997, co-founded NHLC, a private Nevada company  established
     to  manage  the  purchasing  and  distribution  of  medical  products,
     including those of the Company, to hospital groups in the USA;

    in  August 1997, through its 50% interest in NHLC, entered into  a  10-
     year agreement with Sysco Corporation to provide material distribution
     to  integrated hospital systems (see ITEM #9, Management's  Discussion
     and  Analysis  of  Financial  Condition  and  Results  of  Operations,
     Acquisitions and Dispositions, National Healthcare Logistics, LLC";

    in  September 1997, completed the acquisition of certain textile rights
     from  Importex (see ITEM #9, Management's Discussion and  Analysis  of
     Financial  Condition  and  Results  of  Operations,  Acquisitions  and
     Dispositions, Textile Rights, Importex Corporation"); and

    in   October  1997,  completed  the  Convertible  Note  ("CN")  Private
     Placement.

    in  November  1997,  signed  definite agreement  to  purchase  100%  of
     privately-held  Medi Guard Inc., a leading Canadian  manufacuturer  of
     cellulose based disposable protective products.
Products

The  Company's business consists of the assembly and packaging  of  sterile
and  non-sterile  ready-to-use  custom procedure  trays,  packs  and  kits,
containing  mostly  disposable medical/surgical  products,  for  hospitals,
outpatient  surgery centres, dental and medical clinics, retirement  homes,
homecare  providers and multi-level care facilities.  The Company  produces
medical and surgical products under its own brand name.

The  Company's product line is comprised of several hundred items,  ranging
in  price  from $1.00 to $1,900 based on the complexity of each item.   The
Company's production cost is estimated as follows:


                                   Patient Care  Custom Proced
                                   Trays         ure Trays
Direct Cost (labour and             55% to 68%    40% to 55%
materials)
Indirect Cost (indirect labour,     12% to 15%    12% to 15%
manufacturing supervision, etc.)


To date, the Company's products include the following:

       patient care trays
       custom procedure kits
       medical, speciality and diagnostic trays
       wound care kits and mother/baby kits
       NCP liquid products
       surgical textiles
       antimicrobial products

<PAGE>

Patient Care Trays
Sterile   patient   care  trays  include  those  for   dressings,   urinary
catheterization, irrigation, and suture removal.  Non-sterile patient  care
trays   include  those  for  mouth  care,  shave  preparation   and   enema
administration.

Custom Procedure Kits
All of the Company's custom procedure kits (which include orthopaedic kits,
eye  packs, laparoscopy kits, anthroscopy kits and cardiovascular kits) are
sterile.  The main custom procedure products have been developed.  A custom
procedure kit is a single tray/package containing a procedure-ready set  of
customer  specified disposable supplies in a pre-determined  configuration.
Typically, the product is aseptically wrapped, sterilized and delivered  to
the  customer  as needed.  The custom kits are designed to meet  individual
customer  specifications.  Contents may be as simple  as  a  double-wrapped
bowl,  pitcher and cup with lid to a complex tray of items for  open  heart
surgery,  including a bulky collection of towels, gowns  and  drapes.   The
majority  of the items included in the custom kits are disposable.   As  an
example, a typical custom kit for a cataract procedure would include all of
the following items:

* Latex Gloves            * Mayo Stand Cover  * Table Cover
* Med Cup                 * Suture Bag        * Syringe 3cc L/L
* Saline                  * Wrap 23" x 24"    * Tray
* Cotton Tip Applicator   * Eye Pad           * Sponge 3" x 3"
* Sponge 8" x 4"          * Incise Drape      * Wrap 54" x 54"
* Eye Spears


Medical, Specialty and Diagnostic Trays
Medical,  specialty and diagnostic trays cover such procedures as  regional
anaesthesia,  lumbar puncture and myelogram.  This product  line  is  still
under development.

Wound Care Kits and Mother/Baby Kits
The  Company has introduced two other product lines, namely the wound  care
kits  and  mother/baby kits, for the homecare market.  The Company  is  not
aware  of  any  current  competition  existing  for  these  products.   The
mother/baby  kits each contain four days of supplies commonly  required  by
mothers  and  newborns  upon their discharge from  hospital  following  the
infant's birth.

NCP Liquid Products
Pursuant  to the Arjo Agreement (see ITEM #9, "Management's Discussion  and
Analysis of Financial Condition and Results of Operations, Acquisitions and
Dispositions,  Liquid Division of Arjo Canada Inc."), the  following  lists
the private label products (the "NCP Products") for which formulae has been
transferred by Arjo to NCP:

Mouthwash/Mouthrinse               Shampoo and Body Wash
Hair Conditioner                   High Powered Cleanaway
Whirlclean                         Vita Health Vitamin E Cream
Hand and Body Lotion               Tub Cleansers
All Purpose Disinfectant           Medicated and Non-Medicated Skin Creams
Antiseptic Liquid Hand Soaps       Scrubs and Preps


<APGE>

Surgical Textiles
Pursuant  to the Importex Assignment (see ITEM #9, "Management's Discussion
and Analysis of Financial Condition and Results of Operations, Acquisitions
and   Dispositions,  Importex  Corpora-tion"),  the  Company  acquired  the
exclusive  rights to distribute and sell Mertex and Mertex Plus  protective
textiles.  These state-of-the-art textiles are used to manufacture reusable
surgical  gowns  and drapes.  Mertex and Mertex Plus offer  technologically
advanced protection from bodily fluids and bacterial contamination.  With a
life  expectancy  of  80 uses, these fabrics are not only  economical,  but
reduce medical waste.

Antimicrobial Products
Pursuant  to  the Gam-Med Agreement (see ITEM #9, "Management's  Discussion
and Analysis of Financial Condition and Results of Operations, Acquisitions
and  Dispositions,  Huntington Laboratories Gam-Med Division,  Inc."),  the
Company's  subsidiary has agreed to purchase Ecolab iodine products,  which
will be sold by the Company both separately and as part of a kit/tray.


Proprietary Protection
Neither  the Company nor Excelco has made application for patent protection
relating to the Robotic Technology.

The  Arjo  Agreement transferred any outstanding service marks, trademarks,
trade  names  and  copyrights provided to NCP solely  for  the  purpose  of
manufacturing  and  distributing of products for the  authorized  person(s)
selling those products.

The  Gam-Med Agreement transferred all proprietary patents relating to  the
fusion moulding process technology acquired by NHMC US thereunder.

The  Importex  Agreement  gives the Company exclusive  North  American  and
European marketing rights for Mertex and Mertex Plus for five years.
Market and Competition
The  statistical  information provided throughout  this  section  has  been
sourced   from   reports  and  public  offering  disclosure  published   by
competitors  believed  by Management of the Company to  be  accurate,  from
common  and  general  industry knowledge, and knowledge  of  the  Company's
executive   obtained  through  experience  in  the  industry  and   related
activities.

The Market

Kits and Trays Market
The  Company  has entered the procedure tray segment of the medical  device
market.   This segment is comprised of patient care trays, custom procedure
kits  and  diagnostic trays.  The Company's management  estimates  that  in
North  America,  the  market for patient care trays is  approximately  $1.3
billion  annually and growing at a minimum rate of 5% per year,  while  the
market for custom procedure kits and diagnostic trays is approximately $1.8
billion annually and growing at a minimum of 10% per year.  The market  for
such products in Europe and elsewhere cannot presently be determined.

The  market for the Company's procedure tray products is comprised of users
of  medical  and  surgical  device products such as  hospitals,  outpatient
surgery  centres,  dental and medical clinics, retirement  homes,  homecare
providers  and multi-level care facilities.  The Company has  marketed  its
procedure  tray products to various healthcare facilities throughout  North
America, through independent distributors, and sales to date have been made
in  Canada  and  Asia.   Although the Company does not  intend  to  provide
exclusive distribution rights to its procedure tray products to any  party,
the Company's marketing efforts to date have resulted in alliances with the
following Canadian distributors to cover the Provinces noted:

<PAGE>

  Medical Mart Supplies Limited        - Quebec and Ontario
  Cascade Dismed                       - Quebec and Ontario
  Stevens and Sons                     - Western Canada and Ontario
  Associated Healthcare Systems Inc.   - British Columbia and Alberta
  Can-Med Surgical Supplies Limited    - Nova Scotia and Newfoundland

No formal written agreements have been entered into between the Company and
any  of  the  above  distributors, all of which are  arms'  length  to  the
Company.

The  United  States and Europe are the Company's other primary targets  for
all  its  products.  The Company is permitted by the FDA to market all  its
current  patient  care trays and custom procedure kits  in  the  USA.   The
Company's  sales  and marketing efforts have resulted  in  establishing  an
independent  national sales team in the USA; the Company also  signed  with
two  European distributors, Althin Medical A.B. of Sweden and Mediset  GMBH
of  Germany.  The Company has also co-founded NHLC which offers and manages
alternative material distribution channels to integrated hospital  systems.
In  August 1997, NHLC signed a 10-year agreement with Sysco Corporation  to
provide  material  management distribution systems to hospitals  throughout
the USA.

Liquid Products Market
NCP  products  currently compete in the $450 million  consumable  chemicals
segment  of the $2.1 billion healthcare infection control market  in  North
America.   NCP's  current product mix is focused  on  the  long  term  care
segment,  with  secondary  applications in  hospitals.   NCP  products  are
currently  supplied  through  Arjo  Industries.   The  Company  is  seeking
regional and national distributors to facilitate access to all segments  of
the North American market.


Competition

Kits and Trays Competition
The  Canadian  market  for kits and trays is dominated  by  two  companies,
Baxter Canada Inc. and Ingram & Bell Inc.  Baxter International Corporation
("Baxter") of Deerfield, Illinois, has more than 50% of the tray market  in
both  the  USA and Canada in all market sub-segments.  Baxter is positioned
as  the leading manufacturer and marketer of products and services used  in
healthcare  settings.  Ingram & Bell Inc. ("I & B"), a  subsidiary  of  MDS
Health   Group   Ltd.,  is  the  leading  Canadian  owned  distributor   of
medical/surgical  supplies and equipment.  I & B only participates  in  the
Canadian market.  In June 1997, the parent companies of Baxter and  I  &  B
merged  to  form  a  new company, Source Medical, to service  the  Canadian
market.

    Patient Care Trays
     Baxter  supplies 50% of the $50 million market in Canada by  importing
     trays that are private branded for them by a contract manufacturer.  I
     & B controls 30% of the market via their own manufacturing facility in
     Canada.  The balance of the market is very fragmented with five or six
     small  players.  This market has achieved a substantial conversion  to
     single  use  product in hospitals but continues to grow at  a  minimum
     rate of 5% per year due to market expansion in other areas.

    Custom Procedure Trays
     I  & B has a minor position in this segment in Canada.  This market is
     served  by U.S. manufacturers exporting product and serving the market
     by  a  direct sales force or via select distributors.  In addition  to
     Baxter  Custom Sterile, a division of Baxter, the major providers  are
     Maxxim  and  Deroyal.   This market is in its infancy  in  Canada  and
     growing at a minimum rate of 20% per year.  This market represents  an
     opportunity area for the Company.

<PAGE>

    Medical Specialty and Diagnostic Trays
     I  & B and Preferred Medical Products of Thorald, Ontario, are the two
     Canadian  manufacturers of these products.  I & B supplies  their  own
     requirements  for  the  Canadian market.  Preferred  Medical  Products
     markets   their   product  directly  in  Canada  and   via   specialty
     distributors  in  the U.S.  The other entrants are Baxter  and  Portex
     (the  trademark for Smith Industries Medical Systems),  both  of  whom
     have   major  market  shares  in  Canada  and  the  U.S.   There   are
     manufacturers  that  supply  only the U.S.  market,  such  as  Kendall
     Healthcare Products Co.

     This  segment  represents an area of innovation  and  relatively  high
     profit  potential for the Company.  The complexity of the product  and
     the  direct  decision  making process by the  end  user  removes  this
     product segment from the commodity area.  While price is important  in
     the  buying  process, innovation, product design and personal  rapport
     are the key factors for success.

Liquid Products Competition

    Skincare Products
     The major competitors in this segment are Sween, Calgon and Huntington
     Laboratories.   Skincare products are Sween's  primary  market  focus,
     whereas Calgon and Huntington access this segment as add on sales from
     their handwashing customers.

    Bathing Products
     Competition consists of Sween and Calgon, as well as companies such as
     Chester Labs and Amada.

    Antimicrobial Handwashing Products
     Calgon and Huntington Laboratories are the current market leaders.

    Surgical Scrub Products
     This  is  a  highly fragmented component of the overall  market,  with
     Purdue  Fredrick, Becton-Dickenson, Baxter Healthcare, and  Huntington
     Laboratories being the key competitors.

Pricing Policy
It  is  the Company's policy to price its products at a slight discount  to
market.

Competitive Environment
Consolidation of the kit and tray industry has been occurring for the  past
few years as distributors divest of manufacturing subsidiaries in order  to
return  to  their  core business and manufacturers acquire  small  regional
competitors to realize the benefits of increased economics of scale.   This
is  evidenced  by the actions of several competitors in the industry:   the
merger  of the parent companies of Baxter and I & B; the sale by Owens  and
Minor  of  its unprofitable tray business to Sterile Concepts in 1990;  the
sale by Johnson & Johnson of Sterile Design to Maxxim Medical Inc. in 1993;
the  purchase by Isolyser of MedSurg; the desire by I & B to divest of  its
manufacturing facilities in Canada; and the purchase by Maxxim  of  Sterile
Concepts.

The following table indicates the current North American market share (with
respect to the kit and tray product segments in which the Company competes)
estimated by the Company to be held by certain competitors:

<PAGE>

                          Market Share
 Name of Competitor
                              U.S.                 Canada
Baxter                         44%                    0%
Maxxim Medical                 23%                    4%
Deroyal                        10%                   10%
Source Medical                 --                    80%
Others*                        23%                    6%
Total                         100%                  100%

*    Smaller  manufacturing  competitors include the  Company,  C.R.  Bard,
     Seamles, Cypress Medical Products and Trinity Laboratories.

The  foregoing estimates are based upon the knowledge and experience within
the kit and tray industry possessed by management of the Company.
Key Success Factors

Low Cost Producers
Price  competition  increases the importance of reducing production  costs.
The Company intends to become the low cost producer of procedure trays with
its  automated  assembly line, allowing the Company  to  establish  a  cost
advantage over its U.S. competitors.  In addition, a Canadian manufacturing
facility  should reduce transportation and holding costs relative  to  U.S.
competitors.

Access to Distribution Networks
In  attempting  to  achieve  efficient distribution  of  product,  existing
competitors   have  shown  their  commitment  to  developing  sophisticated
material  handling  systems for their customers to  achieve  this  goal  by
introducing Just-In-Time ("JIT") inventory and practices.

The  Company intends to access customers, through independent distributors,
in  a  quick  and efficient manner in order to pass the benefits  of  lower
production   costs  on  to  the  consumer.   (See  ITEM  #9,  "Management's
Discussion  and Analysis of Financial Condition and Results of  Operations,
Acquisitions  and Dispositions", for information relating to the  Company's
recent acquisitions.)

Customer Service
A  high  commitment to service and a fast response to consumer demands  are
critical  to  success  in this market.  The Company's automated  production
allows  it  to achieve a timely product turnaround (from order to shipment)
in  45  days, as opposed to the industry standard which management believes
is 90 days.

Reference  should  be made to ITEM #1, "Business of the Company,  Products"
for   additional  information  concerning  the  pricing  of  the  Company's
products.   In addition, reference should be made to disclosure under  ITEM
#1,   "Business  of  the  Company,  Description  of  Business  and  General
Development" with respect to the Company's marketing plan.


Marketing Plans and Strategies
Management  believes  that the healthcare industry is currently  undergoing
significant  transformations  driven  not  by  legislation,  but  by  major
purchasers  of  healthcare.  One important element of this  reform  is  the
continuous  effort  on  the  part  of healthcare  providers  to  streamline
routines   and  maximize  efficiencies  by  eliminating  labour   intensive
processes  and  reducing procedural costs without negative  impact  on  the
outcome of those procedures.

<PAGE>

The  Company's approach to serving the healthcare industry is to  introduce
cost  effective  systems.   New  and progressive  concepts  for  healthcare
industry  supply  and  distribution will be continuously  explored  by  the
Company  in order to assist end users in reducing and having better control
over  their  costs.  Although the Company expects to expand its  growth  in
Canada, its primary focus will be to the U.S. market where it believes that
the  low  Canadian  dollar, low production cost and  quick  purchase  order
turnaround  will enable it to enter into strategic business alliances  with
established North American marketing and distribution companies such as the
distribution  agreement  entered into August 1997 between  NHLC  and  Sysco
Corporation.

Since the initial public offering, the Company has added the following  key
individuals to assist with its sales and marketing program:
  Gordon John Farrimond - VP, Sales and Marketing, and Director;
  Nancy Clark           - Vice President Operations; and
  John Stone            - VP, Mertex and Mertex-Plus Surgical Division.

Recent  acquisitions have resulted in synergistic opportunities  for  sales
and marketing and have provided distribution channels to a broader and more
established market.

The  Company advertises in trade magazines and has attended numerous  trade
and  investment  shows throughout North America.  Since the initial  public
offering, the Company has expended over $500,000 on administration costs to
cover  the Company's marketing program.  The Company anticipates that  over
the  next 12 months, over $1,000,000 will be required to meet the costs  of
its  marketing  program  which  is designed to  meet  its  stated  business
objectives, the major components of which are as follows:

          Marketing Component           Monthly Cost
          Advertising                   $ 10,000
          Brochures and Promotional        5,000
          Conferences                      2,000
          Samples                          3,000
          Salaries and Consultants        70,000
          Tradeshows                       2,000
          Total                        $  92,000
Risk Factors

Investment  in  the  Company's  common shares  must  be  considered  highly
speculative  due  to the nature of the Issuer's business  and  its  present
stage of development.  Specific risk factors to be considered include,  but
are not limited to, the following:

(1) The  market  for  the  Company's products  is  highly  competitive  and
    subject  to increasing competition based on price.  The Company  has  a
    limited  operating history and existing competitors  may  have  greater
    financial  and  managerial  resources,  operating  histories  and  name
    recognition.  There is no assurance that the Company will  be  able  to
    adapt  to  evolving  markets and technologies,  develop  new  products,
    achieve  and maintain technological advances or maintain a unit selling
    price competitive with other products.  (See ITEM #1, "Business of  the
    Company, Market and Competition".)

(2) The Company's operations currently rely upon the two computerized form-
    fill  seal  units and two robotic units for the assembly and  packaging
    of its product.

<PAGE>

(3) Receipt  of  the  balance of the government financial  assistance,  and
    repayment  of  the  total  amounts received,  as  disclosed  under  the
    heading  ITEM  #9, "Management's Discussion and Analysis  of  Financial
    Condition   and  Results  of  Operations",  are  subject   to   certain
    conditions.

(4) The  Company  is subject to government regulations in the jurisdictions
    in   which  it  distributes  its  products.   Future  changes  in  such
    regulations  may  have  an  adverse impact on  the  operations  of  the
    Company.

(6) Neither  the  Company nor Excelco has filed an application  for  patent
    protection relating to the Robotic Technology.

(7) The  Company  is dependent upon the personal efforts and commitment  of
    its  management  team.   The  loss of senior management  personnel  may
    adversely affect the Company.

(8) The  Company's  business may be affected by other  factors  beyond  its
    control,  such  as  economic  recessions and  adverse  fluctuations  in
    foreign exchange rates.

(9) The  Company has not paid dividends in the past and does not anticipate
    paying  dividends in the near future.  The MG Agreement  and  the  WEDD
    Agreement  place  certain restrictions on the payment of  dividends  by
    the  Company.  (See ITEM #9, "Management's Discussion and  Analysis  of
    Financial Condition and Results of Operations".)

(10)Certain  of the Company's directors and officers may serve as directors
    or  officers of, or have shareholdings in, other companies and, to  the
    extent  that  such  other  companies  may  compete  with  the  Company,
    conflicts  of interests may arise which may be harmful to the interests
    of  the  Company.   (See ITEM #13, "Interest of Management  in  Certain
    Transactions".)

(11)The  Company's  business  utilizes  a  new  technology  that  is  being
    developed for the purpose of the Company's business.  Accordingly,  the
    Company  is  subject  to  risks  associated  with  start-up  companies,
    including  start-up  losses,  uncertainty  of  revenues,  markets   and
    profitability  and the necessity of additional funding.   In  addition,
    the  technology  acquired by the Company and  being  developed  by  the
    Company  has  not  yet been proven in a production  environment  on  an
    ongoing basis.

(12)The  evolving  nature of the healthcare industry in  North  America  in
    terms  of  cost containment is leading to changing purchasing practices
    amongst  purchasers at various institutions.  This change in purchasing
    environment (i.e. towards a more centralized buying approach)  may  put
    additional  pressure  on the Company to compete on  a  price  basis  in
    order  to  achieve  adequate market penetration and  maintain  customer
    loyalty.  There can be no assurances that the Company will be  able  to
    implement its business strategy with its current pricing structure.
Plan of Operations

Sources of Funds
At  6/30/97,  the  Company  had working capital  of  $5,456,000,  including
$4,213,255 in cash and equivalents.

The Company received the final advance on the MG Loan of $561,000 in August
1997;  and received an additional advance from WEDD of $150,655 in  October
1997.

<PAGE>

In  addition, in October 1997, the Company issued Convertible Notes in  the
amount of US$5,000,000.  The Convertible Notes bear cumulative dividends at
the  rate  of  6%  per  year, payable in cash or  in  common  shares.   The
Convertible  Notes  entitle  the  holders to  acquire,  without  additional
payment, Convertible Debentures in the aggregate amount of US$5,000,000 and
an  aggregate  of  250,000  CN  Warrants.  The Convertible  Debentures  are
convertible into common shares at a conversion price equal to the lower  of
(a)  US$2.33 or (b) 85% of the closing price of the Company's common shares
on NASDAQ on the conversion date.

Each  CN Warrant is exercisable for two years (until 10/1/99), and entitles
the  holder to purchase one common share at US$4.76 per share in the  first
year  and  at  US$5.20 per share during the second year.   A  holder  of  a
Convertible Debenture has the right to convert same at any time during  the
Debenture  Conversion Period, commencing the earlier of: (a)  December  30,
1997  or  (b)  the later of the effective date of a Registration  Statement
filed  with  the US Securities and Exchange Commission under the  1933  Act
regarding  the  Convertible Notes or the date on  which  the  last  of  the
receipts for a prospectus filed with British Columbia Securities Commission
regarding  registration of the Convertible Debentures and CN Warrants,  and
maturing on October 2, 1998.

The  Company has 1,267,154 stock options outstanding entitling the  holders
to  acquire  additional shares at prices ranging from $2.00  to  $6.13  per
share.   The  Company  has  1,076,000 share purchase  warrants  outstanding
entitling  the holder to acquire additional shares at prices  ranging  from
$3.50 to $7.94 per share.

In addition, in January 1997, the Company issued 1,600,000 Special Warrants
at  $6.00  each.   Each  Special Warrant entitles the  holder  to  acquire,
without  additional  payment, one SW Unit.  Each SW Unit  consists  of  one
common  share and one share purchase warrant which entitles the  holder  to
purchase  one additional common share at $7.00 until 1/9/98.  1,509,000  of
these Special Warrants remain outstanding.

The  Company  believes that it has sufficient working capital   to  sustain
operations  through  Fiscal 1998.  The Company anticipates  profitable  and
self-sustaining operations to be achieved by the end of Fiscal 1998.

Uses of Funds
While  the  Company generated $4.9 million in revenue from sales in  Fiscal
1997,  net losses of $4.2 million were still reported.  During Fiscal 1998,
the Company anticipates generating about $26 million in revenue and a small
profit.

The  Company expenses research/development costs in the period incurred and
anticipates about $300,000 of such expenses during Fiscal 1998.

In  addition,  the  Company anticipates capital  expenditure  of  about  $4
million, including the Medi Guard Inc. acquisition.

Finally, the Company anticipates utilizing about $3 million to reduce long-
term debt and capital leases.

Anticipated Changes to Facilities/Employees
The Company anticipates acquiring material facilities during Fiscal 1998 to
facilitate  manufacturing and marketing growth.   The  Company  anticipates
staffing at the Vancouver, British Columbia office will remain the same  in
Fiscal  1998.  Staffing at the Winnipeg, Manitoba head office/manufacturing
facility  is anticipated to increase modestly from 84 employees at 6/30/97.
Staffing   at  the  Antioch,  Illinois,  USA,  manufacturing  facility   is
anticipated  to  increase modestly from 20 employees at 6/30/97.   Recently
acquired, Medi Guard Inc. has thirty employees.

<PAGE>

Research and Development Activities
During   Fiscal  1995, the Company expended approximately $1.4  million  on
research  and development efforts, primarily to develop and fine  tune  its
robotic  manufacturing/packaging  technology.   During  Fiscal  1996,   the
Company  expended approximately $0.5 million on such efforts, primarily  to
develop  a  second generation of its technology, with new feeders  for  its
robots to handle various components for new products.  During Fiscal  1997,
the  Company expended approximately $0.4 million on such efforts, primarily
to fine tune its robotic manufacturing/packaging technology.  During Fiscal
1998,  the  Company expected to expend approximately $0.3 million  on  such
efforts,  primarily  to  generate  fourth generation  technology  aimed  at
further automation of the manufacturing facility.


USA vs. Foreign Sales/Assets
During Fiscal 1995, the Company generated no revenue.

During  Fiscal 1996, the Company generated $171,217 of its revenue  through
sales in Canada and $384,888 in the United States.

During Fiscal 1997, the Company generated $2,423,366 of its revenue through
sales in Canada and $2,482,035 in the United States.

At  6/30/96  and  6/30/97,  all assets were  located  in  Canada  with  the
exception  of $1.1 million located in Antioch, Illinois, representing  NHMC
Gam-Med  Division US and $2.3 located in California representing laboratory
equipment.


Employees
At   11/30/97,   the  Company operated with  the/services   of   its  eight
 Directors,  eleven Executive Officers (six  of  whom  are Directors),  and
ninety-three  (93)  additional employees.  In addition,  recently  acquired
Medi  Guard  Inc. has thirty employees.  There is no collective  bargaining
agreement in place.
ITEM 2.  DESCRIPTION OF PROPERTY

General
The  Company  owns a 71,000 square foot manufacturing plant, located  on  a
3.396  acre  fully  developed  site at 251  Saulteaux  Crescent,  Winnipeg,
Manitoba.  This facility is located in the Murray Industrial Park, close to
the  Winnipeg  International Airport.  At the Winnipeg facility,  kits  and
trays are assembled, and liquid products are formulated and produced.

Where  necessary,  sterilization of the Company's  kits  and  trays  occurs
following   assembly   of   the  components  in  the   Winnipeg   facility.
Sterilization of the Company's kits and trays is provided under contract by
various  companies  at  arms'-length to  the  Company.   The  sterilization
process currently utilizes technology associated with ethylene oxide gas.

The Company also owns a 15,253 square foot manufacturing plant, located  on
a  9.568  acre fully developed site at 712 Anita Street, Antioch, Illinois.
Using a proprietary plastic fusion molding process, NHMC US custom packages
a  wide  variety of antimicrobial solutions in patented disposable  plastic
dispensers.

The  Company  has  obtained general liability insurance in  the  amount  of
$5,000,000.   While the Company believes that its insurance provisions  are
adequate  for  its operations, there can be no assurance that the  coverage
maintained by the Company will be sufficient to cover any future claims  or
will continue to be available in adequate amounts or at a reasonable cost.

<PAGE>

Regulatory Process
All  phases  of the Company's manufacturing, sterilization and distribution
process in Canada are governed by the Food and Drug Act, R.S., c.F-27,  s.1
(the  "CFDA").  The class of medical devices forming part of the  Company's
products   sold  in  Canada  requires  the  filing  of  a  medical   device
notification form with the Bureau of Radiation and Medical Devices,  Device
Evaluation  Division (the "Bureau"), within 10 days of the first  completed
sale  of  the device.  The purpose of this filing is to inform  the  Bureau
that  the  Company is marketing a product which conforms with the  Bureau's
requirements.  To date, all requisite filings have been made by the Company
under the CFDA.

In  addition, the export of certain products of the Company from Canada  is
subject to further regulation.

Distribution of the Company's products in the U.S. is subject to  FDA  Good
Manufacturing Practices Regulations ("GMPR") CFR 801 and CFR 820.  The main
elements of the GMPR cover quality assurance systems, building environment,
equipment and calibration thereof, components and raw materials, labelling,
packaging,   distribution,   quality  control  testing,   quality   control
documentation and product failure complaints.  In the U.S., medical  device
manufacturers  and  importers are required to file premarket  notifications
under s. 510(k) of the Federal Food, Drug and Cosmetic Act for each type of
device  with the FDA.  As a general practice, for each new device that  the
Company develops, the Company files a premarket notification with the  FDA.
Effective  May  20,  1997, the FDA established Interim Regulatory  Guidance
("IRG") exempting pre-market notification for packs and trays.  As a result
of  the IRG, the Company is allowed to market all of its current packs  and
trays in the U.S.

The  Company's Winnipeg manufacturing facility has been designated  by  the
FDA  as  a  'Class 10,000 clean room'.  Clean room classification specifies
concentration  limits  for  airborne particles within  the  confines  of  a
designated  space;  the lower the classification number,  the  cleaner  the
environment.   Class 100,000 is the minimum requirement for  the  Company's
type of operation.  The Company's Class 10,000 clean room designation means
its Winnipeg facility is 10 times cleaner than the minimum requirement.

Suppliers
There  exist approximately 400 to 500 suppliers from which the Company  may
purchase the components for its kits and trays.  The Company purchases such
components  from numerous North American suppliers based upon an evaluation
with  emphasis  on  quality and pricing.  Major product  purchases  of  the
Company   include  procedural  hospital  tray  components   and   packaging
materials.  The Company also relies on supplies from its own subsidiaries.

Equipment
The  Company  has  purchased  most  of its automated  insertion  equipment,
together  with two fully computerized Tiromat 3000 Form-Fill-Seal packaging
units (the "Tiromats").  The Company utilizes this equipment together  with
two  leased  robotic units to assemble and package patient care  trays  and
procedural kits.  The Tiromats form trays, seal packages, and print barcode
and product/customer related information.  The robotic units pick and place
the  tray  components.   The first robotic unit  has  been  utilized  since
commencement  of  production  in July 1995; the  second  robotic  unit  was
installed in July 1997 and will be operational in Fiscal 1998.  The cost of
leasing  the  robotic units is covered under the existing Lease  Agreements
(referred to below).

<PAGE>

As  at  September 30, 1997, the Company has spent $962,942 to  install  and
upgrade its robotic units.  The Company is in the process of finalizing its
fourth generation robotic packaging units.  These additional units will  be
used  to  package operating room packs.  The Company has allocated $250,000
from  the  current Funds Available towards the upgrade and installation  of
its fourth generation robotic units.


The  Company leases specialized equipment (the "Equipment"), including  the
robotic  packaging  units,  under three capital leases  (collectively,  the
"Lease Agreements") from arms'-length parties, D & T Leasing, Inc. and D  &
T   Leasing  Limited  Partnership  (jointly,  the  "Lessors").   The  Lease
Agreements have been entered into by NHMC US, which was established for the
specific  purpose of entering into the Lease Agreements on  behalf  of  its
parent  company,  the  Company.   The  Lease  Agreements  provide  for  the
following  payments  by  NHMC US over the next five  fiscal  years  of  the
Company (converted from U.S. to Canadian dollars using the exchange rate as
at June 30, 1997):
<TABLE>
<S>                    <C>            <C>            <C>        <C>
                           Lease         Lease        Lease       Total
                       NHM#1094-001   NHM#1094-002   NHM#1194
1998                      $1,131,226    $  619,818    $675,705  $2,426,749
1999                       1,131,226       619,818     619,400   2,370,444
2000                       1,131,226       619,818         nil   1,751,044
2001                       1,131,226       619,818         nil   1,751,044
2002                         377,077       309,909         nil     686,986
Total Minimum              4,901,981     2,789,181   1,295,105   8,986,267
Payments                                                                  
Less Interest              1,055,670       619,705      87,355   1,762,730
approximating 10.4%
to 11.5%
                           3,846,311     2,169,476   1,207,750   7,223,537
Less Current Portion         726,397       390,484     601,671   1,718,552
Balance of Obligation     $3,119,914    $1,778,992  $  606,079  $5,504,985
</TABLE>
Upon  expiration  of the initial terms of the Lease Agreements,  the  Lease
Agreements will automatically renew for successive three month terms unless
either  party  gives notice to the contrary.  NHMC US  has  the  option  to
purchase the equipment leased under Leases NHM#1094-001 and NHM#1094-002 at
the expiry of their respective terms by paying the fair market value of the
equipment.   NHMC  US also has the option to purchase the equipment  leased
under  Lease  NHM#1194 at the expiry of the term by paying the fair  market
value of the equipment, which has been agreed to be nominal.

As  the  owner  of the Robotic Technology incorporated into the  Equipment,
Excelco  has  the right, pursuant to an agreement, dated October  26,  1994
(the  "Guarantee Agreement") with the Lessor, to acquire the leased robotic
packaging unit for $100 if NHMC US does not exercise its option to  acquire
the same upon expiration of Lease NHM#1094-001.

Reference  is  made  to ITEM #9, Management's Discussion  and  Analysis  of
Financial   Condition   and   Results  of  Operations,   Acquisitions   and
Dispositions,   Robotic   Technology  License   Agreement"   for   specific
information  relating  to  the  grant by Excelco  to  the  Company  of  the
exclusive  right  to  assemble, package and market  custom  procedure  tray
packaging in North America using Excelco's Robotic Technology.

ITEM 3.  LEGAL PROCEEDINGS

Equipment Lease Dispute
Since  Fiscal 1995, the Company was in dispute with the original lessor  in
respect of capital leases 1094-001, 1094-002 and 1194.  The lessor did  not
recognize  the  validity of a settlement agreement signed in  Fiscal  1995.
The  Company believed that it had strong arguments to support the  validity
of  the  settlement  agreement.   As a result,  the  Company  made  certain
adjustments in 1995 to the various equipment under capital leases  and  the
lease obligations based on the then interpretation of the settlement terms.

<PAGE>

During  Fiscal  1997, the dispute was finally settled and the  leases  were
assumed  by  a  new lessor.  The terms were similar to the 1995  settlement
agreement except for the following:
a)  the refundable deposit on equipment paid by the Company was
    applied against the lease liability by the lessor; and
b)  the implicit interest rate of the capital lease obligations
    was reduced as a result of the settlement.

Accordingly, the capital lease obligations, the respective equipment  under
capital  leases  and  the  refundable deposit on  equipment  were  adjusted
accordingly.


Other  than disclosed above, the Company knows of no  material, active   or
pending legal proceedings against them; nor  is  the Company  involved as a
plaintiff in any material proceeding  or pending litigation.

Other   than  disclosed above, the Company knows of no active   or  pending
 proceedings  against  anyone  that  might   materially adversely affect an
interest of the Company.
ITEM 4.  CONTROL OF REGISTRANT

The  Registrant  is a publicly-owned Canadian corporation,  the  shares  of
which  are  owned  by Canadian residents, US  residents, and  residents  of
other  countries.  The Registrant is not controlled directly or  indirectly
by  another  corporation  or any foreign government,  except  as  disclosed
below.

Table  No.  2  lists  as of 11/30/97, all persons/companies  known  to  the
Registrant to be the beneficial owner of more than ten percent (10%) of the
outstanding common shares of the Registrant.
<TABLE>
                                Table No. 2
                             10% Shareholders
<S>                                   <C>                 <C>
Title                                 Amount and Nature   Percent
  of                                      of Beneficial        of
Class   Name of Beneficial Owner              Ownership   Class #
Common  Janice Shahsavar (1)                  4,491,805     36.1%
        Total                                 4,491,805     36.1%
</TABLE>
   120,000 shares are escrowed where release is controlled by
             Canadian regulatory authorities; refer to ITEM #14,
             "Escrowed Performance Shares".
     100,000 represent currently exercisable stock options.
   4,271,805 shares are held indirectly through Excelco, a private
             company controlled by Ms. Shahsavar.
   1,071,100 shares held by Mahmood (Mac) Shahsavar excluded.

  #  Based on 12,474,331 shares outstanding as of 11/30/97.
Table  No.  3  lists  as  of  11/30/97,  all  Directors  and  Officers  who
beneficially own the Registrant's voting securities and the amount  of  the
Registrant's  voting  securities  owned  by  the  Directors  and  Executive
Officers as a group.

<PAGE>
<TABLE>
                                Table No. 3
                  Shareholdings of Directors and Officers
<S>                                   <C>                 <C>
Title                                 Amount and Nature   Percent
  of                                      of Beneficial        of
Class   Name of Beneficial Owner              Ownership   Class #
Common  Janice Shahsavar (1)                  4,491,805     36.0%
Common  Mahmood (Mac) Shahsavar (2)           1,071,100      8.3%
Common  Morteza Seyed Torabian (3)              675,874      5.3%
Common  Alice Elaine Affleck (4)                290,600      2.3%
Common  Aristotle (Telly) John Mercury (5)      175,498      1.4%
Common  Robert Alexander Jackson (6)             81,400      0.7%
Common  Gordon John Farrimond (7)                57,900      0.5%
Common  Reginald Adrian Ebbeling (8)             32,000      0.3%
Common  Ross Scavuzzo (9)                        20,000      0.2%
Common  Darrell Wayne Van Dyke (9)               20,000      0.2%
Common  Richard J. Johnson (10)                  19,250      0.1%
Common  John Ryrie Stone (11)                    27,000      0.2%
Common  Nancy Clark (12)                         17,000      0.1%
Total Directors/Officers                      6,979,427     55.6%
</TABLE>

(1)  120,000 shares are escrowed where release is controlled by Canadian
     regulatory  authorities;  refer  to ITEM  #14,  "Escrowed  Performance
     Shares".
     100,000  represent  currently exercisable  stock  options.   4,271,805
     shares
     are held indirectly through Excelco, a private company controlled   by
     Ms.
     Shahsavar.    1,063,600   shares  held  by  Mahmood  (Mac)   Shahsavar
     excluded.
(2)  690,000 shares are escrowed where release is controlled by Canadian
     regulatory  authorities;  refer  to ITEM  #14,  "Escrowed  Performance
     Shares".
     370,000 represent currently  exercisable stock options.  Excludes
     4,491,805 shares held directly/indirectly by Janice Shahsavar.
(3)  120,000 shares are escrowed where release is controlled by Canadian
     regulatory authorities; refer to ITEM #14, "Escrowed Performance
     Shares".
     210,779 represent currently exercisable stock options.  17,000
     represent
     currently exercisable Special Warrants which are held indirectly
     through
     Paymon Trading, a private company controlled by the Torabian family.
(4)  80,000 shares are escrowed where release is controlled by Canadian
     regulatory authorities; refer to ITEM #14, "Escrowed Performance
     Shares".
     75,000 represent currently exercisable stock options.
(5)  30,000 represent currently exercisable stock options.
(6)  50,000 shares are escrowed where release is controlled by Canadian
     regulatory authorities; refer to ITEM #14, "Escrowed Performance
Shares".
     28,500 represent currently exercisable stock options.
(7)  47,500 represent currently exercisable stock options.
(8)  17,000 represent currently exercisable stock options.
(9)  20,000 represent currently exercisable stock options.
(10) 19,250 represent currently exercisable stock options.
(11) 10,000 represent currently exercisable stock options.
(12) 17,000 represent currently exercisable Special Warrants.

<PAGE>

 #   Based on 12,474,331 common shares outstanding as of 11/30/97 and stock
     options/Special Warrants held by each beneficial owner which are
     exercisable within 60 days.

ITEM 5.  NATURE OF TRADING MARKET

The  Company's  common shares trade on the Senior Board  of  the  Vancouver
Stock  Exchange in Vancouver, British Columbia, Canada, having the  trading
symbol  "NHM" and CUSIP# 635902-10-9.  The common shares were posted/called
for trading on 1/15/96.

The  Company's common shares trade on the NASDAQ Small Cap Stock Market  in
the  United States, having the trading symbol "NHMCF".  Trading  on  NASDAQ
was initiated on 8/14/96.

Table  No.  4  lists the trading activity on the Vancouver  Stock  Exchange
during  the  last six fiscal quarters.  The closing price on  11/30/97  was
CDN$4.20.
<TABLE>
                                Table No. 4
                 Vancouver Stock Exchange Trading Activity
<S>                            <C>           <C>   <C>     <C>
                                               Canadian Dollars__
Fiscal Quarter Ended              Volume     High    Low    Close
June 30, 1997                    589,772    $7.75  $5.50    $7.25
March 31, 19976                  500,399     8.00   6.00     7.00
December 31, 1996              1,805,605     8.00   3.80     7.00
September 30, 1996               598,152     4.85   3.80     4.15

June 30, 1996                    931,720    $4.46  $2.66    $4.30
March 31, 1996                 1,669,783     3.15   2.00     2.75
</TABLE>

Table  No.  5  lists  the trading activity on the NASDAQ  Small  Cap  Stock
Exchange  during  the  last four fiscal quarters.   The  closing  price  on
11/30/97 was US$2.89.

<TABLE>
                                Table No. 5
                 Vancouver Stock Exchange Trading Activity
<S>                            <C>          <C>    <C>      <C>           
                                            _____US Dollars______
Fiscal Quarter Ended              Volume     High    Low    Close
June 30, 1997                  1,177,701    $5.94  $3.88    $5.38
March 31, 1997                 1,236,000     6.00   4.25     5.09
December 31, 1996              2,973,400     6.62   2.75     5.25
September 30, 1996                95,000     3.62   2.75     3.06
</TABLE>

The  Company's  common  shares  are issued  in  registered  form.   Pacific
Corporate Trust Company (located in Vancouver, British Columbia, Canada) is
the registrar and transfer agent for the common shares.

On  10/15/97, the shareholders' list for the Company's common shares showed
126  registered  shareholders and 12,474,331 shares  outstanding.    40  of
these registered shareholders were U.S. residents, holding 2,751,695 shares
or 22% of the issued stock.

The  Company  has researched indirect holdings registered  to  the  various
depository  institutions and stockbrokerage firms and estimates that  there
were  3300  "holders of record" resident in the United States  holding  the
above referenced 2,751,695 shares.

<PAGE>
Based on the above research and other research, the Company estimates  that
there are in excess of 4300 beneficial shareholders.

The  Company's  common shares are not registered to trade  in   the  United
States  in  the  form  of American Depository Receipts (ADR's)  or  similar
certificates.

The Company has not declared any dividends since incorporation and does not
anticipate  that  it  will do so in the foreseeable  future.   The  present
policy  of  the  Company  is  to retain future  earnings  for  use  in  its
operations and the expansion of its business.

Pursuant  to  the  MG Agreement the Company is restricted from  paying  any
dividends for the first three years after the advance of funds under the MG
Agreement (until October  1998).

In   addition,   the  WEDD Agreement prohibits  the  Company   from  paying
  dividends  without the prior written  approval  of  the FGWEDD until  the
WEDD loan is repaid in full.
ITEM 6.  EXCHANGE CONTROLS AND OTHER LIMITATIONS
         AFFECTING SECURITY HOLDERS

The   Investment  Canada  Act  (the  "ICA"),  which  became   effective  on
6/30/85,   regulates  the acquisition  by  non-Canadians  of control  of  a
Canadian  business enterprise.  In effect, the  ICA required    review   by
Investment  Canada,  the  agency   which administers the ICA, and  approval
by  the Canadian government in the case of an acquisition of control  of  a
Canadian  business  by  a non-Canadian (other than a  "NAFTA  investor"  as
defined  in  the ICA)  where:  (i)  in the case of  a  direct   acquisition
(for example,  through  a  share purchase or  asset  purchase),  the assets
of  the business are $5 million or more in value; or (ii) in  the  case  of
an  indirect  acquisition  (for  example,  the acquisition  of  the foreign
parent  of the  Canadian  business) where  the Canadian business has assets
of  $50  million or  more in  value or if the Canadian business  represents
more  than   50%  of   the assets of the original group  and  the  Canadian
business  has  assets of $5 million or more in value.  Review and  approval
are   also   required for acquisition or establishment of  a  new  business
in   areas  concerning "Canada's cultural  heritage  or national  identity"
such  as book publishing, film production and distribution, television  and
radio,  production and distribution of  music, and the oil and natural  gas
industry, regardless  of the size of the investment.

In   the   context of the Company, in essence, three  methods  of acquiring
control  of  a  Canadian business are regulated  by   the  ICA:   (i)   the
acquisition of all or substantially all  of  the assets  used  in  carrying
on   the   Canadian   business;   (ii)   the  acquisition,   directly    or
indirectly, of voting  shares  of  a Canadian  corporation carrying on  the
Canadian  business;  (iii) the  acquisition of voting shares of  an  entity
which   controls,  directly  or indirectly, another entity  carrying  on  a
Canadian business.  An acquisition of a majority of the voting interests of
an  entity,  including a corporation, is deemed  to  be  an acquisition  of
control  under  the  ICA.  An acquisition of  less than  one-third  of  the
voting  shares  of  a corporation is  deemed not  to be an  acquisition  of
control.  An acquisition  of  less than a majority, but one-third or  more,
of  the  voting shares of a corporation  is  presumed to be an  acquisition
of  control unless  it  can  be established that  on  the  acquisition  the
corporation  is  not,  in  fact, controlled by  the  acquirer  through  the
ownership   of voting shares.   For  partnerships,  trusts, joint  ventures
or  other  unincorporated entities, an acquisition of  less than a majority
of the voting interests is deemed  not to be an acquisition of control.
In   1988,   the  ICA  was amended pursuant  to  the  Free  Trade Agreement
dated  1/2/88  between  Canada  and  the  United  States   to  relax    the
restriction   of   the  ICA.  As  a  result  of  these amendments,   except
where   the  Canadian   business  is  in  the cultural,    oil   and   gas,
uranium,   financial   services   or transportation sectors, the  threshold
for  direct  acquisition  of control by U.S. investors  and  other  foreign
investors  acquiring control  of  a Canadian business from  U.S.  investors
has   been raised  from  $5 million to $150 million of gross  assets,   and
indirect acquisitions are not reviewable.

<PAGE>

In    addition  to  the  foregoing,  the  ICA  requires  that  all    other
acquisitions of control of Canadian businesses by non-Canadians are subject
to formal notification to the Canadian  government.
These   provisions  require  a foreign investor  to  give  notice   in  the
required   form,   which  notices  are  for  information,   as  opposed  to
review, purposes.

ITEM 7.  TAXATION
The   following  summary  of  the  material  Canadian  federal  income  tax
considerations  generally  applicable  in  respect  of  the  common  shares
reflects  the  Company's  opinion.  The tax consequences to any  particular
holder of common shares will vary according to the status of that holder as
an   individual,  trust,  corporation  or  member  of  a  partnership,  the
jurisdiction in which that holder is subject to taxation, the  place  where
that  holder  is  resident  and,  generally,  according  to  that  holder's
particular  circumstances.  This summary is applicable only to holders  who
are resident in the United States, have never been resident in Canada, deal
at  arm's  length  with the Company, hold their common  shares  as  capital
property  and  who will not use or hold the common  shares in  carrying  on
business  in  Canada.   Special rules, which  are  not  discussed  in  this
summary, may apply to a United States holder that is an issuer that carries
on business in Canada and elsewhere.

This  summary is based upon the provisions of the Income Tax Act of  Canada
and  the  regulations thereunder (collectively, the "Tax Act, or ITA")  and
the Canada-United States Tax Convention as amended by the Protocols thereto
(the "Tax Convention") as at the date of the Registration Statement and the
current  administrative practices of Revenue Canada,  Customs,  Excise  and
Taxation.   This  summary  does not take into account  Canadian  provincial
income tax consequences.

This    summary   is   not  exhaustive  of  all   possible    income    tax
consequences.  It is not intended as legal or tax advice to any  particular
holder  of  common  stock  and  should  not  be  so construed.  Each holder
should  consult  his  own  tax  advisor with  respect  to  the  income  tax
consequences applicable to him in his own particular circumstances.


North American Free Trade Agreement (Canada)
The   Investment   Act  was amended with the North   American   Free  Trade
Agreement   (NAFTA)  to  provide  for   special   review  thresholds    for
Americans    (including   "American-controlled "entities"  as  defined   in
the   Investment   Act).    Under   the Investment   Act,  as  amended,  an
investment  in  the   Registrant's common shares by an  American  would  be
reviewable  only  if  it  was an  investment  to  acquire  control  of  the
Registrant  and  the value  of the assets of the Registrant was equal to or
greater  than   a   specified  amount  (the  "Review  Threshold"),    which
increases   in  stages.  The Review Threshold is  currently   $150  million
and  remains  at  $150  million in constant  1992  dollars  (calculated  as
prescribed in the Investment Act) after 1992.

Disposition of Common Shares
If  a  non-resident  were to dispose of  common  shares of  the Company  to
another  Canadian corporation which  deals  or  is deemed  to  deal   on  a
non-arm's  length  basis  with  the  non-resident  and  which,  immediately
after  the  disposition,  is connected   with   the  Company  (i.e.,  which
holds    shares representing  more than 10% of the voting power  and   more
than  10% of the market value of all issued and outstanding shares  of  the
Company),  the  amount by which the fair market value of  any consideration
(other   than  any  shares  of   the   purchaser corporation)  exceeds  the
paid-up  capital of the  common  shares sold  will  be deemed to be taxable
as a dividend paid  by  the purchasing  corporation,  either immediately or
eventually   by means  of a deduction in computing the paid-up capital   of
the  purchasing   corporation,   and  subject  to  withholding   taxes   as
described below.

<PAGE>

Under the Tax Act, a gain from the sale of common shares by  a non-resident
will  not  be  subject  to Canadian tax, provided  the shareholder  (and/or
persons  who  do not deal at arm's  length with the shareholder)  have  not
held a "substantial interest" in the Company  (25% or more of the shares of
any  class  of the Company's stock) at any time in the five years preceding
the  disposition.  Generally, the Tax Convention will exempt from  Canadian
taxation  any  capital gain realized by a resident of  the  United  States,
provided  that  the  value of the common shares is not derived  principally
from real property situated  in Canada.
Dividend
In  the  case of any dividends paid to non-residents, the Canadian  tax  is
withheld  by  the  Company,  which  remits  only  the  net  amount  to  the
shareholder.  By virtue of Article X of the Tax Convention, the rate of tax
on  dividends paid to residents of  the United States is generally  limited
to  15%  of  the  gross  dividend (or 5% in the case of  certain  corporate
shareholders  owning  at least 10% of the Company's voting  shares  pending
ratafication  of  the Protocol amending the treaty; the Protocol  has  been
ratified  by  the  USA and is awaiting ratification  in  Canada).   In  the
absence  of the Tax Convention provisions, the rate of Canadian withholding
tax imposed on non-residents is 25% of the gross dividend.  Stock dividends
received  by  non-residents  from the Company  are  taxable  by  Canada  as
ordinary  dividends  and  therefore  the  withholding  tax  rates  will  be
applicable.

Where  a  holder  disposes  of common shares to the  Company   (unless  the
Company  acquired the common shares in the open market in  the  manner   in
which   shares would normally be  purchased  by  any member of the public),
this  will  result  in a deemed dividend to the U.S. holder  equal  to  the
amount  by which the  consideration paid by the Company exceeds the paid-up
capital  of  such  stock.  The amount of such dividend will be  subject  to
withholding  tax as described above.

Capital Gains
A  non-resident of Canada is not subject to tax under the ITA in respect of
a  capital gain realized upon the disposition of a share of a class that is
listed  on a prescribed stock exchange unless the share represents "taxable
Canadian  property" to the holder thereof.  A common share of  the  Company
will  be taxable Canadian property to a non-resident holder if, at any time
during  the period of five years immediately preceding the disposition, the
non-resident holder, persons with whom the non-resident holder did not deal
at  arm's  length, or the non-resident holder and persons with whom  he/she
did  not deal at arm's length owned 25% or more of the issued shares of any
class  or series of the Company.  In the case of a  non-resident holder  to
whom  shares of the Company represent taxable Canadian property and who  is
resident in the United States, no Canadian tax will be payable on a capital
gain  realized  on such shares by reason of the Tax Convention  unless  the
value of such shares is derived principally from real property situated  in
Canada  or  the  non-resident   holder previously  held  the  shares  while
resident  in  Canada.  The Company believes that the value  of  its  common
shares is not derived from real property situated inside Canada.
Certain United States Federal Income Tax Consequences
The  following  is a discussion of certain possible United  States  Federal
income  tax  consequences, under  the  law,  generally applicable to a U.S.
Holder  (as  defined  below) of common shares  of    the   Company.    This
discussion   does  not  address   all potentially relevant  Federal  income
tax  matters  and  it does not address  consequences  peculiar  to  persons
subject   to  special provisions  of Federal income tax law, such as  those
described  below  as  excluded from the definition of a U.S.  Holder.    In
addition,  this discussion does not cover any state,  local  or foreign tax
consequences.

The   following  discussion is based upon the  sections  of   the  Internal
Revenue    Code    of    1986,   as   amended   ("the    Code"),   Treasury
Regulations,   published   Internal   Revenue    Service  ("IRS")  rulings,
published  administrative positions of the  IRS and  court  decisions  that
are  currently  applicable, any or  all of which could  be  materially  and
adversely  changed,  possibly on a retroactive  basis,  at  any  time.   In
addition, the  discussion does  not  consider  the potential effects,  both
adverse   and  beneficial,  of  recently  proposed  legislation  which,  if
enacted,  could be applied, possibly on a retroactive basis, at  any  time.
The  following  discussion  is  for general information  only  and  is  not
intended  to be, nor should it be construed to be, legal  or tax advice  to
any  holder  or prospective holder of common shares of the Company  and  no
opinion or representation with respect to the  United States Federal income
tax  consequences  to  any   such holder or  prospective  holder  is  made.
Accordingly,  holders and prospective  holders  of common  shares  of   the
Company   should  consult their own tax advisors about the federal,  state,
local,  and    foreign   tax  consequences  of  purchasing,   owning    and
disposing of common shares of the Company.

<PAGE>

U.S. Holders
As   used herein, a ("U.S. Holder") includes a holder of  common shares  of
the   Company  who  is a citizen or  resident  of  the  United   States,  a
corporation  created  or organized in or  under the   laws  of  the  United
States or of any political  subdivision thereof  and  any  other person  or
entity   whose   ownership  of common shares of the Company is  effectively
connected  with  the conduct  of a trade or business in the United  States.
A   U.S. Holder  does not include persons subject to special  provisions of
Federal  income  tax  law,  such as  tax-exempt   organizations,  qualified
retirement plans, financial institutions,  insurance companies, real estate
investment  trusts, regulated  investment companies,  broker-dealers,  non-
resident  alien  individuals  or foreign  corporations  whose ownership  of
common  shares   of   the Company  is  not effectively connected  with  the
conduct   of   a trade  or  business in the United States and  shareholders
who acquired  their  stock through the exercise of  employee  stock options
or otherwise as compensation.


Distributions on Common Shares of the Company
U.S.  Holders  receiving  dividend  distributions  (including  constructive
dividends)  with  respect to common shares of the Company are  required  to
include in gross  income for United States Federal income tax purposes  the
gross  amount  of  such distributions to the extent that  the  Company  has
current  or  accumulated earnings and profits, without  reduction  for  any
Canadian  income tax withheld from such distributions.  Such  Canadian  tax
withheld may be credited, subject  to certain limitations, against the U.S.
Holder's United States Federal Income tax liability or, alternatively,  may
be  deducted in computing the U.S. Holder's United  States Federal  taxable
income  by those who itemize deductions.  (See more detailed discussion  at
"Foreign  Tax  Credit"  below).  To the extent  that  distributions  exceed
current  or accumulated earnings and profits of the Company, they  will  be
treated first as a return of capital up to the U.S. Holder's adjusted basis
in  the  common shares and thereafter as gain from the sale or exchange  of
the common shares.  Preferential tax rates for long-term  capital gains are
applicable  to  a  U.S. Holder which is an  individual,  estate  or  trust.
There  are currently no preferential tax rates for long-term capital  gains
for a U.S. Holder which is a corporation.

Dividends   paid  on the common shares of the Company  will  not  generally
be    eligible  for  the   dividends   received   deduction  provided    to
corporations    receiving   dividends   from    certain   United     States
corporations.    A   U.S.   Holder  which  is   a  corporation  may,  under
certain circumstances, be entitled to  a 70% deduction of the United States
source portion of  dividends received  from the Company (unless the Company
qualifies   as   a "foreign  personal  holding  company"  or   a   "passive
foreign  investment company", as defined below) if such  U.S.  Holder  owns
shares  representing at least 10% of the voting power  and   value  of  the
Company.   The  availability  of this deduction  is   subject  to   several
complex limitations which are beyond the  scope  of this discussion.

Foreign Tax Credit
A   U.S.   Holder who pays (or has withheld  from  distributions)  Canadian
income   tax  with  respect to the ownership  of  common  shares   of   the
Company may be entitled, at the option  of  the U.S.  Holder,  to either  a
deduction  or  a  tax credit  for  such foreign  tax   paid   or  withheld.
Generally,  it   will  be  more advantageous to claim a  credit  because  a
credit  reduces   United States Federal income taxes on a dollar-for-dollar
basis,  while  a  deduction  merely reduces the taxpayer's income   subject
to  tax.   This election is made on year-by-year basis and  applies to  all
foreign  income  taxes (or taxes in lieu of  income   tax)  paid   by   (or
withheld  from) the U.S. Holder during  the  year.  There  are  significant
and  complex limitations which  apply  to the  credit,  among which is  the
general   limitation  that  the credit  cannot  exceed   the  proportionate
share   of  the  U.S. Holder's  United  States  income tax liability   that
the   U.S. Holder's  foreign  source  income  bears  to  his/her  or    its
worldwide   taxable  income.   In  the  determination  of   the application
of  this  limitation,  the various items of income and  deduction  must  be
classified  into foreign and domestic sources.  Complex  rules govern  this
classification process.   There  are further limitations on the foreign tax
credit  for  certain  types of  income  such  as "passive  income",   "high
withholding  tax interest", "financial services income", "shipping income",
and  certain   other classifications of income.  The availability   of  the
foreign tax credit and the application of the  limitations on  the   credit
are  fact specific and holders  and  prospective holders  of common  shares
of  the  Company  should  consult  their own tax advisors  regarding  their
individual circumstances.

<PAGE>

Disposition of Common Shares of the Company
A U.S. Holder will recognize gain or loss upon the sale of common shares of
the Company equal to the difference, if any, between (i) the amount of cash
plus  the  fair  market  value  of  any property  received,  and  (ii)  the
shareholder's tax basis in the common shares of the Company.  This gain  or
loss   will be capital gain or loss if the common shares are capital  asset
in  the  hands of the U.S. Holder, which will be a short-term or  long-term
capital  gain or loss depending upon the holding period of the U.S. Holder.
Gains  and  losses are netted  and combined according to special  rules  in
arriving  at  the overall capital gain or loss for a particular  tax  year.
Deductions  for net capital losses are subject to significant  limitations.
For  U.S.  Holders which are individuals, any unused portion  of  such  net
capital  loss may be carried over to be used in later tax years until  such
net  capital  loss  is  thereby exhausted.   For  U.S.  Holders  which  are
corporations (other than corporations subject to Subchapter S of the Code),
an  unused net capital loss may be carried back three years from  the  loss
year and carried forward five years from the loss year to be offset against
capital gains until such net capital loss is thereby exhausted.

Other Considerations
In  the  following four circumstances, the above sections of the discussion
may  not  describe  the  United  States  Federal  income  tax  consequences
resulting from the holding and disposition of common shares of the Company.
However,  on  the  basis of (a) the number of shareholders  of  its  common
shares, (b) the majority ownership of its shares by Canadian residents, and
c)  the  majority of its assets are actively managed (not passively  held),
the  Company  believes  that  its is neither a  "Foreign  Personal  Holding
Company",   "Foreign  Investment  Company",  "Passive  Foreign   Investment
Company", nor a "Controlled Foreign Corporation".

Foreign Personal Holding Company
If at any time during a taxable year more than 50% of the  total
combined  voting  power  or  the  total  value  of  the  Company
outstanding shares is owned, actually or constructively, by five
or fewer individuals who are citizens or residents of the United
States  and 50% or more of the Company's gross income  for  such
year  was  derived  from  certain  passive  sources  (e.g.  from
dividends received from its subsidiaries), the Company would  be
treated as a "foreign personal holding company."  In that event,
U.S.  Holders  that hold common shares of the Company  would  be
required  to  include  in  gross  income  for  such  year  their
allowable  portions  of such passive income to  the  extent  the
Company does not actually distribute such income.

Foreign Investment Company
If   50%  or  more  of the combined voting power or total   value   of  the
Company    outstanding  shares  are   held,   actually  or  constructively,
by  citizens  or  residents of the United  States, United  States  domestic
partnerships  or  corporations, or  estates or  trusts other  than  foreign
estates or trusts (as  defined  by the  Code Section 7701(a)(31)), and  the
Company  is  found  to  be engaged primarily in the business of  investing,
reinvesting,   or  trading  in  securities, commodities,  or  any  interest
therein,   it  is   possible  that the Company  might  be  treated   as   a
"foreign  investment  company"  as defined in Section 1246  of  the   Code,
causing  all  or  part of any gain realized  by  a  U.S.  Holder selling or
exchanging  common shares of the Company to be treated as  ordinary  income
rather than capital gains.

<PAGE>

Passive Foreign Investment Company
As    a   foreign  corporation  with  U.S.  Holders,  the   Company   could
potentially  be treated as a passive foreign investment  company  ("PFIC"),
as  defined  in Section 1297 of the Code, depending upon the percentage  of
the  Company's income which is passive, or  the percentage of the Company's
assets which is held for the purpose of producing passive income.

Certain   United  States income tax  legislation  contains  rules governing
PFICs  which  can  have  significant tax effects on  U.S.  shareholders  of
foreign corporations.  These rules do not  apply to  non-U.S. shareholders.
Section 1297(a) of the Code  defines  a PFIC  as a corporation that is  not
formed in the  United  States and,  for any taxable year, either (i) 75% or
more  of  its  gross income  is "passive income", which includes  interest,
dividends  and certain rents and royalties or (ii) the average  percentage,
by  fair  market  value  (or,  if  the  company  is  a  controlled  foreign
corporation  or makes an election, by adjusted tax basis),  of  its  assets
that produce or are held for the production of  "passive income" is 50%  or
more.   The  taxation  of a US shareholder who owns  stock  in  a  PFIC  is
extremely complex and is therefore beyond the scope of this discussion.  US
persons  should  consult with their own tax advisors with  regards  to  the
impact of these rules.
Controlled Foreign Corporation
If more than 50% of the voting power of all classes of stock  or the  total
value  of  the stock of the Company is owned,  directly or  indirectly,  by
citizens  or  residents  of  the  United  States,  United  States  domestic
partnerships  and  corporations or  estates or trusts  other  than  foreign
estates  or  trusts,  each of whom own 10% or more of  the  total  combined
voting  power of all classes of stock of the Company or the total value  of
the  stock  of  ("United States  shareholder"),  the   Company   could   be
treated   as    a controlled foreign corporation" under Subpart  F  of  the
Code.

This  classification  would  effect many  complex  results   including  the
required   inclusion  by such United States  shareholders   in  income   of
their   pro rata share: of  "Subpart  F  Income"  (as specially defined  by
the  Code)  of the Company; of the  Company's earnings  invested   in  U.S.
property;   and  of   earnings   invested  "excess   passive  assets"   (as
specifically  defined  by  the   Code). the  Company,  In  addition,  under
Section 1248 of the Code, gain from the  sale or exchange of common  shares
of  the  Company by a U.S. person who is or was a United States shareholder
(as  defined in the  Code) at any time during the five years period  ending
with  the  sale or exchange is treated as ordinary dividend income  to  the
extent of earnings  and profits of the Company  attributable to the   stock
sold or exchanged.  Because of the complexity of Subpart F,  and because it
is  not clear that the Company is a controlled foreign corporation, a  more
detailed review of these rules is outside of the scope of this discussion.
ITEM 8.  SELECTED FINANCIAL DATA

The  selected  financial data for Fiscal 1997, 1996 and Fiscal  1995  ended
June  30th  was derived from the financial statements of the Company  which
have  been  audited  by  Arthur  Andersen &  Co.  and  Deloitte  &  Touche,
independent Chartered Accountants, as indicated in their reports which  are
included elsewhere in this Annual Report.  The selected financial data  for
Fiscal  1994  was  derived  from the audited financial  statements  of  the
Company, not included herein.

<PAGE>

The  selected financial data was extracted from the more detailed financial
statements  and  related  notes  included herein  and  should  be  read  in
conjunction  with  such    financial statements and  with  the  information
appearing under the heading ITEM #9, "Manage-ment's Discussion and Analysis
of Financial Condition and Results of Operations".

Reference  is  made  to notes to the audited financial  statements  of  the
Company  included  herein  for  a discussion of  the  material  differences
between  Canadian  GAAP and U.S. GAAP, and their effect  on  the  Company's
financial statements.

The  Company did not generate material revenue from  operations until   the
last  half of Fiscal 1996.  Accordingly, through Fiscal 1997, the   Company
has   not  generated sufficient cashflow from operations  to  fund  ongoing
operational  requirements and cash commitments.  The Company  has  financed
its  operations  principally through the sale  of  its  equity  securities,
government-backed  loans, and lease financing for equipment.   The  Company
believes  it  has  sufficient  capital and  liquidity  to  finance  current
operations.

Nevertheless,  the Company's ability to continue operations  is  ultimately
dependent  on the ability of the Company to generate profitable  operations
 and/or to arrange  additional external financing.  The Company anticipates
  reaching a level of operations by the end of Fiscal 1998 sufficient  that
operating profits will make the Company self-sustaining.
<TABLE>

                                Table No. 6
                          Selected Financial Data
                   (CDN$ in 000, except per share data)
<S>                               <C>       <C>      <C>      <C>
                                      Year     Year     Year     Year
                                     Ended    Ended    Ended    Ended
                                   6/30/97  6/30/96  6/30/95  6/30/94
Sales Revenue                        $4905     $556        0        0
Net Income (loss)                    (4248)   (3212)    (869)       0
Earnings (Loss) per Share           ($0.39)  ($0.32)  ($0.15)       0
Wgt. Avg. No. Shares (1)(5)          10926    10088     5768        0
Dividends Per Share                  $0.00    $0.00    $0.00        0

Working Capital                      $5456   $ (927)   $(818)       0
Property/Plant/Equipment              7698     6917     7436        0
Assets Under Development              9867     8924     8010        0
Long-Term Debt                        3267     2169        0        0
Capital Lease Obligations (3)         7224     8651     8837        0
Loans Payable to Shareholders, etc.   2065      721      203        0
Shareholders' Equity                 13083     4597     5958        0
Total Assets                         27313    17534    15922        0

US GAAP Shareholders' Equity         13137     4607     6152        0
US GAAP Net (Loss) (4)               (4382)   (3202)    (674)       0
US GAAP (Loss) per Share (5)        ($0.45)  ($0.36)  ($0.12)       0
US GAAP Wgt.Avg. No. Shares (5)       9746     8908     5751        0
</TABLE>

(1)  Effective 5/15/95, the Company's common shares were split on a
     571.4286:1 basis.  All discussion in this Annual Report refer
     to post-split stock unless otherwise indicated.
(2)  Refer to ITEM #1, ITEM #2, ITEM #9, and ITEM #14 for a
     discussion of disputed lease agreements.
(3)  Refer to ITEM #1, ITEM #2, and ITEM #9 for a discussion of
     the Lease Agreements.
(4)  Under US GAAP, the Company would have expensed "foreign exchange
     gain (loss)" during Fiscal 1995 of $194,301, during Fiscal 1996
     of $9,772 and during Fiscal 1997 of ($134,026).
(5)  Under US GAAP, the Company would not have utilized 1,180,000
     contingently-cancelable escrowed shares in the calculation of
     weighted average number of shares used in the calculation of
     loss per share.

<PAGE>

ITEM 9.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATION

<TABLE>
                        Domestic and Foreign Sales
<S>                                       <C>              <C>
                                            Year Ended       Year Ended
                                          June 30, 1997    June 30, 1996
  Sales to customers outside Canada         2,482,035          384,888
  Sales to customers inside Canada          2,423,366          171,217
  Gross Profit after Cost of Sales          2,268,086          264,786
</TABLE>

While  sales  volumes  increased from 1996 to  1997,  gross  profit  before
depreciation  percentages of 47.6% for 1996 and  46.2%  for  1997  remained
relatively the same.

Fiscal Year Ended June 30, 1997
For  Fiscal 1997, the Company had cost of sales of $2,637,315 on  sales  of
$4,905,401.  Gross profit before depreciation for the year ended  June  30,
1997 was $2,268,086.  The Company recorded depreciation and amortization of
property, plant and equipment of $1,576,975 and interest on long term  debt
of  $415,035.   These amounts were expensed, as the Company  was  past  the
start-up  stage and capable of production.  The Company also experienced  a
significant  increase in selling, distribution and administrative  expenses
which  totalled $4,424,582.  The increase was due to increased activity  in
sales  and  marketing, the expenses associated with investigating potential
acquisitions,  and  the  expenses associated with the  acquisition  of  the
liquid division of Arjo Canada Inc.  Sales increased from $556,105 for 1996
to  $4,905,401 for 1997, due to increased sales and marketing activity  and
the  addition of liquid and antimicrobial products to the Company's product
line.

On July 31, 1996, 905,000 special warrants were issued by the Company for a
subscription  price  of $3.00 each for gross proceeds of  $2,715,000.   The
Special  Warrants converted into units of common shares and share  purchase
warrants.  After deduction of the Agent's commission of $190,050 in respect
of this private placement, the Company received net proceeds of $2,524,950.

On  January 8, 1997, 1,600,000 Special Warrants were issued by the  Company
for  a  subscription price of $6.00 each for proceeds  of  $9,600,000.   As
commission the Agent was issued Agent's Special Warrants.

The  long  term  liabilities of the Company as at June  30,  1997  included
obligations under capital leases of $5,504,985.

(For  additional information on leased equipment, see ITEM #2, "Description
of  Property, Operations, Equipment" and the Financial Statements  appended
hereto.)  As at June 30, 1997, inventories were valued at $2,850,012.   The
Company's  working capital was $5,456,000 and its asset base  exceeded  $27
million.  The net loss for Fiscal 1997 was ($4,248,043).

Fiscal Year Ended June 30, 1996
For  Fiscal  1996, the Company had cost of sales of $291,319  on  sales  of
$556,105.   Gross profit before depreciation for the year  ended  June  30,
1996  was $264,786.  The Company recorded depreciation and amortization  of
property, plant and equipment of $1,188,053 and interest on long term  debt
of $409,258.  These amounts were expensed as the Company was past the start-
up  stage  and  capable  of  production.  The Company  also  experienced  a
significant  increase in selling, distribution and administrative  expenses
which totalled $1,888,352, including advertising expenses of $185,082.  The
increase was due to increased activity in sales and marketing, the expenses
associated  with  investigating potential acquisitions,  and  the  expenses
associated with the acquisition of the liquid division of Arjo Canada  Inc.
which closed subsequent to this period.

<PAGE>

General  and administrative expenses included $328,019 in consulting  fees,
$149,384 in business and property taxes, and $540,927 in wages and employee
benefits.

The  long  term  liabilities of the Company as at June  30,  1996  included
obligations  under  capital leases of $7,223,699.  As  at  June  30,  1996,
inventory was valued at $507,203.  The Company's working capital deficiency
was $926,575 and its asset base exceeded $17,500,000.  The net loss for the
year ended June 30, 1996 was ($3,211,746).
Liquidity
Historically,  the  Company  has relied on debt  and  equity  financing  to
develop and operate its business.  On a prospective basis, the Company  has
not  yet  achieved  profitable operations and must continue  to  rely  upon
funding through further private and public equity financings and by drawing
upon  funds  available under the MG Agreement and the  WEDD  Agreement  (as
hereinafter  defined).   (For  further  information  relating  to  the   MG
Agreement  and  the  WEDD Agreement, see subheading "Financial  Assistance"
following.)

Prior  to  the  initial public offering of the Company's common  shares  on
November 30, 1995 (the "IPO Prospectus"), liquidity was dependent upon cash
invested  by  principals of the Company and private investors.   Additional
funds  were  provided  by  shareholder loans and funds  advanced  from  the
Manitoba  and  Federal Governments pursuant to the MG  Agreement  and  WEDD
Agreement.   In  December  1995,  the  Company  received  net  proceeds  of
approximately $1,800,000 from the IPO Prospectus offering.  As at June  30,
1997, the Company had received a total of $1,613,146 under the MG Agreement
and $1,654,180 under the WEDD Agreement.  Although these sources of funding
were  adequate  for  its initial start-up expenses,  the  Company  required
additional  funding  from further private equity  financings  in  order  to
pursue its acquisition plans and implement a sales and marketing program in
Canada and the United States.  To that end, during its year ended June  30,
1997,  the Company completed the SW Private Placement, raising proceeds  of
$9,600,000  and,  on  October 1, 1997, closed  the  CN  Private  Placement,
raising  net proceeds of $6,543,600.  The Company will continue to  require
additional funds, through private or public equity financings, in order  to
maintain its objective of rapid growth.
Private Placement of Equity
In  June  1996, the Company sold 905,000 Special Warrants at $3.00, raising
$2,715,000 gross.

In  January  1997,  the Company sold 1,600,000 Special Warrants  at  $6.00,
raising  $9,600,000  gross.   Refer  to  ITEM  #12,  "Options  to  Purchase
Securities from Registrant or Subsidiaries".

In October 1997, the Company sold US$5,000,000 of Convertible Notes.  Refer
to   ITEM   #12,  "Options  to  Purchase  Securities  from  Registrant   or
Subsidiaries".


Financial Assistance

Manitoba Government
By  agreement  dated November 24, 1994, as amended September 21,  1995  and
November  14,  1995 (the "MG Agreement"), the Department of Industry  Trade
and  Tourism of the Manitoba Government, through its Crown Corporation  and
agent,  Manitoba  Development Corporation ("MDC")  agreed  to  provide  the
Company with financial assistance equal to the lesser of $2,674,000 or  33%
of  the costs excluding G.S.T. incurred and paid for the land and buildings
purchased,  building  improvements made, and equipment  purchased  at  arms
length,  all  respecting  the Company's production  of  automated  packaged
medical and surgical devices, kits and procedural trays for the medical and
healthcare  market  (the  "Eligible  Project  Costs").   The  Company   met
conditions sufficient for it to obtain a maximum of $2,174,000 of financial
assistance (the "MG Loan") from MDC.

<PAGE>

The  MG Agreement requires the creation and maintenance of a certain number
of jobs over a four year period, starting in 1995, as follows:

    Calendar Year      Number of New Jobs      Number of Jobs
                         Required to be        Required to be
                            Created              Maintained
         1995                  5                     5
         1996                  23                    28
         1997                  18                    46
         1998                  3                     49

During  calendar 1999 and until the MG Loan is repaid in full, the  Company
is  required  to maintain the number of jobs required to be maintained  for
calendar 1998.  The Company has created and maintained the requisite number
of jobs and currently employs 84 full-time employees.




The  MG  Loan is secured with a first-fixed charge against land,  buildings
and certain equipment and certain second fixed charges, and will be subject
to interest (both before and after maturity) at a rate, compounded monthly,
equivalent to that being charged by the Province of Manitoba to  its  Crown
corporations for borrowings amortized over a ten year period.  The MG  Loan
is to be repaid as follows:

(a)  six  consecutive monthly payments of $30,000 from May 5, 1999  through
     October 5, 1999; and

(b)  the  remaining  principal payments must be made by  way  of  48  equal
     consecutive monthly payments of $51,958.33 from November 5, 1999 up to
     and including October 5, 2003.

In  addition, a maximum 42 months' relief on interest has been  granted  to
the  Company, subject to the Company providing a certain number of jobs per
year,  as  stated  in the above table, until the MG Loan has  been  repaid.
However,  the MG Agreement also provides for the acceleration  of  interest
and  principal in the event the Company fails to provide the  above  stated
number  of  jobs  per year.  The accelerated payments shall  be  calculated
proportionally to the shortfall in jobs for a specific year.  The  MG  Loan
is  also  repayable on demand in the event of default by the Company  under
any of the security agreements.

The  Company received a total draw down pursuant to the MG Agreement in the
amount  of  $2,174,000  (of  the $2,674,000  originally  available  to  the
Company).   Prior to advance of the final $500,000 of the possible  maximum
of  $2,674,000  from  MDC, the Company was to achieve sales  of  $2,093,000
during  the  12  months ended June 30, 1996 and $16,884,000 during  the  12
months  ended June 30, 1997.  As such sales targets were not achieved,  the
Company did not receive the final $500,000 from MDC.

The  MG  Agreement  also  places  certain limitations  on  the  payment  of
dividends  by the Company, including that the Company not pay any dividends
until October 5, 1998.
Pursuant  to the MG Agreement, the following supporting documentation,  all
dated September 5, 1995, was delivered by the Company to MDC:

(a)  Real Property Mortgage and Security Agreement
     The  Company  has  granted  to  MDC a  mortgage  (the  "Real  Property
     Mortgage")  on the Property.  Pursuant to an agreement (the  "Security
     Agreement"), the Company also granted to MDC a first security interest
     in  certain  lands,  buildings and equipment, and  a  second  security
     interest in receivables and inventory of the Company.

<PAGE>

(b)  Assignment/Postponement of Shareholder Loans Agreement
     Pursuant  to an agreement (the "Assignment/Postponement of Shareholder
     Loans Agreement") among the Company, Excelco Systems Inc. ("Excelco"),
     Mahmood (Mac) Shahsavar, Janice Shahsavar and MDC, it was agreed  that
     during the term of the MG Loan:
          (i)   neither Mahmood (Mac) Shahsavar nor Janice Shahsavar  would
          sell,  transfer, assign or otherwise dispose of their  respective
          incentive  stock  options  (see  "Options  and  Other  Rights  to
          Purchase Securities"),
          (ii)  neither Mahmood (Mac) Shahsavar nor Janice Shahsavar  would
          sell,  transfer,  assign  or  otherwise  dispose  of  any  Shares
          acquired  pursuant  to an exercise of their respective  incentive
          stock  options or acquired upon the release of shares from escrow
          (as disclosed under the heading "Performance Shares"), and
    (iii) the  Company  would not make any payments to Excelco  or  to  any
          other  shareholders  of  the Company  on  account  of  any  loans
          advanced by them to the Company,

     without the prior written consent of MDC.
(c)  Equity Undertaking Agreement
     Pursuant  to  an  agreement (the "Equity Undertaking Agreement")  with
     Excelco, Mahmood (Mac) Shahsavar, Janice Shahsavar and MDC, as amended
     October  8, 1996, the Company agreed that during the term  of  the  MG
     Loan it would:
          (i)   not  repay any debts or liabilities owing to persons  other
          than  MDC, except for debts and liabilities owing to Her  Majesty
          The  Queen  in  Right  of  Canada under the  WEDD  Agreement  and
          accounts  payable incurred by the Company in the ordinary  course
          of business; and
          (ii)  not issue any new shares or create any new class of shares,
          and will not merge with any other entity, without first notifying
          MDC.

(d)  Lease and Credit Undertaking Agreement
     An  agreement (the "Lease and Credit Undertaking Agreement") among the
     Company,  Excelco and MDC, whereby Excelco has agreed  and  undertaken
     that,  in the event the Company is unable or unwilling to meet any  or
     all  of its obligations to the lessors under the Lease Agreements  (as
     disclosed  under  the  heading  ITEM  #2,  "Description  of  Property,
     Operations"), Excelco shall advance such funds to the Company  or  the
     lessors  directly as are required to fulfil such obligations.   Should
     the Company be in default or fail to comply with any term of the Lease
     Agreements, MDC has the right, but not the obligation, to  assume  the
     obligations of the Company under the Lease Agreements.

(e)  Excelco Guarantee
     An  agreement (the "Excelco Guarantee") among the Company, Excelco and
     MDC, whereby Excelco has agreed to guarantee the repayment of the loan
     by the Company to MDC.
Federal Government
By  agreement  dated December 5, 1994 (the "WEDD Agreement"), entered  into
with  the  Government of Canada's Western Economic Diversification  Program
("WEDP"),   the   Company  received  approval  for  non-interest   bearing,
subordinated  financial assistance in the aggregate amount  of  $1,937,852.
To  date, $1,804,835 has been received under the WEDD Agreement, leaving  a
balance  of  $133,017 available to be paid and expected to  be  drawn  down
prior to March 1998.

<PAGE>

Repayment  of  the  loan, assuming the full amount of $1,937,852  is  drawn
down,  will be made by quarterly payments commencing December 1,  1997  and
ending December 1, 1999, as follows:

                              December 1, 1997         $100,000
                              March 1, 1998            $180,000
                              June 1, 1998             $180,000
                              September 1, 1998        $210,000
                              December 1, 1998         $210,000
                              March 1, 1999            $290,000
                              June 1, 1999             $290,000
                              September 1, 1999        $290,000
                              December 1, 1999         $187,852

The  WEDD Agreement prohibits the Company from paying dividends without the
prior  written approval of the WEDP until the WEDD loan is repaid in  full.
The  loan is also repayable on demand upon default by the Company of a term
or  condition  of the WEDD Agreement, including bankruptcy,  insolvency  or
winding-up of the Company or failure to operate in Western Canada until the
WEDD loan has been repaid in full.

Copies  of  the  MG Agreement, WEDD Agreement, Real Property  Mortgage  and
Security Agreement, Assignment/Postponement of Shareholder Loans Agreement,
Equity  Undertaking Agreement, Lease and Credit Undertaking Agreement,  and
Guarantee  Agreement  are available for inspection as specified  under  the
heading "Material Contracts".
Stated Business Objectives
The primary objectives of the Company are:
 to obtain ISO (International Standards Organization) 9000
  Series certification;
 to develop and exploit the markets of Europe, Asia and South
  America;
 to acquire additional automated robotic units; and
 to distribute its surgical gowns, on a lease basis, through
  joint venture arrangements with distributors.

Milestones
The  significant events that must occur for the business objectives of  the
Company  to  be accomplished, and the specific time periods in  which  each
event  is  expected to occur and the estimated costs related to each  event
are as follows:

             Significant Event              Time Period      Related Cost
  Satisfy ISO (International Standards       1 year        nominal
  Organization) that ISO 9000 Series
  certification standards are met by
  Company
  Hire key individual to develop and         1 year        $45,000
  exploit markets in Asia, South America                  per annum
  and Europe
  Structure additional equity financing to  12-18 months  $6,000,000
  acquire additional robotic packaging
  units
  Enter into joint venture arrangements     12-18 months  $1,500,000 to
  with distributors to distribute the                     $2,000,000 for
  Company's surgical gowns on a lease                     initial inventory
  basis

<PAGE>

Acquisitions and Dispositions

Property
Pursuant  to an arms'-length agreement dated December 15, 1994, as  amended
April  20, 1995 (the "Property Agreement"), the Company acquired from  Otto
Bock   Orthopaedic   Industry  of  Canada  ("Otto   Bock")   its   Winnipeg
manufacturing  plant, together with equipment located thereon,  located  at
251  Saulteaux Crescent, Winnipeg, Manitoba (the "Property").  The Property
consists of a one storey manufacturing building together with a two  storey
office  portion, altogether comprising a total building area in  excess  of
71,000  square  feet sited on a land area of approximately  147,930  square
feet (3.396 acres).

The  consideration  paid by the Company to Otto Bock  was  $1,400,000  cash
together  with 200,000 Shares issued at a deemed price of $1.75 per  share,
for  a  total  purchase  price of $1,750,000.  The  Company  also  incurred
additional costs in the approximate amount of $40,000 in transfer taxes and
legal fees associated with this transaction.

Robotic Technology License
By   agreement  dated  May  30,  1995  (the  "Robotic  Technology   License
Agreement"),  as amended, Excelco Systems Inc. ("Excelco") granted  to  the
Company the exclusive right and license (the "Licensed Rights") to use  the
robotic  technology (the "Robotic Technology") to manufacture  and  package
surgical  custom  procedure  trays  and  kits,  and  to  sell  products  to
healthcare  institutions  in  Canada, Mexico  and  the  U.S.   The  Robotic
Technology License Agreement is for an initial term of ten years,  with  an
automatic renewal for consecutive ten year terms thereafter.

Janice  Shahsavar, the Vice-President Human Resources of the Company,  owns
100%  of  the  issued shares of Excelco.  In addition, Mac  Shahsavar,  the
President, Chief Executive Officer, Promoter and a Director of the Company,
is  also the President and Chief Executive Officer of Excelco.  At the time
of  entering into the Robotic Technology License Agreement, Seyed Torabian,
the Executive Vice-President and a Director of the Company, owned 5.78%  of
the issued shares of Excelco.

The  Company  agreed  to  purchase all automated  machinery  from  Excelco,
subject to the terms and conditions of an agreement dated October 21,  1994
(the   "Selectronics   Agreement")  entered  into   between   Excelco   and
Selectronics  Robotics & Automation Inc. and Selectronics  Brokerage,  Inc.
(jointly, "Selectronics"), the manufacturer of the equipment and machinery.
Pursuant  to the Selectronics Agreement, which is for a term of  20  years,
Excelco has granted to Selectronics the exclusive right to manufacture  all
machinery  and  equipment  which incorporate the  Robotic  Technology  (the
"Products"),  and  Excelco  has  agreed  to  purchase  Products  only  from
Selectronics.   The Selectronics Agreement provides that the  price  to  be
paid  for  the Products to be supplied by Selectronics to Excelco,  or  its
designate, shall not exceed 25% of the competitive market retail price  for
the  Products.   Selectronics and Excelco have agreed to meet  annually  to
negotiate the price of the Products to be supplied.  Excelco has agreed  to
sell  the Products under the Selectronics Agreement to the Company at cost.
(For  information relating to the purchase of equipment by the Company from
Selectronics,   see   ITEM  #2,  "Description  of   Property,   Operations,
Equipment".)

The  Robotic Technology License Agreement prohibits the Company  from  sub-
licensing  the  License  Rights  without first  obtaining  the  consent  of
Excelco,  and  then only under certain other conditions which  Excelco  may
impose as to equity ownership of the sub-licensee.

<PAGE>

Liquid Division of Arjo Canada Inc.
Pursuant to an agreement dated May 14, 1996 (the "Arjo Agreement")  between
the  Company and Arjo Canada Inc. ("Arjo"), Arjo USA Inc. ("Arjo U.S.") and
3485367  Manitoba Ltd. (now known as National Care Products Ltd.)  ("NCP"),
the Company acquired Arjo's Liquid Division by purchasing all the shares of
NCP.   At the time of purchase, NCP was a wholly-owned subsidiary of  Arjo.
In  consideration therefor, the Company paid to Arjo the  sum  of  $10  and
assumed  an  unsecured promissory note payable to Arjo  in  the  amount  of
$896,447, representing payment for certain assets as set forth in the  Arjo
Agreement.   This promissory note was paid in full.  The parties negotiated
the  allocation of the purchase price to be as follows: $262,680  in  fixed
assets;  $633,768 in inventory; and $10 in goodwill, contract  assignments,
licenses,  records  and  intangibles.  Ross Scavuzzo,  a  director  of  the
Company,  was  the  President of Arjo as well as being a  director  of  the
Company at the date of the Arjo Agreement.

The  Arjo  Agreement was accepted for filing by the Exchange on  August  9,
1996.

Arjo, a wholly-owned subsidiary of Getinge Industrict A.B. of Sweden, began
operations  in  1975.   From a manufacturing facility in  Winnipeg,  Arjo's
liquid division produced liquid disinfectant, shampoos, skin care ointments
and  creams  for  sale  in Canada as well as in the United  States  and  in
Europe.

NCP  has  agreed  that, subject only to certain limited  circumstances,  it
shall sell and distribute all of the products it manufactures under its own
label, distinct from the Arjo label.
Pursuant to the Arjo Agreement, Arjo and Arjo US have jointly and severally
agreed,  until  August 31, 1999 (the "Purchase Expiry Date"),  to  purchase
disinfectants  used  for bathtubs and whirlpools,  shampoo  and  body  wash
liquid soaps, bath oils and Arjosound water conditioners (the "Selected NCP
Products")  only  from  NCP,  totalling in  the  aggregate  not  less  than
$2,180,000 annually (the "Minimum Purchase"), failing which Arjo agrees  to
pay  annually  to  NCP an amount equal to the amount by which  the  Minimum
Purchase exceeds the amount of such liquid products actually purchased in a
particular year multiplied by the following:
       (a)  33.75% in the first year;
       (b)  20.00% in the second year; and
       (c)  15.00% in the third year;

provided that the Minimum Purchase shall be reduced by an amount,  if  any,
of sales by NCP (either directly or through its distributors and/or agents)
of the Selected NCP Products not bearing the Arjo label to Arjo's customers
in  North  America.  Upon the Purchase Expiry Date, NCP has  the  right  of
first  refusal to continue to supply the Selected NCP Products to Arjo  and
Arjo  US  for an additional two years.  No Minimum Purchase shall apply  to
the extended term.

NCP has agreed to use its best efforts to cause delivery of at least 90% of
the  Selected  NCP Products sold to Arjo and Arjo US within  three  working
days of receipt of an order from Arjo, directly to customers located in the
greater   Vancouver  urban  area,  Calgary,  Edmonton,  Saskatoon,  Regina,
Winnipeg, Hamilton, Toronto, Ottawa, Moncton, and Halifax, and within  five
working  days  to  any  other  location in Canada,  Aurora,  Nebraska,  and
Chicago, Illinois (the "Delivery Deadlines").  If in any quarter less  than
90%  of  the  Selected NCP Products sold to Arjo and Arjo US are  delivered
within  the  Delivery Deadlines, then the Minimum Purchase  obligations  of
Arjo and Arjo US shall be reduced during that and the following year by  2%
for each 1% drop in delivery performance level below 90% and if, during any
two  consecutive  quarters or during any two of four consecutive  quarters,
such delivery service levels drop below 80%, then Arjo and Arjo US shall be
released  from all further purchase obligations.  Deficiencies in  delivery
which  are directly attributable to causes which are beyond the control  or
direct  influence  of  NCP  and  which are generally  applicable  to  other
suppliers of comparable products in North America shall not be counted.

<PAGE>

Pursuant to the provisions of the Arjo Agreement, the Company and NCP  have
agreed  that  they  shall not, without the prior written consent  of  Arjo,
until the Purchase Expiry Date, actively solicit sales of shampoos and body
wash liquids and bath oils from the specific locations of stated hospitals,
nursing  homes  or  healthcare  facilities located  in  North  America  and
serviced  by Arjo, in competition with Arjo, or sell to or solicit  to  the
same  facilities any water conditioners or disinfectants used only for  the
purposes  of  bathtubs or whirlpools.  Arjo and Arjo US have  agreed  that,
except  as  permitted pursuant to the Arjo Agreement, they  shall  not,  or
cause anyone to, until the Purchase Expiry Date, sell or solicit sales  for
skin  cream products to anyone, and thereafter, until August 31, 2001, sell
or  solicit sales for skin cream products to hospitals, anywhere  in  North
America,  in  competition with the Company and NCP, except for  skin  cream
products purchased from NCP.

The  principal assets and operations of the Liquid Division are located  at
the Company's manufacturing facility in Winnipeg.

Huntington Laboratories Gam-Med Division, Inc.
By  an  arms'-length asset purchase agreement dated January 22,  1997  (the
"Gam-Med  Agreement")  among  NHMC  US,  Huntington  Laboratories   Gam-Med
Division, Inc. ("Gam-Med") and Ecolab Inc. ("Ecolab"), the Company acquired
certain  properties, assets, contracts and business of  Gam-Med,  including
land,  building,  machinery and equipment, accounts receivable,  inventory,
proprietary patents and on-going business, in consideration of the  payment
to  Gam-Med of US $1,310,165 (the "Purchase Price"), and the assumption  by
the  Company  of  certain contractual obligations of Gam-Med.   Gam-Med,  a
wholly-owned subsidiary of Ecolab (listed on the New York Stock  Exchange),
is  a  medical products packager and owns the proprietary right to a fusion
moulding  process  (the  "Gam-Med  Technology")  which  has  been  used  to
manufacture various patented plastic disposable liquid-dispensing  products
since  1989.   On  February  17, 1997, the Exchange  approved  the  Gam-Med
Agreement and the acquisition closed on February 20, 1997.

Pursuant to and as part of the Gam-Med Agreement, the Company entered  into
a  supply agreement (the "Ecolab Supply Agreement") dated February 20, 1997
between  NHMC  US and Ecolab whereby NHMC US has committed  to  purchase  a
minimum of 500 gallons of Ecolab iodine products every 6 months, at a price
of  actual cost plus 15% (subject to certain allowances) over a term of two
years  or unless earlier terminated by mutual consent, by NHMC US  upon  90
days'  written notice, by either party on written notice upon any  material
breach of default and failure to cure such breach or default within 30 days
of  such notice, or by Ecolab by written notice to NHMC US upon any failure
to  meet  its  minimum purchase commitments for any six  month  period  and
failure to cure such breach within 30 days of such notice.
Textile Rights

Mercana Industries Ltd.
By  an arm's length letter of intent (the "Mercana LOI") dated October  18,
1996  with  Mercana  Industries Ltd. ("Mercana"),  the  Company  agreed  to
acquire  all  the  issued and outstanding share capital  of  Mercana.   The
primary  asset of Mercana at the date of the Mercana LOI was the  exclusive
marketing  rights  (the  "Exclusive Rights") for  two  protective  textiles
"Mertex" and "Mertex-Plus" used to manufacture reusable surgical gowns  and
drapes.   The Company had proposed to include surgical gowns and drapes  in
its  custom  procedure  kits.  Pursuant to the  Mercana  LOI,  the  Company
advanced  a total of $300,000 to Mercana.  By a general security  agreement
(the "Mercana GSA") dated October 16, 1996, Mercana granted to the Company,
by  way of a subordinate fixed and specific mortgage and charge, a security
interest  in  the present and future undertaking, property  and  assets  of
Mercana, to secure the funds advanced to Mercana.

<PAGE>

The  Mercana  LOI expired without a binding agreement having  been  entered
into.   Subsequently,  Mercana ceased to hold the  Exclusive  Rights.   The
$300,000 advanced by the Company to Mercana has been written off.

Importex Corporation
By  an  arms'-length  agreement  dated  February  4,  1997  (the  "Importex
Assignment")  among  the  Company, Importex  Corporation  ("Importex")  and
Mertexas  Partnership  ("Mertexas"), the Company  was  assigned:  Importex'
interest in an agreement between Importex and Nosawa & Co., Ltd. ("Nosawa")
dated January 31, 1997 (the "Nosawa Agreement").

Nosawa,  with  its manufacturing and administrative operations  located  in
Osaka, Japan, is the manufacturer of certain protective textiles, including
"Mertex"  and "Mertex-Plus" (collectively, the "Textiles").  By  virtue  of
the  Importex  Agreement,  the Company has the exclusive  right  under  the
Nosawa  agreement  to distribute and sell the Textiles  in  North  America,
Mexico and Europe (including the European Community).

Pursuant  to  the  Importex  Assignment, the Company  paid  and  issued  to
Importex:  (a) $100,000 cash; (b) 225,000 Shares at a deemed price of $6.90
per Share; and (c) a warrant (the "Importex Warrant") entitling Importex to
purchase 150,000 Shares at a price of $6.90 per Share in the first year and
at  a price of $7.94 per Share in the second year, expiring on February  3,
1999.  Closing of the Importex Assignment occurred on September 8, 1997.


Pursuant  to  the  Nosawa Agreement, the Company will be required  to  make
minimum purchases of the Textiles from Nosawa, as follows:
(a)   25,000 meters on or before January 31, 1998;
(b)   60,000 meters on or before January 31, 1999;
(c)   75,000 meters on or before January 31, 2000;
(d)  100,000 meters on or before January 31, 2001; and
(e)  125,000 meters on or before January 31, 2002.

and  if  the foregoing minimum purchases are not made, Nosawa may terminate
the agreement on 90 days' written notice.

The  term  of the Nosawa Agreement is five years, renewable for  additional
one-year  periods.  The minimum textile purchase for each  additional  one-
year renewal period is negotiable.

Machinery and Equipment
As  at September 30, 1997, the Company has expended in excess of $3,277,518
towards machinery and equipment purchases, office supplies and other set-up
costs related to production, and has expended in excess of $250,000 towards
modifying  the utilities systems of its Winnipeg facility to establish  air
quality  to  meet  operational requirements.  A further $387,958  has  been
expended   on   machinery   and  equipment,  furniture,   furnishings   and
accessories,  and computer hardware in connection with the  acquisition  of
the  liquid division.  (See ITEM #9, "Management's Discussion and  Analysis
of   Financial  Condition  and  Results  of  Operations,  Acquisitions  and
Dispositions, Liquid Division of Arjo Canada Inc.")  A further $224,493 has
been   expended   on  machinery,  equipment,  furniture,  furnishings   and
accessories,  and computer hardware in connection with the  acquisition  of
the   antimicrobial  packaging  division.   (See  ITEM  #9,   "Management's
Discussion  and Analysis of Financial Condition and Results of  Operations,
Acquisitions  and  Dispositions, Huntington Laboratories Gam-Med  Division,
Inc.")   Also,  the Company has arranged for lease financing in  excess  of
$10,000,000  for  its  robotic  assembly  and  packaging  equipment.    All
production  machinery purchased and leased by the Company  is  from  arms'-
length  parties.   (See  ITEM  #2, "Description  of  Property,  Operations,
Equipment")

<PAGE>

Medi Guard Inc.
The  Company has entered into a binding letter agreement dated November 25,
1997,  with  shareholders of the privately-held Medi Guard Inc. ("MGI")  of
Oakville,  Ontario for the purchase of 100% of the issued  and  outstandind
shares  of MGI together with all shareholder loans.  MGI is one of Canada's
leading manufacturers of celluose-based disposable protective products  for
medical  use.   These  products include examination  gowns,  drapes,  table
paper, bibs, towels, and aprons.  Medi Guard also produces a line of single
use  products for airline in-flight services.  In 1996, Medi Guard revenues
were  $770,000, which increased to $2.8 million in 1997, with  revenue  for
1998 projected at $5 million.  The consideration agreed upon is $1 plus the
greater of $400,000 or 3.5 time the annualized earnings of MGI for the  one
year period following the agreement date.  The terms of the acquisition are
subject  to  the  preparation  of a formal agreement  and  Vancouver  Stock
Exchange approval.

National Healthcare Logistics LLC
During  Fiscal 1997, the Company acquired 150 Class A common voting shares,
representing  a  50%  interest, and 333 1/3 Class C  non-voting  shares  of
National Healthcare Logistics LLC.  This investment is being accounted  for
under the equity method.

National  Healthcare Logistics LLC , a limited liability company  ("NHLC"),
was created in April 1997 by the Company as an equal partner with two well-
respected  US  authorities in materials management and medical distribution
systems.  The Company owns the Class A voting shares purchased at  a  price
of  US$1  each and the Class C non-voting shares purchased at  a  price  of
US$1,500 each.  The Company intends to contribute additional share  capital
to purchase a further 500 Class C preferred shares of NHLC.  NHLC is in the
service  business  managing the purchasing and distibution  activities  for
multiple  numbers  of  hospitals utilizing a "hub and  spoke"  distribution
system.  The hub and spoke distribution system is the state of the  art  in
supply chain management for integrating hospital systems.  This concept has
been developed by Duane Jorgenson, one of the principals of NHLC, who is  a
highly-regarded authority in material management logistics.  Mr.  Jorgenson
has  also developed and implemented a number of stockless inventory systems
for hospitals throughout the United States.  The formation of NHLC provides
the  Company  with  an  entry to "alternative" distribution  channels,  the
fastest growing segment of the medical products distribution market.   This
directly  benefits the Company and its subsidiaries by providing them  with
an  opportunity  to  market their products directly  to  end  user  hosital
through  hub  and  spoke distribution systems managed by NHLC.   In  August
1997,  NHLC  entered  into  a ten-year agreement  with  Sysco  Corporation,
through  which  NHLC will bring in supply management contacts  for  various
integrated  hospitals systems, based on hub and spoke  distribution,  while
Sysco  Corporation will provide the capital for setting  up  the  hubs  and
provide inventory and distribution.
RISK FACTORS

Investment in the Company's securities must be considered speculative.   In
addition  to  the  other  information contained in this  Annual  Report,  a
prospective investor should carefully consider the following factors:

<PAGE>

(1)  The  market  for  the  Company's products is  highly  competitive  and
     subject to increasing competition based on price.  The Company  has  a
     limited  operating history and existing competitors may  have  greater
     financial  and  managerial  resources, operating  histories  and  name
     recognition.  These competitors may be able to institute  and  sustain
     price  wars,  resulting in a reduction of the Company's share  of  the
     market and reduced price levels and profit margins.  There can  be  no
     assurance that the market will consider the Company's products  to  be
     superior  or equivalent to existing or future competitive products  or
     that  the  Company  will  be able to adapt  to  evolving  markets  and
     technologies, develop new products, achieve and maintain technological
     advances  or  maintain  a  unit selling price competitive  with  other
     products.   (See  ITEM  #1,  "Business  of  the  Company,  Market  and
     Competition".)

(2)  The Company's operations currently rely upon the two Tiromats with two
     robotic units for the assembly and packaging of the product.

(3)  Receipt  of  the  balance of the government financial assistance,  and
     repayment  of  the  total  amounts received, as  disclosed  under  the
     heading  ITEM  #9, "Management's Discussion and Analysis of  Financial
     Condition   and  Results  of  Operations",  are  subject  to   certain
     conditions.

(4)  The  Company is subject to government regulations in the jurisdictions
     in  which it distributes its products.  Future changes in governmental
     regulations  may  have  an adverse impact on  the  operations  of  the
     Company.

(5)  The  Company  currently has 12,474,331 Shares issued and  outstanding.
     After  giving  effect to the issue of the common shares issuable  upon
     the  exercise  of  the Special Warrants, there will be  an  additional
     1,637,000  Shares  outstanding.  In addition, there  are  or  will  be
     outstanding  options  and warrants to acquire a minimum  of  3,980,154
     Shares.    (See  ITEM  #12,  "Options  to  Purchase  Securities   from
     Registrant or Subsidiaries".)

(6)  Neither the Company nor Excelco has filed an application for patent or
     copyright protection relating to the Robotic Technology.

(7)  The  Company is dependent upon the personal efforts and commitment  of
     its  management  team.   The loss of senior management  personnel  may
     adversely affect the Company.  Upon such loss, other individuals would
     be  required  to  manage  and operate the business  and  there  is  no
     assurance  that  individuals  with suitable  qualifications  could  be
     found.

(8)  The  Company's  business may be affected by other factors  beyond  its
     control,  such  as  economic recessions and  adverse  fluctuations  in
     foreign exchange rates.

(9)  The Company has not paid dividends in the past and does not anticipate
     paying  dividends in the near future.  The MG Agreement and  the  WEDD
     Agreement  place certain restrictions on the payment of  dividends  by
     the Company.

(10) The Company has a limited operating history.  The Company's ability to
     meet market demand will be a critical factor in the Company's success.

(11) Certain of the Company's directors and officers may serve as directors
     or officers, or have shareholdings in other companies and accordingly,
     conflicts of interest may arise.  Reference should be made to specific
     disclosure  under  ITEM  #13,  "Interest  of  Management  in   Certain
     Transactions, Payments to Insiders and Promoters".  All such  possible
     conflicts  will  be  disclosed  and handled  in  accordance  with  the
     requirements of the Corporations Act (Manitoba).

<PAGE>

(12) The  Company's  business  utilizes a  new  technology  that  is  being
     developed for the purpose of the Company's business.  Accordingly, the
     Company  is  subject  to  risks associated  with  start-up  companies,
     including  start-up  losses,  uncertainty  of  revenues,  markets  and
     profitability and the necessity of additional funding.   In  addition,
     the  technology  acquired by the Company and being  developed  by  the
     Company  has  not  yet been proved in a production environment  on  an
     ongoing basis.

(13) The  evolving  nature of the healthcare industry in North  America  in
     terms  of cost containment is leading to changing purchasing practices
     amongst purchasers at various institutions.  This change in purchasing
     environment (i.e. towards a more centralized buying approach) may  put
     additional  pressure on the Company to compete on  a  price  basis  in
     order  to  achieve  adequate market penetration and maintain  customer
     loyalty.  There can be no assurances that the Company will be able  to
     implement its business strategy with its current pricing structure.

ITEM 10.  DIRECTORS AND OFFICERS OF THE REGISTRANT

Table No. 7 lists as of 11/30/97 the names of the Directors of the Company.
The  Directors  have  served  in their respective  capacities  since  their
election  and/or appointment and will serve until the next  Annual  General
Meeting  of  Shareholders or until a successor is duly elected, unless  the
office  is vacated in accordance with the Articles/By-Laws of the  Company.
All Directors are residents and citizens of Canada.

<TABLE>
                                Table No. 7
                                 Directors
<S>                                     <C>    <C>
                                               Date First Elected
Name                                    Age          or Appointed
Alice Elaine Affleck (1)(4)              66           August 1993
Reginald Adrian Ebbeling (2)(4)          67              May 1995
Gordon John Farrimond (1)(2)(4)          47              May 1995
Robert Alexander Jackson (2)(3)          54              May 1995
Aristotle (Telly) John Mercury (1)(3)    62              May 1995
Ross Scavuzzo (4)                        41        September 1995
Mahmood (Mac) Jamshidi Shahsavar (2)(3)  41           August 1993
Morteza Seyed Torabian (2)               41              May 1995
Jack Tapper (1)(2)                       44          October 1997
</TABLE>
(1)  Member of Audit Committee.
(2)  Member of Executive Committee
(3)  Member of Nomination Committee
(4)  Member of Compensation and Corporate Governance Committee

<PAGE>

Table  No.  8 lists, as of 11/30/97, the names of the Executive Officers  of
the  Company.  The Executive Officers serve at the pleasure of the Board  of
Directors.   All Executive Officers devote full time to the affairs  of  the
Company.  All Executive Officers are residents and citizens of Canada,  with
the  following exceptions: Mr. Van Dyke who is resident/citizen of Illinois,
USA.
<TABLE>

                                Table No. 8
                            Executive Officers
<S>                       <C>            <C>
Name                      Position       Date of Board Approval
Mahmood (Mac) Shahsavar   President/CEO               July 1994
Jack Tapper               VP and CFO               October 1997
Reginald Adrian Ebbeling  Chairman                    June 1995
Morteza Seyed Torabian    Executive Vice President    June 1995
Robert Alexander Jackson  Executive Vice President     May 1995
Alice Elaine Affleck      Secretary/Treasurer          May 1995
Nancy Clark               VP Operations           November 1997
Gordon John Farrimond     VP Sales-Marketing        August 1996
Janice M.J. Shahsavar     VP Human Relations          June 1995
John Ryrie Stone          VP, Mertex and Mertex Plus   Feb 1997
Darrell Wayne Van Dyke    VP, NHMC US             February 1997
Richard J. Johnson        VP, NCP                 February 1997
</TABLE>
No  Director and/or Executive Officer has been the  subject  of any  order,
judgment, or decree of any governmental  agency  or administrator   or   of
 any  court  or  competent  jurisdiction, revoking  or suspending for cause
any  license,  permit  or   other  authority  of  such  person  or  of  any
corporation of which he is a Director and/or Executive Officer,  to  engage
in  the   securities  business or in the sale of a particular  security  or
temporarily or permanently restraining or enjoining any such person or  any
corporation  of  which he is an officer or director from  engaging  in   or
  continuing  any conduct,  practice,  or  employment  in connection   with
  the   purchase  or  sale  of  securities,   or convicting such person  of
any  felony  or  misdemeanor involving a security  or  any  aspect  of  the
securities business or of  theft or of any felony.

Mahmood   (Mac)  Shahsavar and  Janice Shahsavar  are  husband   and  wife.
  Other   than   disclosed  above,  there  are  no    family  relationships
 between any two or more Directors  or  Executive Officers.

There  are  no  arrangements or understandings between  any  two   or  more
Directors or Executive Officers, pursuant to which  he/she was selected  as
a Director or Executive Officer.

Other  than  disclosed below, there are no arrangements  or  understandings
between any two or more Directors or  Executive Officers.  Janice Shahsavar
owns  100%  of Excelco; refer to ITEM #1, ITEM #4, ITEM $9, ITEM  #13,  and
ITEM  #14.   Refer to ITEM  #1, ITEM #9, ITEM #12, ITEM #13  and  ITEM  #14
regarding   restrictions  and  obligations   placed   upon  Mahmood   (Mac)
Shahsavar  and  Janice Shahsavar and Excelco pursuant to the MG  Agreement,
the WEDD Agreement, and various agreements with D&T Leasing.
ITEM 11.  EXECUTIVE COMPENSATION

The  Company  has no formal plan for compensating its Directors  for  their
service  in  their  capacity  as  Directors.   Directors  are  entitled  to
reimbursement  for  reasonable  travel  and  other  out-of-pocket  expenses
incurred  in  connection  with  attendance at  meetings  of  the  Board  of
Directors.   The Board of Directors may award special remuneration  to  any
Director  undertaking any special services on behalf of the  Company  other
than  services  ordinarily required of a Director.   Other  than  indicated
  below  no  Director  received and/or accrued any compensation   for   his
services  as  a Director, including committee participation and/or  special
assignments.

<PAGE>

The  Company  grants  stock options to Directors,  Executive  Officers  and
employees;  refer  to  ITEM  #12,  "Options  to  Purchase  Securities  from
Registrant or Subsidiary".

Other  than  discussed below, the Company has no plans or  arrangements  in
respect  of  remuneration  received or that may be  received  by  Executive
Officers of the Company in Fiscal 1998 to compensate such  officers in  the
event of termination of employment (as a result of resignation, retirement,
change  of  control) or a change of responsibilities following a change  of
control,  where  the  value  of  such compensation  exceeds  US$60,000  per
Executive Officer.

During  Fiscal 1997, no funds were set aside or accrued by  the Company  to
provide pension, retirement or similar benefits  for Directors or Executive
Officers.

Except  for  the  stock option  program  discussed  below,  the Company has
no  material bonus or profit sharing plans  pursuant to which cash or  non-
cash compensation is or may be paid to the Company's Directors or Executive
Officers.

During  Fiscal  1997,  no  Director or Executive  Officer  received  and/or
accrued "other compensation" in excess of the lesser of US$25,000 or 10% of
such cash compensation, and all Directors and Executive Officers as a group
did  not  receive  other compensation which exceeded  US$25,000  times  the
number of persons in the group or 10% of compensation.

There  are  no written employment agreements with any Director or Executive
Officer.
Table  No. 9 details the compensation during Fiscal 1997 ended 6/30/97  for
the Chief Executive Officer, the four next highly compensated Directors and
Executive  Officers to the extent that they were compensated in  excess  of
US$60,000, all other Directors and Executive Officers as a group,  as  well
as compensation for all Directors and Executive Officers as a group.
<TABLE>
                                Table No. 9
               Compensation to Executive Officers/Directors
                         Fiscal 1997 Ended 6/30/97

                                                       Value of
                                     Stock Option  Below Market
                         Salary/Bonus     Exercise        Stock
                           Consulting   Net Market      Options
<S>                          <C>          <C>       <C>        <C>
Total
Directors/Officers               Fees     Value(1)   Granted(2)Compensation
Mahmood (Mac) Shahsavar (3)  $120,000          $0            $0    $120,000
Alice E. Affleck               30,000     118,000             0     148,000
M. Seyed Torabian (3)          72,000           0        69,560     141,560
Robert A. Jackson              78,000      37,180         3,700     118,880
Darrell Van Dyke               56,700           0             0      56,700
Other Officers/Directors      114,775      12,900        11,100     138,775
Total                        $471,475    $168,080       $84,360    $723,915
</TABLE>
(1)  Stock Option Exercise Net Market Value represents the aggregate
      difference  between  the  exercise price of stock  options  exercised
during
     Fiscal 1997 and the market value of the common stock on the date of
     exercise.
(2)  Market Value of Below-Market Stock Options Granted represents the
      aggregate  difference  between the exercise price  of  stock  options
granted
     in Fiscal 1997 and the market value of the common stock on the date of
     granting.
(3)  Accrued but not paid.  Refer to ITEM #13.

<PAGE>

ITEM 12.  OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR
          SUBSIDIARIES

Stock  Options  to  purchase  securities from  Registrant  are  granted  to
Directors   and  Employees  of  the  Registrant  on  terms  and  conditions
acceptable  to the regulatory authorities in Canada, notably the  Vancouver
Stock  Exchange.  The Registrant has no formal written stock  option  plan.
The Company is examining the feasibility of adopting a formal stock plan.

Under the stock option program, stock options for up to 10%  of the  number
  of   issued and outstanding common  shares  may  be granted from time  to
time, provided that stock options in favor of  any  one  individual may not
exceed 5% of  the  issued  and outstanding common shares.  A waiver of  the
10%  and  5%  rules  is  available  to Senior  Board  companies  (like  the
Registrant).    No  stock   option   granted   under   the   stock   option
  program   is transferable by the optionee other than by will or the  laws
  of descent and distribution, and each stock option is  exercisable during
the lifetime of the optionee only by such optionee.

The  exercise  price of all stock options granted under  the  stock  option
program  must be at least equal to the fair market  value of  such   common
shares  on  the date of grant, and  the  maximum term of each stock  option
may not exceed ten years.

The  exercise  prices for stock options were determined in accordance  with
Vancouver Stock Exchange ("VSE") guidelines and reflect the average closing
price of the Registrant's common shares for the ten trading days on the VSE
immediately  preceding the day on which the Directors granted and  publicly
announced the stock options, less an allowable discount.
The  names  and  titles  of  the Directors and Executive  Officers  of  the
Registrant  to  whom outstanding stock options have been  granted  and  the
number  of  common shares subject to such stock options are  set  forth  in
Table No. 10 as of 11/30/97, as well as the number of stock options granted
to Directors and all employees as a group.  The exercise price of the stock
options is stated in Canadian Dollars.
<TABLE>
                               Table No. 10
                         Stock Options Outstanding

                          Number of Shares of  CDN$
<S>                                  <C>       <C>     <C>
                                       Common  Exer.   Expiration
Name                                    Stock  Price         Date
Mahmood (Mac) Shahsavar (1)           370,000  $2.00   11/30/2000
Morteza Seyed Torabian                107,829   2.00   11/30/2000
Morteza Seyed Torabian                 94,000   3.81    8/11/2001
Morteza Seyed Torabian                  8,950   6.13    6/03/2002
Janice Shahsavar (1)                  100,000   2.00   11/30/2000
Alice Elaine Affleck                   60,000   2.00   11/30/2000
Alice Elaine Affleck                   15,000   6.13    6/03/2002
Robert Alexander Jackson               16,000   2.00   11/30/2000
Robert Alexander Jackson                5,000   3.81    8/11/2001
Robert Alexander Jackson                7,500   6.13    6/03/2002
Reginald Adrian Ebbeling               12,000   2.00   11/30/2000
Reginald Adrian Ebbeling                5,000   3.81    8/11/2001
Gordon John Farrimond                  30,000   2.00   11/30/2000
Gordon John Farrimond                  10,000   3.81    8/11/2001
Gordon John Farrimond                   7,500   6.13    6/03/2002
Aristotle (Telly) John Mercury         30,000   2.00   11/30/2000
Ross Scavuzzo                          20,000   2.00   11/30/2000
Darrell Van Dyke                       20,000   6.13    6/03/2002
Richard Johnson                        19,250   6.13    6/03/2002
John Stone                             10,000   6.13    6/03/2002
Total Officers/Directors (12 persons) 948,029
Total Employees/Advisors (39 persons) 319,125
Total                               1,267,154
</TABLE>
<PAGE>

(1) Pursuant to the MG Agreement and the WEDD Agreement, the exercise
    of stock options and the subsequent resale of such shares is
    restricted (refer to ITEM #2, ITEM #9, and ITEM #13).
Table No. 11 lists, as of 11/30/97 share purchase warrants outstanding, the
date  the share purchase warrants were issued, the exercise price, and  the
expiration date of the share purchase warrants.
<TABLE>
                                     
                               Table No. 11
                    Share Purchase Warrants Outstanding
<S>            <C>        <C>          <C>      <C>    <C>
               Number of  Number of
               Share      Share                        Expiration
               Purchase   Purchase                        Date of
Effective      Warrants   Warrants      Exercise Price      Share
Date of        Originally Still         First   Second   Purchase
Issuance       Granted    Outstanding   Year      Year   Warrants
 6/02/96 (1)   905,000    835,000       $3.50 (18 months) 2/02/98
 8/05/97 (2)    91,000     91,000        6.00     7.00    7/08/98
12/09/97 (3)   150,000    150,000        6.90     7.94    2/03/99
</TABLE>
(1)  Issued upon exercise of the July 1996 Special Warrants.
(2)  Issued upon exercise of the January 1997 Special Warrants.
(3)  Issued pursuant to acquisition of Importex.

In addition, in January 1997, the Company issued 1,600,000 Special Warrants
at  $6.00  each.   Each  Special Warrant entitles the  holder  to  acquire,
without  additional  payment, one SW Unit.  Each SW Unit  consists  of  one
common  share and one share purchase warrant which entitles the  holder  to
purchase  one additional common share at $7.00 until 7/8/98.  1,509,000  of
these  Special Warrants remain outstanding.  Officers/Directors own  34,000
Special Warrants.

In  connection  with  the  above referenced private  placement  of  Special
Warrants,  the  Company issued 128,000 Agent Warrants.  Each Agent  Warrant
entitles the holder to acquire, without additional consideration, one Agent
Unit.   Each Agent Unit consists of one common share and one share purchase
warrant  which entitles the holder to purchase one additional common  share
at $7.00 until 7/8/98.
In  addition, in October 1997, the Company issued Convertible Notes in  the
amount of US$5,000,000.  The Convertible Notes bear cumulative dividends at
the  rate  of  6%  per  year, payable in cash or  in  common  shares.   The
Convertible  Notes  entitle  the  holders to  acquire,  without  additional
payment, Convertible Debentures in the aggregate amount of US$5,000,000 and
an  aggregate  of  250,000  CN  Warrants.  The Convertible  Debentures  are
convertible into common shares at a conversion price equal to the lower  of
(a)  US$2.33 or (b) 85% of the closing price of the Company's common shares
on NASDAQ on the conversion date.

Each  CN Warrant is exercisable for two years (until 10/1/99), and entitles
the  holder to purchase one common share at US$4.76 per share in the  first
year and at US$5.20 per share during the second year.

A  holder of a Convertible Debenture has the right to convert same  at  any
time during the Debenture Conversion Period, commencing the earlier of: (a)
December  30,  1997  or  (b)  the later of the  the  effective  date  of  a
Registration Statement filed with the US Securities and Exchange Commission
under the 1933 Act regarding the Convertible Notes or the date on which the
last  of  the  receipts  for  a  prospectus  filed  with  British  Columbia
Securities  Commission regarding registration of the Convertible Debentures
and CN Warrants, and maturing on October 2, 1998.

<PAGE>

ITEM 13.  INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS

Ross  Scavuzzo, a director of the Company, was the President of Arjo and  a
director  of the Company at the time the Company entered into an  agreement
with  Arjo  whereby the Issuer has acquired Arjo's Liquid  Division.   (See
ITEM  #9, "Management's Discussion and Analysis of Financial Condition  and
Results  of  Operation, Acquisitions and Dispositions, Liquid  Division  of
Arjo Canada Inc.")

Janice  Shahsavar, the Vice-President Human Resources of the  Company,  owns
100%  of the issued and outstanding shares of Excelco.  In addition, Mahmood
(Mac)  Shahsavar,  the President, Chief Executive Officer,  Promoter  and  a
director  of  the Company, is the President and Chief Executive  Officer  of
Excelco.   The  Company has entered into an agreement  whereby  Excelco  has
granted to the Company the right to use certain Robotic Technology.   During
Fiscal  1995/1996/1997, respectively, the Company paid  $345,890,  $314,228,
and  $804,832  for  machinery and equipment from  Excelco.   (See  ITEM  #9,
"Management's Discussion and Analysis of Financial Condition and Results  of
Operation,   Acquisitions  and  Dispositions,  Robotic  Technology   License
Agreement".)

See  ITEM  #9, "Management's Discussion and Analysis of Financial Condition
and  Results  of Operation, Financial Assistance, Manitoba Government"  for
information  relating to certain restrictions and obligations  placed  upon
Mahmood  (Mac) Shahsavar and Janice Shahsavar in order to provide  security
to MDC pursuant to the MG Agreement.

Darrell  Wayne Van Dyke, Vice President of NHMC US, was General Manager  of
Huntington Laboratories Gam-Med Division, Inc. ("Gam-Med") at the time that
the  Company  entered  into an agreement with Gam-Med whereby  the  Company
acquired  the on-going business and certain assets of Gam-Med.   (See  ITEM
#9,  "Management's  Discussion  and Analysis  of  Financial  Condition  and
Results   of   Operation,   Acquisitions   and   Dispositions,   Huntington
Laboratories Gam-Med Division, Inc.)

Aristotle  (Telly) John Mercury, Director of the Company, is a  partner  in
the  Manitoba  law  firm of Aikins MacAulay & Thorvaldson.   During  Fiscal
1995/1996/1997,  respectively,  that  firm  received  $1,927,  $64,965  and
$48,331 for legal services rendered to the Company.

Seyed  Torabian  and Elaine Afflect are both directors of World  Wide  Golf
Resorts and Mahood (Mac) Shahsavar is Chairman.
Shareholder Loans
At   6/30/95, 6/30/96, and 6/30/97, respectively, the  Company had received
non-interest bearing loans totaling $203,109, $551,479, and $1,049,410 from
Excelco  (owned by Janice Shahsavar; in addition, Mahmood (Mac)  Shahsavar,
is President/CEO of Excelco), which loans have no fixed terms of repayment.

At  6/30/95,  6/30/96, and 6/30/97, respectively, the Company had  received
  non-interest  bearing  loans  totaling $0, $155,496,  and  $155,496  from
Inscoca, an arm's length company which had a significant stock position  in
the  Company  until 3/13/96 whereupon the shareholding in the  Company  was
distributed to that firm's shareholders, which loans have no fixed terms of
repayment.

At 6/30/97, Mahmood (Mac) Shahsavar owed the Company $17,355.

At 6/30/96 and 6/30/97, respectively, the Company had received non-interest
bearing  loans totaling  $25,320 and $877,219 from companies controlled  by
Mahmood (Mac) Shahsavar, President and CEO of the Company.  These loans are
unsecured, non-interest bearing, with no fixed terms of repayment.

<PAGE>

Accrued Salaries
Salary  owed  to  Mahmood  (Mac) Shahsavar, President/CEO/Director  of  the
Company, for Fiscal 1995/1996/1997, respectively, of $60,000, $120,000, and
$120,000 has been accrued but not paid.

Salary  owed  to  Morteza  Seyed  Torabian, Executive  Vice  President  and
Director of the Company, for Fiscal 1995 and 1996, respectively, of $48,000
and $72,000 was been accrued but not paid.  During Fiscal 1997, the Company
paid  $138,000  to Mr. Torabian, leaving a balance of $54,000  accrued  and
owing.


Other  than  as  disclosed  above, there have been  no  transactions  since
8/23/93, or proposed transactions, which have materially affected  or  will
materially affect the Company in which any Director, Executive Officer,  or
beneficial holder of more that 10% of the outstanding common shares, or any
of their respective relatives, spouses, associates or affiliates has had or
will have any direct or material indirect interest.

Management  believes the transactions referenced above  were  on  terms  at
least  as favorable to the Company as the Company could have obtained  from
unaffiliated parties.
                                  PART II

ITEM 14.  DESCRIPTION OF SECURITIES TO BE REGISTERED

The  authorized capital of the Company is an unlimited number  of  Class  A
common  shares  without  par  value, of which 12,474,331  were  issued  and
outstanding at 11/30/97.

Effective  5/15/95, the Company's common shares were split on  a 571.4286:1
basis.   All  discussion in this Annual Report  refers to post-split  stock
unless otherwise indicated.

All  of  the authorized shares of common shares of the Company are  of  the
same  class and, once issued, rank equally as to dividends, voting  powers,
and  participation in assets.  Holders of common shares are entitled to one
vote for each share  held of record on all matters to be acted upon by  the
shareholders.

Holders of common shares are entitled to receive such dividends as  may  be
declared  from  time to time by the Board of Directors, in its  discretion,
out of funds legally available therefore.

Upon  liquidation,  dissolution or winding up of the  Company,  holders  of
common  shares are entitled to receive pro rata the assets of  Company,  if
any, remaining after  payments of all debts and liabilities. No shares have
been  issued  subject to call or assessment.  There are no  pre-emptive  or
conversion  rights  and  no  provisions  for  redemption  or  purchase  for
cancellation, surrender, or sinking or purchase funds.

There  are no restrictions on the repurchase or redemption of common shares
of  the Company while there is any arrearage in the payment of dividends or
sinking fund installments.

Pursuant  to  the  MG Agreement the Company is restricted from  paying  any
dividends  for  the first three years after the initial  advance  of  funds
under  the  MG  Agreement  (until October 1998).   In  addition,  the  WEDD
Agreement  prohibits the Company from paying dividends  without  the  prior
written approval of the FGWEDD until the WEDD loan is repaid in full.

<PAGE>

Manitoba Corporations Act

Provisions  as  to  the  modification,  amendment  or  variation  of   such
shareholder  rights or provisions are contained in the Corporation  Act  of
Manitoba.   Unless  the  Corporations Act  or  the  Company's  Articles  or
memorandum otherwise provide, any action to be taken by a resolution of the
members  may be taken by an ordinary resolution or by a vote of a  majority
or more of the common shares represented at the shareholders' meeting.

The Company's Articles and the Manitoba Corporations Act contain provisions
which  require  a  "special   resolution" for effecting  certain  corporate
actions.   Such  a  "special  resolution" requires  a  two-thirds  vote  of
shareholders  rather  than a simple majority for  passage.   The  principle
corporate actions that require a "special resolution" include:
a.  Transferring the Company's jurisdiction from one province
    to another jurisdiction;
b.  Disposing of all or substantially all of the Company's
    undertakings;
c.  Removing a Director before expiration of his term of office;
d.  Certain alterations of share capital;
e.  Changing the Company name;
f.  Altering any restrictions on the Company's business; and
g.  Certain reorganizations of the Company.

In  addition,  the Manitoba Corporation Act permits cumulative  voting  for
Directors.

Escrowed Performance Shares
1,180,000   of  the  issued and outstanding  common  shares  are  "Escrowed
Performance Shares" held as indicated below:
Mahmood (Mac) Shahsavar  -- 690,000 shares
Seyed Torabian           -- 120,000 shares
Janice Shahsavar         -- 120,000 shares
Alice Elaine Affleck     --  80,000 shares
Robert Alexander Jackson --  50,000 shares
Employees                -- 120,000 shares

The  escrow restrictions provide that the common shares may  not be  traded
in,  dealt with in any manner whatsoever, or released, nor may the Company,
its transfer agent or escrow holder make any transfer or record any trading
of  these  shares without the consent of the Superintendent of Brokers  for
British Columbia.
The   terms  of  the  escrow  agreement  provide  that  a  portion  of  the
consideration  for  the  original issuance of the  escrowed  shares  is  to
encourage  the  escrow  shareholders to act in the best  interests  of  the
Company, and if the Company becomes successful, due in part to the  efforts
of  the  escrow  shareholders, or any one of them, the escrow  shareholders
shall be entitled to maintain their ownership of the escrowed shares and to
a  release of the shares from the terms of the escrow agreement, from  time
to  time, in accordance with the general policies of the Superintendent  of
Brokers or the Vancouver Stock Exchange.

The   performance shares may be released from escrow, on a  pro-rata basis,
based upon the cumulative cash flow of the Company, as   evidenced  by  the
  Company's   annual  audited   financial statements.    "Cash   Flow"   is
defined  as  Net   Income  or  loss before tax, adjusted for  certain  add-
backs.   For  each  $0.09  of cumulative  cash  flow   generated   by   the
 Company  from   its operations, one performance share may be released from
escrow.

<PAGE>

The   terms   of  the escrow agreement further  provide  that   any  escrow
shares not released shall be canceled if the  Company's common  shares  are
 subject to a cease  trade  order  for  two consecutive years.

The   terms   of  the escrow agreement further  provide  that   any  escrow
shares not released by 11/30/2005 shall be canceled.

See  ITEM  #9, "Management's Discussion and Analysis of Financial Condition
and  Results  of Operation, Financial Assistance, Manitoba Government"  for
information  relating to certain restrictions and obligations  placed  upon
Mahmood  (Mac) Shahsavar and Janice Shahsavar in order to provide  security
to  MDC  pursuant  to the MG Agreement with respect to the sale,  transfer,
assignment  or  other disposition of their respective escrowed  performance
shares.


Debt Securities to be Registered.  Not applicable.
American Depository Receipts.  Not applicable.
Other Securities to be Registered.  Not applicable.
                                 PART III

ITEM 15.  DEFAULTS UPON SENIOR SECURITIES  Not Applicable.

ITEM 16.  CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR
          REGISTERED SECURITIES  Not Applicable.



                                  PART IV

ITEM 17.  FINANCIAL STATEMENTS
The  Company's  financial statements are stated in Canadian Dollars  (CDN$)
and  are prepared in accordance with Canadian Generally Accepted Accounting
Principles  (GAAP), the application of which, in the case of  the  Company,
conforms  in  all material respects for the periods presented  with  United
States GAAP, except as discussed in notes to the financial statements.

The  financial statements and notes thereto as required under ITEM #17  are
attached  hereto and found immediately  following the text of  this  Annual
Report.   The audit reports of Arthur Andersen & Co. and Deloitte & Touche,
independent   Chartered  Accountants,  are  included   herein   immediately
preceding the financial statements.

  Audited Financial Statements
  for Fiscal 1997, Fiscal 1996 and Fiscal 1995


ITEM 18.  FINANCIAL STATEMENTS
The  Company has elected to provide financial statements pursuant  to  ITEM
#17.
ITEM 19.  FINANCIAL STATEMENTS AND EXHIBITS

(A)  FINANCIAL STATEMENTS

The  financial statements and notes thereto as required under ITEM #17  are
attached  hereto and found immediately  following the text of  this  Annual
Report.  The audit reports of Arthur Andersen & Co.  and Deloitte & Touche,
independent Chartered Accountants, for the audited financial statements and
notes  thereto  are  included  herein  immediately  preceding  the  audited
financial statements.

<PAGE>

     Audited Financial Statements:
     Fiscal 1997, 1996 and 1995 Ended June 30th
       Auditor's Report dated 10/6/1997
       Auditor's Report dated 11/8/1996

       Consolidated Balance Sheet at 6/30/97 and 6/30/96

       Consolidated Statement of Operations
        for the years ended 6/30/97, 6/30/96 and 6/30/95

       Consolidated Statement of Shareholders' Equity
        for the years ended 6/30/97, 6/30/96 and 6/30/95

       Consolidated Statements of Changes in Financial Position
        for the years ended 6/30/97, 6/30/96 and 6/30/95

       Notes to Consolidated Financial Statements
(B)  INDEX TO EXHIBITS:
                                                           Page

     1.  Certificate of Incorporation, By-Laws/Articles
         -- Incorporated by Reference to Form 20-FR
            (as amended) and Form 6K's --

     2.  Instruments defining the rights of holders of
         equity or debt securities being registered.
            --- Refer to Exhibit No. 1 ---

     3.  Material Contracts:
         -- Incorporated by Reference to Form 20-FR
            (as amended) and Form 6K's --

     4.  Foreign Patents: Not Applicable.
     5.  Diagram of Parent and Subsidiaries: Not Included.

     6.  Other Documents:
         -- Incorporated by Reference to Form 20-FR
            (as amended) and Form 6K's --





     SIGNATURE PAGE.......................................   99

<PAGE>

               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
               
               CONSOLIDATED FINANCIAL STATEMENTS
               
               FOR THE YEAR ENDED JUNE 30, 1997
               
               
               TOGETHER WITH AUDITORS' REPORT

<PAGE>                                     
                             AUDITORS' REPORT
                                     

To the Directors of
NATIONAL HEALTHCARE MANUFACTURING CORPORATION:

We  have  audited  the  consolidated balance sheet of  NATIONAL  HEALTHCARE
MANUFACTURING CORPORATION (a Manitoba corporation) as at June 30, 1997  and
the  consolidated statement of operations, shareholders' equity and changes
in  financial  position  for  the  year  then  ended.   These  consolidated
financial  statements  are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We  conducted  our  audit  in accordance with generally  accepted  auditing
standards in Canada, which are in substantial agreement with those  in  the
United States of America.  Those standards require that we plan and perform
an  audit  to obtain reasonable assurance 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.

In  our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at June 30,
1997  and  the  results of its operations and the changes in its  financial
position  for  the  year then ended in accordance with  generally  accepted
accounting principles in Canada.

Accounting  practices  of  the Company used in preparing  the  accompanying
consolidated   financial   statements  conform  with   generally   accepted
accounting  principles applicable to consolidated financial  statements  in
Canada  ("Canadian  GAAP"), but do not conform with  accounting  principles
generally  accepted  in  the United States of  America  ("U.S.  GAAP").   A
description of the significant differences between Canadian GAAP  and  U.S.
GAAP  and  the approximate effect of those differences on consolidated  net
loss  and  shareholders' equity are set forth in Note 19 of  the  Notes  to
consolidated financial statements.

The   consolidated  balance  sheet  of  National  Healthcare  Manufacturing
Corporation  as  at  June  30,  1996  and  the  consolidated  statement  of
operations, shareholders' equity and changes in financial position for  the
years  ended  June  30, 1996 and 1995 were audited by  other  auditors  who
expressed  an  opinion  without reservation on those  statements  in  their
report dated July 22, 1996.


Winnipeg, Manitoba
October 6, 1997

<PAGE>
<TABLE>
               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
                        CONSOLIDATED BALANCE SHEET
                               JUNE 30, 1997
              (with comparative balances as at June 30, 1996)
                                  ASSETS
                                     
                                                         1997          1996
<S>                                                <C>             <C>       
CURRENT ASSETS                                                             
Cash and short-term investments                    $4,213,255      $958,568
Accounts receivable (Note 8)                        1,827,239       153,322
Inventories (Notes 4 and 8)                         2,850,012       507,203
Prepaid expenses                                      364,998        73,808
                                                    9,255,504     1,692,901
INVESTMENT IN NATIONAL                                                     
  HEALTHCARE LOGISTICS LLC (Note 5)                   490,772             -
PROPERTY, PLANT AND EQUIPMENT                                              
  USED IN OPERATIONS (Notes 6, 8 and 9)             7,698,374     6,916,680
ASSETS UNDER DEVELOPMENT (Notes 7, 8  and 9)        9,868,849     8,924,389
                                                  $27,313,499   $17,533,970
<FN>
</TABLE>
<TABLE>
                                     
                   LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                 <C>           <C>      
CURRENT LIABILITIES                                                        
Cheques issued in excess of amounts on deposit       $349,336       $68,448
Accounts payable and accrued liabilities            1,271,616     1,123,986
Current portion of long-term debt (Note 8)            460,000             -
Current portion of obligations                                             
  under capital leases (Note 9)                     1,718,552     1,427,042
                                                    3,799,504     2,619,476
LONG-TERM DEBT (Note 8)                             2,807,326     2,169,085
OBLIGATIONS UNDER CAPITAL LEASES (Note 9)           5,504,985     7,223,699
DEFERRED FOREIGN EXCHANGE GAIN                         54,128       204,073
LOANS PAYABLE TO SHAREHOLDERS                                              
  AND DIRECTOR-RELATED COMPANIES (Note 10)          2,064,770       720,826
                                                   14,230,713    12,937,159
SHAREHOLDERS' EQUITY                                                       
Share capital (Note 11)                             9,318,163     8,677,351
Warrants (Note 12)                                 12,093,206             -
Deficit                                           (8,328,583)   (4,080,540)
                                                   13,082,786     4,596,811
                                                  $27,313,499   $17,533,970
<FN>
</TABLE>
<PAGE>
<TABLE>
                                   
                                     
               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
                   CONSOLDIATED STATEMENT OF OPERATIONS
                     FOR THE YEAR ENDED JUNE 30, 1997
  (with comparative balances for the years ended June 30, 1996 and 1995)
                                     
                                     
                                              1997        1996         1995
<S>                                     <C>           <C>            <C>   
REVENUES                                                                   
Sales (Note 14)                         $4,905,401    $556,105           $-
Other                                      166,196      51,339       25,659
                                         5,071,597     607,444       25,659
COSTS AND EXPENSES                                                         
Cost of sales                            2,637,315     291,319            -
Depreciation and amortization                                              
  of property, plant and equipment       1,576,975   1,188,053            -
Interest on long-term debt                 415,035     409,258            -
Other                                       56,026      42,208            -
Selling,       distribution       and    4,424,582   1,888,352      894,453
administrative
                                         9,109,933   3,819,190      894,453
LOSS FROM OPERATIONS                     4,038,336   3,211,746      868,794
LOSS FROM INVESTEE                         209,707           -            -
NET LOSS                                $4,248,043  $3,211,746     $868,794
                                                                           
                                                                           
BASIC LOSS PER SHARE                       $  0.39       $0.32        $0.15
                                                                           
WEIGHTED AVERAGE                                                           
  COMMON SHARES OUTSTANDING             10,925,842  10,088,419    5,767,530
<FN>
</TABLE>
<PAGE>
<TABLE>
               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                     FOR THE YEAR ENDED JUNE 30, 1997
  (with comparative balances for the years ended June 30, 1996 and 1995)
                                     
          Class A Common Shares                                       
                                     
              Shares      Amount    Paid in Ca        Deficit         Total
                                         pital
                                     
                                                                           
<S>              <C>          <C>      <C>              <C>             <C>  
Balance                                                                    
s at                                                                       
June                                                                       
30,                                                                        
1994               -          $-        $    -           $  -            $-
                                     
Issue                                                                      
of                                                                         
shares                                                                     
for                                                                        
cash          13,472   6,339,864             -              -     6,339,864
                                     
Issue                                                                      
of                                                                         
shares                                                                     
for                                                                        
propert                                                                    
y                350     350,000             -              -       350,000
                                     
Share                                                                      
split      7,884,468           -             -              -             -
                                     
Issue                                                                      
of                                                                         
shares                                                                     
for                                                                        
cash       1,680,000     136,800             -              -       136,800
                                     
Net                                                                        
loss               -           -             -      (868,794)     (868,794)
                                     
Balance                                                                    
s at                                                                       
June                                                                       
30,                                                                        
1995       9,578,290   6,826,664             -      (868,794)     5,957,870
                                     
                                                                           
                                     
Issue                                                                      
of                                                                         
shares                                                                     
for                                                                        
cash       1,175,000   2,306,250             -              -     2,306,250
                                     
Share                                                                      
issue                                                                      
costs              -   (455,563)             -              -     (455,563)
                                     
Net                                                                        
loss               -           -             -    (3,211,746)   (3,211,746)
                                     
Balance                                                                    
s at                                                                       
June                                                                       
30,                                                                        
1996                                                                       
                                                                           
          10,753,290   8,677,351             -    (4,080,540)     4,596,811
                                     
Issue                                                                      
of                                                                         
shares                                                                     
for                                                                        
cash          67,125     140,812             -              -       140,812
                                     
Issue                                                                      
of                                                                         
special                                                                    
warrant                                                                    
s (Note                                                                    
12)                -           -    12,315,000              -    12,315,000
                                     
Warrant                                                                    
issue                                                                      
costs              -           -     (221,794)              -     (221,794)
                                     
Exercis                                                                    
e of                                                                       
warrant                                                                    
s (Note                                                                    
12)          250,000     500,000             -              -       500,000
                                     
Net                                                                        
loss               -           -             -    (4,248,043)   (4,248,043)
                                     
Balance                                                                    
s at                                                                       
June                                                                       
30,                                                                        
1997      11,070,415  $9,318,163   $12,093,206   $(8,328,583)   $13,082,786
<FN>
</TABLE>
<PAGE>

<TABLE>
                                     
               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
          CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
                     FOR THE YEAR ENDED JUNE 30, 1997
  (with comparative balances for the years ended June 30, 1996 and 1995)
<S>                              <C>            <C>              <C>       
                                         1997           1996           1995
CASH PROVIDED BY (USED IN)                                                 
OPERATING ACTIVITIES                                                       
Net loss                         $(4,248,043)   $(3,211,746)     $(868,794)
Items not affecting cash                                                   
Amortization of deferred                                                   
  foreign exchange gain                                                    
                                     (15,950)              -              -
Depreciation and amortization                                              
                                    1,576,975      1,188,053              -
Loss from investee                    209,707              -              -
                                  (2,477,311)    (2,023,693)      (868,794)
Net change in non-cash                                                     
  operating assets and
liabilities
Accounts receivable               (1,416,063)      (104,443)       (48,879)
Inventories                       (1,377,116)      (507,203)              -
Prepaid expenses                    (291,190)          7,904       (81,712)
Accounts payable and accrued                                               
liabilities                           147,630        393,833        730,153
                                  (5,414,050)    (2,233,602)      (269,232)
INVESTING ACTIVITIES                                                       
Acquisition of shares in                                                   
  National Healthcare                                                      
Logistics LLC                       (700,479)              -              -
Acquisition of property, plant                                             
and equipment                     (1,476,066)    (1,583,214)   (14,692,122)
Deposit on specialized                                                     
equipment                                   -              -      (753,786)
Interest capitalized on                                                    
equipment                           (475,404)              -              -
Acquisition of National Care                                               
Products Ltd.                       (896,447)              -              -
Acquisition of Gam-Med                                                     
Division                          (1,678,728)              -              -
                                  (5,227,124)    (1,583,214)   (15,445,908)
FINANCING ACTIVITIES                                                       
Proceeds from (repayment of)                                               
obligations under capital                                                  
leases                            (1,427,204)      (186,189)      8,836,930
Proceeds from long-term debt                                               
                                    1,098,241      2,169,085              -
Deferred foreign exchange gain                                             
                                    (134,026)          9,772        194,301
Advances from shareholders and                                             
director-related companies                                                 
                                                                           
                                    1,343,944        517,717        203,109
Net proceeds from issuance of                                              
  Class A common shares                                                    
                                      640,812      1,850,687      6,826,664
Net proceeds from issuance of                                              
warrants                           12,093,206              -              -
                                   13,614,973      4,361,072     16,061,004
INCREASE IN CASH                    2,973,799        544,256        345,864
CASH, beginning of year               890,120        345,864              -
CASH, end of year                  $3,863,919       $890,120       $345,864
                                                                           
Represented by:                                                            
Cash and short-term                                                        
investments                        $4,213,255       $958,568       $345,864
Cheques issued in excess of                                                
funds on deposit                    (349,336)       (68,448)              -
                                   $3,863,919       $890,120       $345,864
Supplemental disclosure of                                                 
cashflow information
Cash paid for:Interest (net of                                             
amount capitalized)                  $415,035       $184,241             $-
             Income taxes                 $ -             $-             $-
<FN>
</TABLE>
<PAGE>


               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
                                     
1.DESCRIPTION OF BUSINESS
   
   National  Healthcare  Manufacturing  Corporation  (the  "Company")   was
   incorporated on August 23, 1993 under the Manitoba Corporations Act  and
   registered  as  an extra provincial company in the Province  of  British
   Columbia  on December 9, 1994. The Company is primarily engaged  in  the
   manufacturing,  assembly  and  packaging of  medical  supplies  for  the
   healthcare  industry.   Its shares are traded  on  the  Vancouver  Stock
   Exchange.  As of August 14, 1996, the shares of the Company were  listed
   on the Small Cap board of NASDAQ Stock Market.
   
   These   consolidated  financial  statements  have   been   prepared   in
   accordance  with accounting principles generally accepted in Canada  and
   conform  in  all material respects with accounting principles  generally
   accepted  in  the United States, except as described in  Note  19.   All
   amounts are stated in Canadian dollars.
   
   
2.BUSINESS CONSIDERATIONS
   
   The  Company  has  incurred significant upfront costs  to  establish  an
   automated  plant  for  the assembly and packaging  of  medical  supplies
   which  management  believes is necessary to establish  a  strong  market
   presence  as  a  new entrant to the healthcare industry.  The  Company's
   objective  is  to  produce and distribute custom products  to  users  of
   medical  and  surgical devices throughout North America.  During  fiscal
   1997,  the  Company successfully obtained certification for distribution
   of  products in the United States from the Food and Drug Administration.
   Management's   plans   for  fiscal  1998  are   to   obtain   ISO   9001
   certification,  develop electronic data interchange, undertake  research
   and  development to streamline operations and expand product lines,  and
   evaluate   the   acquisition  of  business  with  existing  distribution
   networks  in  order to consolidate sales and marketing activities.   The
   Company  anticipates  manufacturing products for national  and  regional
   distributing  companies  and  intends  to  sell  directly  to   homecare
   providers  across  Canada and the United States.  The  long-term  growth
   plan  of the Company includes the targeting of additional markets.   The
   Company  expects that private/original equipment manufacturers' branding
   of  products for other manufacturers and/or distributors will be handled
   directly  by  the Company.  No formal agreements are in  place  at  this
   time.
   
   The  Company  has  incurred significant operating  losses  and  business
   development   costs  to  date  and  had  a  consolidated  deficit   from
   operations of $8,328,583 as at June 30, 1997.  As at June 30, 1997,  the
   Company had positive working capital, primarily due to additional  funds
   raised  through  two  private placements (see Note 12).   The  Company's
   ability  to  continue  as a going concern is dependent  upon  developing
   profitable  operations and obtaining additional funds needed to  finance
   these development activities.

   
   These  consolidated financial statements have been prepared on the going
   concern  basis, which assumes that the Company will realize  its  assets
   and discharge its liabilities in the normal course of operations.

<PAGE>
   
               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
                                     
3.ACCOUNTING POLICIES
   
   Basis of Consolidation
   
   These  consolidated  financial statements include the  accounts  of  the
   Company   and   its   wholly-owned  subsidiaries   National   Healthcare
   Manufacturing  Corporation, U.S. and National Care  Products  Ltd.   All
   significant intercompany transactions and balances have been  eliminated
   upon  consolidation.  The Company accounts for its investments  in  non-
   controlled investees using the equity method.
   
   Cash and Short-term Investments
   
   Cash   and   short-term  investments  consist  principally  of   deposit
   instruments which are highly liquid and have original maturities  of  90
   days or less.
   
   Inventories
   
   Raw  materials  are  valued at the lower of cost and  replacement  cost.
   Finished  goods  are  valued at the lower of  cost  and  net  realizable
   value.  Cost is determined on the first in, first out basis.
   
   Property, Plant and Equipment Used in Operations
   
   Property,  plant  and equipment used in operations is recorded  at  cost
   less   accumulated  depreciation.   Costs  of  additions,   betterments,
   renewals  and interest during development are capitalized.  Depreciation
   is  being  provided for by the declining balance method at the following
   annual rates:
   
   
   Building, improvements and paving                        4 - 8%
   Furniture and fixtures                                      20%
   Computer equipment                                     20 - 30%
   Machinery and equipment                                20 - 30%
   Equipment under capital lease                               30%

<PAGE>
   
               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
                                     
3.SIGNIFICANT ACCOUNTING POLICIES (continued)
   
   Assets under Development
   
   Assets  under  development  are recorded at  cost.   Cost  includes  all
   expenditures incurred in acquiring the asset and preparing it  for  use.
   Interest  costs  on related debt obligations are capitalized  until  the
   asset  is  substantially  completed  and  ready  for  its  intended  and
   productive use.
   
   Leases
   
   Leases  entered  into  are  classified as either  capital  or  operating
   leases.   Leases  that transfer substantially all of  the  benefits  and
   risks  of ownership to the Company are accounted for as capital  leases.
   At  the  time  a  capital lease is entered into, an  asset  is  recorded
   together with a related long-term obligation.  Equipment acquired  under
   capital  leases  is being depreciated on the same basis as  other  fixed
   assets.
   
   Rental  payments  under  operating leases are  charged  to  expenses  as
   incurred.
   
   Deferred Foreign Exchange Gain
   
   The  deferred  foreign  exchange gain relates to the  obligations  under
   capital  leases  and is being amortized over the term of the  respective
   leases.
   
   Revenue Recognition
   
   Sales  revenues  are  recognized at the  time  of  product  shipment  to
   distributors or customers.
   
   Foreign Currency Translation
   
   Foreign currency transactions are translated to Canadian dollars at  the
   rate  of  exchange in effect on the dates they occur.   Monetary  assets
   and  liabilities  are  subsequently adjusted  to  reflect  the  rate  of
   exchange  in  effect  at  the balance sheet date.   Exchange  gains  and
   losses  arising  on translation of monetary assets and  liabilities  are
   included  in  income, except for unrealized exchange  gains  and  losses
   relating  to  the  translation of the obligations under  capital  leases
   which are deferred and amortized over the remaining term of the leases.
   
   Use of Estimates
   
   The  preparation  of financial statements in accordance  with  generally
   accepted  accounting principles requires management  to  make  estimates
   and   assumptions  that  affect  the  reported  amounts  of  assets  and
   liabilities  and  disclosure  of  contingencies  at  the  date  of   the
   financial  statements and the reported amounts of revenues and  expenses
   during  the  reporting period.  Actual results could differ  from  those
   estimates.

<PAGE>

               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
                                     
3.SIGNIFICANT ACCOUNTING POLICIES (continued)
   
   Loss Per Share
   
   Loss  per  share  data has been computed by dividing  net  loss  by  the
   weighted average number of common shares outstanding during the year.
   

<TABLE>   
4.INVENTORIES
   
<S>                                             <C>          <C>   
                                                     1997      1996
                                                            
Raw Materials                                     $912,681   $280,542
Finished goods and samples                       1,937,331    226,661
                                                $2,850,012   $507,203
<FN>
</TABLE>
   

5.INVESTMENT IN NATIONAL HEALTHCARE LOGISTICS LLC
   
   During  fiscal  1997,  the Company acquired 150 Class  A  common  voting
   shares,  representing  a 50% interest, and 333 1/3  Class  C  non-voting
   preferred  shares of National Healthcare Logistics LLC.  This investment
   is being accounted for under the equity method.

<TABLE>
6.PROPERTY, PLANT AND EQUIPMENT USED IN OPERATIONS

   
                                   1997                           1996
                                     Accumulated                 
                        Cost         Depreciation    Net         Net
<S>                     <C>            <C>           <C>         <C>         
   Land                    $565,461         $  -       $565,461    $125,000
 Building,                                                                 
   improvements           2,331,828      126,618      2,205,210   1,742,117
     and paving
   Furniture and            254,897       61,286        193,611     139,872
   fixtures
   Computer                 216,783       27,989        188,794      36,198
   equipment
   Machinery and          2,882,646      821,094      2,061,552   1,889,932
   equipment
   Equipment under                                                         
   capital                4,211,479    1,727,733      2,483,746   2,983,561
     lease
                        $10,463,094   $2,764,720     $7,698,374  $6,916,680
<FN>
</TABLE>
   
   In  fiscal  1997,  no  interest was capitalized to the  equipment  under
   capital lease (1996 - $89,034).
   
<PAGE>                                     
               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
<TABLE>
                                     
7.ASSETS UNDER DEVELOPMENT
   
   
                                                    1997       1996
   <S>                                              <C>          <C>         
   Machinery and equipment in storage                $408,562      $408,562
   Refundable  deposit on equipment lease  (Note            -       753,786
   9)
   Equipment under capital lease (1194)             2,313,245     2,432,299
   Equipment under capital lease (1094 - 001)       7,147,042     5,329,742
                                                   $9,868,849    $8,924,389
<FN>
</TABLE>

   In  fiscal  1997, the refundable deposit on equipment lease was  applied
   against  obligations  under  capital  lease,  in  connection  with   the
   settlement as described in Note 9.
   
   Interest  of  $475,404  (1996 - $505,668) has been  capitalized  to  the
   equipment under capital lease 1094-001.
   
<TABLE>   
8.LONG-TERM DEBT

<S>                                               <C>             <C>
                                                          1997           1996
Western   Economic  Diversification,  term  loan,                            
matures  December  1,  1999,  unsecured,   non-                            
interest   bearing,   repayable   in   variable                            
quarterly payments commencing December 1, 1997    $1,654,180       $918,347
Province of Manitoba, term loan, bears interest at                           
the rate charged to Manitoba Crown Corporations                            
for borrowings amortized over a ten year period                            
(currently 8%), secured by a first fixed charge                            
against  land, buildings and equipment,  and  a                            
second  charge  over  accounts  receivable  and                            
inventories,   repayable  in  six   consecutive                            
monthly  instalments of $30,000 each commencing                            
May,  1999  and consecutive monthly instalments    1,613,146      1,250,738
of $51,958 each thereafter, until fully repaid
                                                     3,267,326      2,169,085
Less:  current portion                               (460,000)              -
                                                    $2,807,326     $2,169,085
<FN>
</TABLE>
   
   The   Western  Economic  Diversification  loan  represents  subordinated
   financial  assistance to a maximum of $1,937,852, to assist  in  capital
   costs,  marketing  cost,  and working capital requirements.   Under  the
   terms  of the loan agreement, the Company has agreed to maintain  equity
   of   not  less  than  $2,200,000  and  to  postpone  the  repayment   of
   shareholder loans and

<PAGE>

               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
                                     
8.LONG-TERM DEBT (continued)
   
   dividends  until  the loan is repaid in full.  Subsequent  to  June  30,
   1997,  a  further advance of $150,655 was received by the  Company  (See
   Note 18).
   
   The  Company has entered into an agreement with the Province of Manitoba
   for  a  term  loan.   The  loan is subject to certain  conditions  which
   include    minimum   capital   expenditures   of   $5,000,000,    equity
   contributions of $4,700,000, achievement of certain sales targets and  a
   minimum  level of new job creation.  A maximum of 42 months'  relief  on
   interest  has  been  granted  to the Company,  subject  to  the  Company
   providing  a  certain number of new jobs per year.  A final  advance  of
   $561,000  was received by the Company subsequent to June 30,  1997  (See
   Note 18).
   
   The  agreement  provides for the acceleration of interest and  principal
   in  the event the Company fails to provide a certain number of jobs  per
   year.  Under the terms of the loan agreement, the Company has agreed  to
   postpone the repayment of shareholder loans and dividends.
   
   Minimum  principal  repayments required under  the  terms  of  the  debt
   agreements  are  as  follows (including amounts advanced  subsequent  to
   June 30, 1997):
                                     
                          1998            $460,000
                          1999          $1,060,000
                          2000            $880,502
                          2001            $623,500
                          2002            $623,500
                          2003            $331,479
   
   
9.OBLIGATIONS UNDER CAPITAL LEASES
   
   The  Company  leases specialized equipment under three  capital  leases.
   The  leases  are held in U.S. dollars in the name of National Healthcare
   Manufacturing  Corporation, U.S. and are converted to  Canadian  dollars
   using the exchange rate as at June 30, 1997 as follows:

<PAGE>

               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
<TABLE>
                                     
9.OBLIGATIONS UNDER CAPITAL LEASES (continued)
   
<S>                         <C>           <C>         <C>       <C>   
                              Lease       Lease        Lease     
                             1094-001    1094-002      1194        Total
                                                                           
1998                        $1,131,226    $619,818    $675,705   $2,426,749
1999                         1,131,226     619,818     619,400    2,370,444
2000                         1,131,226     619,818           -    1,751,044
2001                         1,131,226     619,818           -    1,751,044
2002                           377,077     309,909           -      686,986
Total minimum lease          4,901,981   2,789,181   1,295,105    8,986,267
payments
Less: amount representing                                                  
interest approximating       1,055,670     619,705      87,355    1,762,730
10.4% to 11.5%
                             3,846,311   2,169,476   1,207,750    7,223,537
Less:  current portion         726,397     390,484     601,671    1,718,552
                            $3,119,914  $1,778,992    $606,079   $5,504,985
<FN>
</TABLE>
   
   Since  fiscal 1995, the Company was in dispute with the original  lessor
   in  respect  of capital leases 1094-001, 1094-002 and 1194.  The  lessor
   did  not  recognize  the validity of a settlement  agreement  signed  in
   fiscal  1995.   The  Company believed that it had  strong  arguments  to
   support  the validity of the settlement agreement.  As a result, certain
   adjustments  were  made in 1995 to the various equipment  under  capital
   leases  and  the  lease obligations based on the then interpretation  of
   the settlement terms.
   
   During fiscal 1997, the dispute was finally settled and the leases  were
   assumed  by a new lessor.  The terms were similar to the 1995 settlement
   agreement except for the following:
   
   i)The  refundable deposit on equipment paid by the Company  was  applied
       against the lease liability by the lessor.
   
   ii)The  implicit  interest  rate of the capital  lease  obligations  was
       reduced as a result of the settlement.
   
   The  capital  lease obligations, the respective equipment under  capital
   leases   and   the  refundable  deposit  on  equipment   were   adjusted
   accordingly.
   
   The   above  lease  obligations  reflect  the  new  lease  terms   after
   settlement of the dispute with the lessor.

<PAGE>
   
               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
<TABLE>
                                     
10.LOANS PAYABLE TO SHAREHOLDERS AND DIRECTOR-RELATED COMPANIES
   
                                                          1997           1996
<S>                                                 <C>              <C>     
Loans payable, shareholders                         $1,187,551       $720,826
Loans payable, director-related companies              877,219              -
                                                    $2,064,770       $720,826
<FN>
</TABLE>
   
   The  loans  payable to shareholders and director-related  companies  are
   unsecured, non-interest bearing, with no fixed terms of repayment.
   
   The  terms of the government assistance agreement with Western  Economic
   Diversification require that the Company obtain the consent of both  the
   Minister  of  Western Economic Diversification and Manitoba  Development
   Corporation  prior  to  the  repayment  of  shareholders'  loans.    The
   shareholders  and director-related companies have agreed to  not  demand
   repayment  within  fiscal  1998;  accordingly  these  loans  have   been
   classified as non-current.
   
   
11.SHARE CAPITAL


                                                         1997          1996
                                                                           
Common Shares                                                              
Authorized                                                                 
     Unlimited  Class A common shares, voting                              
                                                                           
Issued                                                                     
11,070,415Class A common shares,                                             
      net of issue costs (1996 - 10,753,290)       $9,318,163    $8,677,351
   
   Performance Shares
   
   The  Company has issued 1,180,000 performance shares at a price of  $.01
   per  share  which  are currently held in escrow pursuant  to  an  Escrow
   Agreement  dated  June 29, 1995.  The escrow restrictions  contained  in
   the  Escrow  Agreement provide that the shares may  not  be  traded  in,
   dealt  with in any manner whatsoever, or released, nor may the  Company,
   its  transfer  agent or escrow holder make any transfer  or  record  any
   trading  of  the  shares  without the consent of the  Superintendent  of
   Brokers  for  British Columbia or, while the shares are  listed  on  the
   Vancouver  Stock Exchange, the consent of the Exchange.  For  each  $.09
   of  cumulative  cash flow generated by the Company from its  operations,
   one performance share may be released from escrow.

<PAGE>

               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
                                     
11.SHARE CAPITAL (continued)
   
   Stock Options
   
   The  Company  has issued options to certain directors and  employees  of
   the  Company  and  its  subsidiaries to purchase common  shares  of  the
   Company, as follows:
<TABLE>
   
                                                           Date of Issuance
                                         1997      1996                1995
     <S>                              <C>       <C>              <C>        
     Options      outstanding,        957,829   987,829                 -
     beginning of year
     Options granted                  536,950         -           987,829
     Options exercised               (67,125)         -                 -
     Options   cancelled    or       (60,000)   (30,000)                 -
     expired
     Options outstanding,  end      1,367,654   957,829           987,829
     of year
                                                                         
     Exercise    prices     of                                           
     options                    $3.81 - $6.13                      $ 2.00
     granted during the year
     Expiry date of options     Aug 11, 2001                               
       granted during the year       and                  November 30, 2000
                                 June 3, 2002
<FN>
</TABLE>
   
   Certain  restrictions  and  obligations have been  placed  upon  certain
   management  personnel  with  respect to  the  exercise  of  their  stock
   options  and  the  sale, transfer, assignment or  other  disposition  of
   their  stock  options or shares issued to them upon  exercise  of  their
   stock  options,  as  a  condition of the government assistance  received
   from the Province of Manitoba.
   
   
12.WARRANTS
   
   The Company has issued various types of warrants, as follows:
   
   Agent's Warrants
   
   In  connection with its initial public offering the Company issued to an
   agent  non-transferable share purchase warrants entitling the  agent  to
   purchase  up  to 250,000 shares at any time up to the close of  business
   two  years  from the date the shares are listed, posted and  called  for
   trading  on the Vancouver Stock Exchange, at a price of $2.00 per  share
   in  the first year and at a price of $2.30 per share in the second year.
   As at June 30, 1997, all agents warrants had been exercised.
   
   Special Warrants
   
   On   June   26,  1996,  the  Board  of  Directors  passed  a  resolution
   authorizing  a private placement of up to 1,200,000 special warrants  at
   a  price  of  $3.00 per warrant.  On July 31, 1996, a total  of  905,000
   special  warrants  were issued for gross proceeds  of  $2,715,000.   The
   special warrants

<PAGE>

               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
                                     
12.WARRANTS (continued)
   
   Special Warrants (continued)
   
   were  issued  as  a  fully  paid security and each  special  warrant  is
   exercisable into one Class A common share and one transferable  Class  A
   share  purchase  warrant.  Each Class A share purchase warrant  entitles
   the  holder to purchase one additional Class A share at a price of $3.50
   per  share.   The  warrants are exercisable at the earlier  of  eighteen
   months  from the closing date or six months after the date of  the  last
   receipt for the prospectus.
   
   The  Company  paid  the agent commission equal to 7%  of  the  aggregate
   proceeds and issued 75,416 broker's warrants which represent 8.3333%  of
   the  special  warrants  sold pursuant to the  offering.   Each  broker's
   warrant   is   exercisable   into  one   compensation   warrant.    Each
   compensation warrant entitles the broker to purchase one Class  A  share
   at a price of $3.00 per share.
   
   On  January  8, 1997, the Company closed a second private  placement  of
   1,600,000  special  warrants at a price of $6.00  per  special  warrant.
   Each special warrant entitled the holder, upon exercise, to acquire  one
   unit  consisting  of  one  Class  A  share  and  one-half  of  one  non-
   transferable  share purchase warrant.  Each whole warrant  entitled  the
   holder to purchase one additional Class A share at a price of $7.00  per
   share.   Because  receipts for the prospectus filed by  the  Company  to
   qualify  the  units  were  not  obtained from  all  relevant  regulatory
   authorities  within  120  days  from the date  of  closing  the  private
   placement,  each unit now consists of one Class A share and one  (rather
   than  one-half)  non-transferable share purchase warrant.   The  Company
   raised  gross  proceeds  of $9,600,000 from this private  placement  and
   incurred  a  commission of 8% of gross proceeds which was  paid  by  the
   issuance  of  128,000 special warrants at a deemed price  of  $6.00  per
   special warrant.
   
   All   of   the  above  special  warrants  and  broker's  warrants   were
   outstanding at June 30, 1997.
   
13.INCOME TAXES
   
   The  Company  has  non-capital losses carried forward  of  approximately
   $10,990,000  (1996  - $4,883,000) which can be utilized  to  reduce  the
   taxable  income  of future years.  The Company is also entitled  to  tax
   credits   of  approximately  $244,000  (1996  -  $227,000)   which   are
   creditable against provincial income taxes.
   
   The  benefits relating to the losses and the tax credits have  not  been
   recognized  in  the  financial  statements  and  the  losses  expire  as
   follows:
   
                          2002          $1,887,000
                          2003           2,996,000
                          2004           6,006,000
                          2012             101,000
                                       $10,990,000
<PAGE>

               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
                                     
13.INCOME TAXES (continued)
   
   The tax credits available to the Company begin to expire in 2002.
   
   
14.SEGMENTED INFORMATION
   
   The  Company  operates  primarily in,  and  derives  revenue  from,  the
   automated packaging and sale of surgical and custom procedure trays  and
   liquid products for the healthcare industry segment.
   
   A  significant portion of the Company's sales during the  year  were  to
   customers in a foreign country:
   
                                                   1997       1996     1995
                                                                           
     Sales to customers outside Canada       $2,482,035   $384,888       $-
     Sales to customers within Canada         2,423,366    171,217        -
                                             $4,905,401   $556,105       $-


15.RELATED PARTY TRANSACTIONS
   
   The President and Chief Executive Officer of the Company also serves  as
   President  and  Chief  Executive Officer of another  company  which  has
   granted  National Healthcare Manufacturing Corporation rights to certain
   technology  under  a licensing agreement made under  similar  terms  and
   conditions  as  transactions  with  unrelated  entities.   The   license
   agreement, dated May 30, 1995, is for an initial term of ten years  with
   provisions  for  renewal  for  consecutive ten  year  terms  thereafter.
   National  Healthcare Manufacturing Corporation has  agreed  to  purchase
   all  automated machinery from this related company, subject to the terms
   of   a  twenty  year  agreement  between  the  related  company  and   a
   manufacturer.   The  related company has granted  the  manufacturer  the
   exclusive  right  to  manufacture  all  machinery  and  equipment  which
   incorporates the said technology, and the related company has agreed  to
   purchase  products  only from the manufacturer.  The related  party  has
   agreed   to   sell  machinery  and  equipment  to  National   Healthcare
   Manufacturing  Corporation at its cost.  During the  year,  the  Company
   paid  $804,832 (1996 - $314,228 and 1995 - $345,890) for such  machinery
   and equipment.
   
   The  above  transactions are measured at the exchange amount,  which  is
   the  amount  of consideration established and agreed to by  the  related
   parties.
   

<PAGE>

               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
                                     
16.BUSINESS ACQUISITIONS
   
   Acquisition of National Care Products Ltd.
   
   Effective September 1, 1996, the Company acquired all of the issued  and
   outstanding  shares  of  National Care Products Ltd.,  the  wholly-owned
   liquid  products  subsidiary of Arjo Canada Inc.   The  acquisition  was
   accounted  for  using  the purchase method and the  total  consideration
   paid  was allocated, based on the estimated fair value of the net assets
   at the date of acquisition, as follows:
   
              Inventory                          $633,768
              Property, plant and equipment       262,679
              Total cash consideration           $896,447
                                                       
   
   The  results  of  operations have been included in the accounts  of  the
   Company  from the effective date of acquisition.  Pro-forma  results  of
   operations have not been presented for the full year as it would not  be
   materially different from the 1997 results of operations.
   
   Under the terms of the purchase agreement, Arjo Canada Inc. has given  a
   three  year commitment to certain minimum levels of purchases of  liquid
   products at agreed-upon prices.
   
   Acquisition of Gam-Med Division
   
   Effective  February  21,  1997, the Company  (through  its  wholly-owned
   subsidiary   National   Healthcare  Manufacturing   Corporation,   U.S.)
   acquired  certain properties, assets, contracts and business of Gam-Med,
   a  division  of Huntington Laboratories Inc., including land,  building,
   machinery  and  equipment, accounts receivable,  inventory,  proprietary
   patents  and  on-going  business.  The  total  consideration  paid   was
   allocated, based on the estimated fair value of the net assets  acquired
   at the date of acquisition, as follows:
   
              Accounts receivable                   $257,824
              Inventory                              331,925
              Property, plant and equipment        1,088,979
              Total cash consideration            $1,678,728
   
   The  results  of  operations have been included in the accounts  of  the
   Company  from the effective date of acquisition.  Pro-forma  results  of
   operations have not been presented for the full year as it would not  be
   materially different from the 1997 results of operations.

<PAGE>

               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
                                     
17.COMPARATIVE FIGURES
   
   Certain of the prior years figures have been reclassified to conform  to
   the current year's presentation.
   
   
18.SUBSEQUENT EVENTS
   
   Additional Investment in National Healthcare Logistics LLC
   
   Subsequent to June 30, 1997, the Company acquired an additional 166  2/3
   Class C preferred shares of National Healthcare Logistics LLC, for  cash
   consideration of $347,875.
   
   Exercise of Warrants and Stock Options
   
   Subsequent  to June 30, 1997, 306,416 warrants and 37,500 stock  options
   were exercised in exchange for the issuance of common shares.
   
   Agreement with Importex Corp.
   
   Effective  September 8, 1997 the Company entered into an agreement  with
   Importex  Corp.  to  acquire  the rights to distribute  the  Mertex  and
   Mertex-Plus  fabrics and miscellaneous other assets.   As  consideration
   for  the  purchase,  the  Company agreed to pay $100,000  cash,  225,000
   shares  of  the  Company and a warrant entitling  Importex  to  purchase
   150,000  Class  A common shares of the Company at $6.90.  The  agreement
   requires  the Company to make certain minimum purchases of  the  fabrics
   from the manufacturer.
   
   Issuance of Convertible Debentures
   
   Subsequent  to  June  30, 1997, the Company issued  U.S.  $5,000,000  in
   Convertible Debentures.  The Convertible Debentures bear interest of  6%
   annually  and  are convertible, upon approval by securities authorities,
   into  Class A common shares of the Company at the lesser of the  average
   quoted market price prior to conversion and $6.01.  All debentures  must
   be  converted  within one year from the closing day.  In  addition,  the
   debenture holder received a two year warrant to purchase 50,000 Class  A
   common  shares  at  $6.61 for the first year and $7.21  for  the  second
   year.
   
   The  Company  is in the process of filing a registration statement  with
   respect to this issuance with the appropriate securities authorities.
   
   Government Loans
   
   Subsequent  to  June 30, 1997, the Company received additional  advances
   of  $150,655 and $561,000 from Western Economic Diversification and  the
   Province of Manitoba respectively, under the respective agreements  (See
   Note 8).

<PAGE>

               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
                                     
19.UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP)
   
   The  Company  has applied for registration under the 1934 Act  with  the
   United  States Securities and Exchange Commission.  Effective  July  31,
   1996,  the  Company  obtained  formal  approval  for  quotation  of  its
   securities on NASDAQ in the United States.
   
   A  description  of  the  Company's accounting  principles  which  differ
   significantly from U.S. GAAP follows:
   
   Foreign Currency Translation
   
   Unrealized exchange gains and losses relating to the translation of  the
   obligation  under  capital leases are deferred and  amortized  over  the
   remaining  term  of the leases.  Under U.S. GAAP, these  exchange  gains
   and losses would be recognized in income currently.
   
   Earnings Per Share
   
   Under   U.S.   GAAP,  the  Company  would  not  include  the   1,180,000
   performance  shares held in escrow in the calculation  of  the  weighted
   average  number  of shares used to determine earnings  per  share.   The
   release  of  these  performance shares will  result  in  recognition  of
   compensation  expense  under U.S. GAAP based  on  market  value  of  the
   shares when released from escrow.
   
   Deferred Taxes
   
   Under   U.S.  GAAP,  deferred  taxes  are  provided  on  all   temporary
   differences.   Temporary  differences encompass timing  differences  and
   other  events that create differences between the tax basis of an  asset
   or  liability  and its reported amount in the financial  statements.   A
   deferred  tax  asset is recorded in a loss period and is  reduced  by  a
   valuation  allowance to the extent it is more likely than not  that  the
   deferred  tax  asset will not be realized.  For U.S.  GAAP  purposes,  a
   valuation allowance equal to the tax loss benefits referred to  in  Note
   13 would be disclosed.
   
   Fair Value of Other Financial Instruments and Other Disclosures
   
   The  carrying amount of the following instruments approximate fair value
   because  of  the  short maturity of these instruments -  cash,  accounts
   receivable,  accounts  payable  and  accrued  liabilities,  and  current
   portion of obligations under capital leases.
   
   The  application of U.S. GAAP, as described above, would  have  had  the
   following effects on net loss, loss per share and shareholders' equity.

<PAGE>

               NATIONAL HEALTHCARE MANUFACTURING CORPORATION
              NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               JUNE 30, 1997
(with comparative balances as at June 30, 1996 and for the years ended June
                            30, 1996 and 1995)
                                     
<TABLE>
                                     
19.UNITED  STATES  GENERALLY  ACCEPTED ACCOUNTING  PRINCIPLES  (U.S.  GAAP)
   (continued)
   
   Fair   Value  of  Other  Financial  Instruments  and  Other  Disclosures
   (continued)
   
                                          1997           1996          1995
<S>                               <C>            <C>             <C>         
Net loss as reported              $(4,248,043)   $(3,211,746)    $(868,794)
Deferred foreign exchange  gain      (134,026)          9,772       194,301
(loss)
Net loss - U.S. GAAP              $(4,382,069)   $(3,201,974)    $(674,493)
                                                                           
Weighted     average     shares      9,745,842      8,908,419     5,751,366
outstanding - U.S. GAAP
                                                                           
Loss per share - U.S. GAAP             $(0.45)        $(0.36)       $(0.12)
                                                                           
Shareholders'     equity     as    $13,082,786     $4,596,811    $5,957,870
reported
Deferred foreign exchange gain          54,128          9,772       194,301
Shareholders'  equity  -   U.S.    $13,136,914     $4,606,583    $6,152,171
GAAP
<FN>
</TABLE>
   
   Newly  issued, but not yet adopted, U.S. accounting principles  are  not
   expected  to  have  a  material impact on these  consolidated  financial
   statements.

<PAGE>
   
                                     
              REPORT OF INDEPENDENT OF CHARTERED ACCOUNTANTS
                                     

To:  NATIONAL HEALTHCARE MANUFACTURING CORPORATION:

We  have  audited  the  consolidated balance sheet of  NATIONAL  HEALTHCARE
MANUFACTURING CORPORATION (a Manitoba corporation) as at June 30, 1997  and
the  consolidated statement of operations, shareholders' equity and changes
in  financial  position  for  the  year  then  ended.   These  consolidated
financial  statements  are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We  conducted  our  audit  in accordance with generally  accepted  auditing
standards in Canada, which are in substantial agreement with those  in  the
United States of America.  Those standards require that we plan and perform
an  audit  to obtain reasonable assurance 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.

In  our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at June 30,
1997  and  the  results of its operations and the changes in its  financial
position  for  the  year then ended in accordance with  generally  accepted
accounting principles in Canada.

Accounting  practices  of  the Company used in preparing  the  accompanying
consolidated   financial   statements  conform  with   generally   accepted
accounting  principles applicable to consolidated financial  statements  in
Canada  ("Canadian  GAAP"), but do not conform with  accounting  principles
generally  accepted  in  the United States of  America  ("U.S.  GAAP").   A
description of the significant differences between Canadian GAAP  and  U.S.
GAAP  and  the approximate effect of those differences on consolidated  net
loss  and  shareholders' equity are set forth in Note 19 of  the  Notes  to
consolidated financial statements.



Winnipeg, Manitoba
October 6, 1997

<PAGE>

                                SIGNATURE PAGE

Pursuant to the requirements of Section 12g of the Securities Exchange Act of
1934, the Registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this Annual Report to be signed on its behalf
by the undersigned, thereunto duly authorized.

National Healthcare Manufacturing Corporation -- SEC #0-27998
----------------------------------------------------------------
                        Registrant

BY \s\ Seyed Torabian
------------------------------------------
Seyed Torabian, Vice President/Director