UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549

                                  Form 10-K

                Annual Report Pursuant to Section 13 or 15(d)
                    of the Securities Exchange Act of 1934

                 For the fiscal year ended December 31, 2002
                        Commission File Number 0-11997

                        Carrington Laboratories, Inc.
         -----------------------------------------------------
         (Exact name of Registrant as specified in its charter)

             Texas                                    75-1435663
     ----------------------                      -------------------
    (State of Incorporation)                    (IRS Employer ID No.)

                  2001 Walnut Hill Lane, Irving, Texas 75038
                  ------------------------------------------
                   (Address of principal executive offices)

 Registrant's telephone number, including area code:  (972) 518-1300

         Securities registered pursuant to Section 12(b) of the Act:

         Title of each class    Name of exchange on which registered
         -------------------    ------------------------------------
                 None

         Securities registered pursuant to Section 12(g) of the Act:

                        Common Stock ($.01 par value)
                               (Title of class)
                       Preferred Share Purchase Rights
                               (Title of class)

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

      Indicate by check mark if disclosure  of delinquent filers pursuant  to
 Item 405  of  Regulation  S-K is  not  contained  herein, and  will  not  be
 contained, to the best of the Registrant's knowledge, in definitive proxy or
 information statements incorporated by  reference in Part  III of this  Form
 10-K or any amendment to this Form 10-K.  [ ]

      The aggregate market value of the  voting and non-voting common  equity
 held by non-affiliates  of the Registrant  (treating all executive  officers
 and directors  of  the Registrant  and  holders of  10%  or more  of  shares
 outstanding, for  this  purpose,  as  if  they  may  be  affiliates  of  the
 Registrant) was $10,602,000,  computed by reference  to the  price at  which
 common equity was sold on June 30, 2002.

      Indicate the number of shares outstanding  of each of the  Registrant's
 classes of common stock, as of the latest practicable date:

 9,991,651 shares of Common Stock, par value $.01 per share, were outstanding
                              on March 11, 2003.

                     DOCUMENTS INCORPORATED BY REFERENCE

    Portions of the Registrant's proxy statement for its annual meeting of
  shareholders to be held on May 8, 2003 are incorporated by reference into
               Part III hereof, to the extent indicated herein.

<PAGE>
                                    PART I

 ITEM 1.  BUSINESS.
          --------
                                   General
                                   -------

 Incorporated in Texas in  1973, Carrington Laboratories, Inc.  ("Carrington"
 or the "Company") is a research-based biopharmaceutical, medical device, raw
 materials  and   nutraceutical   company   engaged   in   the   development,
 manufacturing and marketing of  naturally-derived complex carbohydrates  and
 other natural product therapeutics for the treatment of major illnesses, the
 dressing and management of wounds and nutritional supplements.  The  Company
 is  comprised  of  two  business  segments.   See   Note  Thirteen  to   the
 consolidated financial  statements  in  this  Annual  Report  for  financial
 information about these business divisions.  The Company sells  prescription
 and nonprescription  human  and  veterinary  products  through  its  Medical
 Services Division.  Through Caraloe, Inc., its consumer products subsidiary,
 the Company sells consumer and bulk raw material products and also  provides
 product development and manufacturing services to customers in the cosmetic,
 nutraceutical and  medical  markets.   The  Company's research  and  product
 portfolio are based  primarily on  complex carbohydrates  isolated from  the
 Aloe vera L. plant.

 In October 2001, the Company  incorporated, a wholly-owned subsidiary  named
 DelSite Biotechnologies, Inc. ("DelSite").   DelSite operates  independently
 from the Company's research and development  program and is responsible  for
 the  research,  development  and  marketing  of  the  Company's  proprietary
 GelSite[TM] technology  for controlled  release  and delivery  of  bioactive
 pharmaceutical ingredients.

                          Medical Services Division
                          -------------------------

 Carrington's Medical Services Division offers a comprehensive line of  wound
 management products to hospitals, alternate care facilities, cancer  centers
 and the home  health care market.   The Company's  products are designed  to
 provide patients with the highest quality  of care. Carrington products  are
 used in a wide range  of acute and chronic  wounds, for skin conditions  and
 incontinence care.   The primary marketing  emphasis for Carrington's  wound
 and  skin  care  products  is  directed  toward  hospitals,  nursing  homes,
 alternate care facilities,  cancer centers, home  health care providers  and
 managed care organizations.  The wound and skin care product lines are being
 promoted primarily to  physicians and specialty  nurses, e.g.,  enterostomal
 therapists.

 In response to changing market conditions,  the Company decided during  2000
 to redirect the distribution of its Medical Services products from  multiple
 distributors to a  single, sole-source  distributor.   As a  result of  this
 decision, the  Company entered  into an  exclusive Distributor  and  License
 Agreement  effective  December  1,   2000  with  Medline  Industries,   Inc.
 ("Medline").  Medline  is now responsible  for all sales  and marketing  and
 distribution efforts  for Carrington's  wound and skin  care product  lines.
 The Company also has a Supply Agreement with Medline that allows the Company
 to manufacture  specific  products where  the  Company can  meet  or  reduce
 Medline's current purchase price.

 The Company maintains control of  certain national pricing agreements  which
 cover hospitals, alternate  care facilities, home  health care agencies  and
 cancer centers.   These  agreements allow  Medline representatives  to  make
 presentations in  member facilities  throughout the  country.   In order  to
 promote continued  brand-name  recognition,  the Company  has  resumed  some
 limited marketing  and advertising  to bolster  Medline's efforts  in  these
 areas.

 The Company has several distribution and  licensing agreements for the  sale
 of its products into  international markets.  The  Company also sells  wound
 care  products  into international   markets  on  a  non-contract,  purchase
 order  basis.  Opportunities  in  the  growing  Internet  market  are   also
 addressed  through   the  Company's  websites,  www.carringtonlabs.com.  and
 www.woundcare.com.

 The Company  also produces  Acemannan Immunostimulant[TM],  a product  fully
 licensed by  the United  States Department  of  Agriculture ("USDA")  as  an
 adjuvant therapy for certain cancers  in dogs and cats.   This  product,  in
 addition to several wound and skin care products developed specifically  for
 the veterinary market,  are marketed  and distributed  through an  exclusive
 distribution arrangement with Farnam  Companies, Inc., a leading  veterinary
 marketing company.

 Carrington is actively involved in developing and promoting the SaliCept[TM]
 line of products, which includes an oral rinse, patches for oral wounds  and
 extraction sites, and other products.  The SaliCept line[TM] is supported by
 a dedicated sales representative  and strategic partners  for this line  are
 being considered.

                                Caraloe, Inc.
                                -------------

 Caraloe, Inc., a  subsidiary of the  Company, markets  or licenses  consumer
 products and bulk  raw materials  utilizing the  Company's patented  complex
 carbohydrate technology into  the consumer health  and nutritional  products
 markets.   Caraloe's  premier  product is  Manapol[R]  powder,  a  bulk  raw
 material rich in complex  carbohydrates.  Manapol[R]  powder is marketed  to
 manufacturers  of   nutritional   products  who   desire   quality   complex
 carbohydrate ingredients for their finished products.  Caraloe also  markets
 finished products  containing Manapol[R]  powder  into domestic  health  and
 nutritional products markets  through health food  stores, through  internet
 marketing services at www.aloevera.com, and the international marketplace on
 a non-contract,  purchase order  basis.   In  the  fourth quarter  of  2000,
 Caraloe introduced a  new raw material,  Hydrapol[TM], for  use by  cosmetic
 manufacturers.

 In 1997,  Caraloe  signed a  non-exclusive  supply agreement  with  a  major
 customer to supply Manapol[R]  powder.  This  agreement was renewed  through
 August  2003  and contains  monthly minimum  purchase  requirements.  During
 2000, 2001, and 2002 sales of Manapol[R] powder to this customer represented
 38%,  30%,  and 35%  respectively, of  the Company's  total  revenues.   The
 Company expects this supply agreement will  be renewed at the end of  August
 2003.

 Caraloe, Inc. also provides  product development and manufacturing  services
 to customers in the  cosmetic, nutraceutical and medical  markets.  In  June
 2001 a  development group  was formed  to concentrate  efforts on  providing
 these services.   The  scope of  services provided  by this  group  includes
 taking projects from formulation design through manufacturing, manufacturing
 and filling according to customer-provided formulations and  specifications,
 filling customer-provided packaging  components and  assembling custom  kits
 for customers.

 In December 2002 the  Company entered into an  agreement to acquire  certain
 assets of the Custom Division of Creative Beauty Innovations, Inc.  ("CBI"),
 including  specialized  manufacturing  customer  information,   intellectual
 property and equipment.   CBI is a privately  held manufacturer of skin  and
 cosmetic products with operations in Carrollton, Texas.

 Under the agreement, the Company paid CBI $501,000 at closing and  deposited
 $500,000 in escrow,  which was released  to CBI on  February 28,  2003.   In
 addition, Carrington agreed (i) to purchase  inventory of CBI for an  amount
 not greater than $700,000, to be paid  six months after closing and (ii)  to
 pay CBI an  amount equal to  9.0909% of Carrington's  net sales  up to  $6.6
 million per year and  8.5% of Carrington's net  sales over $6.6 million  per
 year of CBI products to  CBI's existing  customers for  the next five years.
 The acquired assets include equipment and other physical property previously
 used by CBI's Custom Division to compound and package cosmetic  formulations
 of liquids, creams, gels and lotions into bottles, tubes  or  cosmetic jars.
 Carrington intends to use these assets  in a substantially  similar  manner.
 The Company will provide  services to these  customers through the  Caraloe,
 Inc. development and manufacturing services group.

 To finance  the acquisition,  the Company  entered  into an  agreement  with
 Medline for accelerated payment of $2.0  million of the royalties due  under
 the Distributor and License Agreement.   The royalty acceleration  agreement
 provides for each of the remaining quarterly royalty payments due to be paid
 to the Company by Medline to be reduced  by equal amounts, the sum of  which
 offsets the royalty  advance.   In addition,  the Company  will pay  Medline
 interest on the  advance at the  rate of 6.5%  per year  on the  outstanding
 balance of the advance.

                        DelSite Biotechnologies, Inc.
                        -----------------------------

 In October 2001  the Company  incorporated a  wholly-owned subsidiary  named
 DelSite Biotechnologies, Inc. ("DelSite").   DelSite operates  independently
 from the  Company's research  and development  program, which  supports  the
 activities associated with the Company's Medical Services and Caraloe,  Inc.
 divisions, and is responsible for the research, development and marketing of
 the Company's proprietary GelSite[TM]  polymer (CR1013),   a new and  unique
 complex carbohydrate, which was isolated in 1998 from Aloe vera L.   DelSite
 commenced operations  in  January  2002  and  is  currently  developing  new
 technologies based on  its GelSite[TM]  polymer for  controlled delivery  of
 bioactive proteins and peptides as therapeutics and vaccines.

 In January  2002  DelSite formed  a  strategic collaboration  with  Southern
 Research  Institute,  Inc.  of  Birmingham,   Alabama,  to  assist  in   the
 development and ultimate commercialization  of the drug delivery  technology
 based on  the  GelSite[TM]  polymer.   Southern  Research  Institute  is  an
 independent, not-for-profit center for  scientific research affiliated  with
 the University of Alabama at Birmingham.  Under the three year collaborative
 agreement, DelSite  retains all  product rights  plus intellectual  property
 rights to its existing technology as well as any discoveries made by DelSite
 or Southern Research,  either jointly or  individually, as a  result of  any
 project undertaken as part of the agreement.  Southern Research will receive
 fees and royalties when undertaking certain specified projects on behalf  of
 DelSite.

                           Research and Development
                           ------------------------
                                   General
                                   -------

 Carrington has developed proprietary processes for obtaining materials  from
 Aloe vera L.   The Company  intends to seek  approval of the  Food and  Drug
 Administration (the "FDA")  and other regulatory  agencies to sell  products
 containing materials obtained from Aloe vera L. in the United States and  in
 foreign countries.  For a more comprehensive listing of the type, indication
 and status  of products  currently under  development  by the  Company,  see
 "Research  and  Development  --  Summary" below.   The  regulatory  approval
 process, both  domestically  and  internationally,  can  be  protracted  and
 expensive, and there is no assurance  that the Company will obtain  approval
 to sell its products for any treatment or use (see "Governmental Regulation"
 below).

 The Company expended approximately $3,602,000, $2,442,000 and $3,580,000  on
 research and development in  fiscal 2000, 2001 and  2002, respectively.   Of
 the total  expenditures  for 2000,  $623,000  reflect clinical  trial  costs
 associated  with  the  Phase  III trial  in  ulcerative  colitis.   Research
 activities associated with DelSite  accounted for 51%  of the 2002  research
 and development expenditures.

                       DelSite Research and Development
                       --------------------------------

 The Company believes that its products' functionality and/or pharmacological
 activity  make  them  potential   candidates  for  further  development   as
 pharmaceutical or  therapeutic agents.   In  2003,  DelSite will  focus  its
 activities in drug  delivery through developing  proof of  concept data  for
 potential pharmaceutical partners.   There  is no  assurance, however,  that
 DelSite will be successful in its efforts.

 The Company  sponsors a  research and  development laboratory  at Texas  A&M
 University in association with the College of Veterinary Medicine to support
 research activities of the Company and its DelSite subsidiary.  Pursuant  to
 this arrangement, the Company has access to leading authorities in the  life
 sciences, as well as facilities and equipment to help further the  Company's
 research programs.

 DelSite is developing  a new platform  technology based  on its  proprietary
 GelSite[TM] polymer (CR1013) for  controlled delivery of bioactive  proteins
 and peptides as therapeutics and vaccines.  Basic proof of concept  research
 is continuing on this material, which  includes both parenteral delivery  of
 therapeutic  proteins  and  peptides  and  intranasal  delivery  of  protein
 antigens   as  vaccines.   Selected  studies  have  been  completed  through
 sponsored research  at Texas  A&M and  Southern Research  Institute.   Pilot
 scale production has been accomplished and studies to refine the process are
 ongoing.   The technology  has  varied utility,  but  the primary  focus  of
 research is  in the  area of  drug delivery.   Three  patents covering  this
 invention have been  issued to the  Company with two  patents pending.   The
 composition and process patent was issued in 1999.

                     Specialized Research and Development
                     ------------------------------------

 The Company  also  has a  separate,  specialized research  team  to  support
 research and  in-house development  for Carrington  products as  well as  to
 provide services to  customers in  the medical,  nutraceutical and  cosmetic
 markets.  These  services typically include  research and  development of  a
 formulation from the  customer's initial concept  and specifications or,  at
 the  customer's  request,  through  reverse engineering  a similar  product.
 Development efforts also include packaging  design, label design and,  where
 required by regulations, production validation.

 During 2002 the Company also  initiated scale-up development activities  for
 the production of  its proprietary  oral patch  product.   This product  had
 previously been  manufactured  by an  independent  vendor on  a  bench-scale
 basis.  The  Company purchased and  installed production-scale equipment  in
 its Costa Rica facility  to form, fill  and seal blister  packs.  The  patch
 product is freeze-dried in the Company's existing freeze-drying equipment in
 Costa Rica.  Installation,  operation and  performance  qualifications  were
 initiated in the fourth quarter of  2002 and completed in the first  quarter
 of 2003.   The first  products were produced  in December  2002 and  January
 2003.
                            Human Clinical Studies
                            ----------------------

 Evaluation of  Carrington[R]  Oral  Wound Rinse  for  Pain  Associated  with
 Mucositis.

 In  March 1997,  the FDA cleared  Carrington to  market an  Oral Wound Rinse
 for the management  and relief  of pain associated with  mucositis  and  all
 types  of  oral  wounds.  A 20  patient trial of  a new formulation  for the
 product was completed in 2001.   This trial evaluated the  effectiveness and
 duration of effect of Carrington[R]  Oral Wound Rinse.  All patients  in the
 trial reported that they experienced pain relief immediately upon use of the
 product and 80% reported the duration of relief was 4-6 hours.

 Evaluation of the SaliCept[TM] Oral Patch for Reduction in the Incidence  of
 Dry Socket.

 An independent  study  conducted in  2000  that compared  the  incidence  of
 alveolar osteitis ("AO", also known as dry socket) in patients treated  with
 Gelfoam[R] soaked with an antibiotic  or SaliCept[TM] Patches was  conducted
 in 2000.  A  retrospective  evaluation  was  performed  of  587  records  of
 Gelfoam[R] treated patients compared to a prospective trial of 608  patients
 treated with  SaliCept[TM] Patches.   The  SaliCept[TM] Patch  significantly
 reduced  the  incidence  of  AO  when  compared  to  the   antibiotic-soaked
 Gelfoam[R]. The study results  were filed with the  FDA and the Company  was
 granted clearance by  the agency in  the fourth quarter  2001 to market  the
 patch as a 510(k) device for management of AO.

                       Research and Development Summary
                       --------------------------------

 The following  table  outlines the  status  of the  products  and  potential
 indications  of  the   Company's  products  developed,   planned  or   under
 development.  There is no assurance of successful development, completion or
 regulatory approval of any product not yet on the market.




                PRODUCTS AND POTENTIAL INDICATIONS DEVELOPED,
                         PLANNED OR UNDER DEVELOPMENT

 PRODUCT OR                      POTENTIAL
 POTENTIAL INDICATION            MARKET APPLICATIONS                STATUS
 --------------------            -------------------                ------
 Topical
 -------
   Dressings                     Pressure and Vascular Ulcers       Marketed
   Dressings                     Diabetic Ulcers, Surgical Wounds   Marketed
   Cleansers                     Wounds                             Marketed
   Anti-fungal                   Cutaneous Fungal Infection         Marketed
   Hydrocolloids                 Wounds                             Marketed
   Alginates                     Wounds                             Marketed

 Oral
 ----
   Human
     Pain Reduction              Mucositis                          Marketed

   Dental
     Pain Reduction              Aphthous Ulcers, Oral Wounds       Marketed
     Post Extraction Wounds      Oral Surgery                       Marketed

 Injectable
 ----------
   Human
     Neutropenia                 Neutropenia associated with        Discovery
                                 cancer

   GelSite[TM] polymer (CR1013)  Drug delivery                      Preclinical

 Intranasal
 ----------
   GelSite[TM] polymer (CR1013)  Vaccine delivery                   Preclinical
   Veterinary
   Adjunct for cancer            Fibrosarcoma                       Marketed

 Nutraceuticals
 --------------
   Immune Enhancing Product      Manapol[R]/Maitake Gold 404[R]     Marketed
   Immune Enhancing Product      Manapol[R]/Calcium Enriched        Clinical
                                                                    Evaluation



                              Licensing Strategy
                              ------------------

 The Company  expects that  prescription pharmaceutical  products  containing
 certain defined  drug  substances  will  require  a  substantial  degree  of
 development effort and expense.  Before governmental approval to market  any
 such product is obtained, the Company may license these products for certain
 indications to  other  pharmaceutical  companies in  the  United  States  or
 foreign  countries  and  require  such  licensees  to  undertake  the  steps
 necessary to  obtain  marketing approval  in  a particular  country  or  for
 specific indications.

 Similarly, the Company intends to license  third parties to market  products
 containing defined chemical entities for  certain human indications when  it
 lacks  the  expertise  or  financial  resources  to  market  such   products
 effectively.  If the Company is unable to enter into such agreements, it may
 undertake marketing the products itself for such indications.  The Company's
 ability to  market  these  products for  specific  indications  will  depend
 largely on its financial  condition at the time  and the results of  related
 clinical trials.  There  is no assurance  that the Company  will be able  to
 enter into  any license  agreements  with third  parties  or that,  if  such
 license agreements  are concluded,  they will  contribute to  the  Company's
 overall profits.

                        Raw Materials and Processing
                        ----------------------------

 The principal raw material used by the Company in its operations is the leaf
 of the plant known as Aloe vera L.  Through patented processes, the  Company
 obtains several bulk freeze-dried aloe extracts from the central portion  of
 the Aloe vera  L. leaf known  as the gel.   A basic  bulk mannan,  Acemannan
 Hydrogel[TM], is  used   as  an ingredient  in   certain  of  the  Company's
 proprietary wound and skin care products.

 The Company owns  a 405-acre farm  in the Guanacaste  province of  northwest
 Costa Rica which  currently has approximately  113 acres  planted with  Aloe
 vera L.  The Company is  currently performing a land reclamation project  on
 the farm to increase productive acreage.  Currently, the Company's need  for
 leaves exceeds the  supply of harvestable  leaves from  the Company's  farm,
 requiring the purchase of leaves from other sources in Costa Rica at  prices
 comparable to the  cost of acquiring  leaves from the  Company's farm.   The
 Company has entered into several supply agreements with local suppliers near
 the Company's factory.   The Company  anticipates that  the local  suppliers
 will be able to meet all of its requirements for leaves in 2003.

 The Company has a  23% ownership interest in  Aloe and Herbs  International,
 Inc., ("Aloe & Herbs"), a Panamanian  corporation formed for the purpose  of
 establishing an Aloe  vera L.  farm in Costa  Rica.   The Company  purchases
 leaves from Rancho Aloe, S.A., ("Rancho Aloe") a wholly owned subsidiary  of
 Aloe &  Herbs,  which  has a  5,000-acre  farm  in close  proximity  to  the
 Company's farm, at a nominal price per kilogram of leaves supplied, with the
 final price  payable  to Rancho  Aloe  based upon  the  yield of  the  final
 product.

 As of December 31, 2002, Rancho Aloe was providing an average of 67% of  the
 Company's monthly requirement of leaves.   See "Management's Discussion  and
 Analysis of Financial Condition and Results  of Operations -- Liquidity  and
 Capital  Resources"  for   further  information   regarding  the   Company's
 relationship with Aloe & Herbs.

                                Manufacturing
                                -------------

 Since 1995, the  Company's manufacturing facility  has been  located in  the
 Company's headquarters in  Irving, Texas.   The Company  believes that  this
 manufacturing facility has  sufficient capacity to  provide for the  present
 line of products and  to accommodate new products  and sales growth.   Final
 packaging of certain of  the Company's wound care  products is completed  by
 outside vendors.   The  Company's calcium  alginates, films,  hydrocolloids,
 foam dressings, gel sheets, tablets, capsules, and freeze-dried products are
 being provided by third parties.

 All of the  Company's proprietary bulk  pharmaceutical products and  freeze-
 dried Aloe vera L.  extracts are produced in  its processing plant in  Costa
 Rica.  This facility has the ability  to supply the bulk aloe raw  materials
 requirements of  the  Company's  current product  lines  and  bulk  material
 contracts for the foreseeable future. Certain liquid nutraceutical  products
 which the Company provides to customers on a custom manufacturing basis  are
 also produced  at the Costa Rica facility.  In addition,  production  of the
 Salicept[TM]Patch has been transferred to the plant in Costa Rica  to better
 meet anticipated market demands  for the product for  post extraction wounds
 and aphthous ulcers.

                                Competition
                                -----------

 Research and  Development.   The  biopharmaceutical  field  is  expected  to
 continue to undergo rapid and  significant technological change.   Potential
 competitors in the  United States are  numerous and include  pharmaceutical,
 chemical  and  biotechnology  companies.   Many   of  these  companies  have
 substantially greater capital  resources, research  and development  staffs,
 facilities and  expertise  (in  areas including  research  and  development,
 manufacturing, testing, obtaining regulatory  approvals and marketing)  than
 the Company.   This competition can  be expected to  become more intense  as
 commercial  applications  for  biotechnology  and  pharmaceutical   products
 increase.  Some of these  companies may be better  able than the Company  to
 develop, refine, manufacture and market  products which have application  to
 the same indications as the Company  is exploring.  The Company  understands
 that certain of  these competitors are  in the process  of conducting  human
 clinical trials of, or have filed applications with government agencies  for
 approval to market  certain products that  will compete  with the  Company's
 products, both in its  present wound care market  and in markets  associated
 with products the Company currently has under development.

 Medical Services Division and  Caraloe, Inc.   The Company competes  against
 many companies that sell products which  are competitive with the  Company's
 products, with  many  of its  competitors  using very  aggressive  marketing
 efforts.  Many of  the Company's competitors  are substantially larger  than
 the  Company  in  terms  of  sales   and  distribution  networks  and   have
 substantially greater financial and other resources.  The Company's  ability
 to compete against these companies will  depend in part on the expansion  of
 the marketing  network for  its products.   The  Company believes  that  the
 principal competitive factors  in the marketing  of its  products are  their
 quality, and that they are naturally based and competitively priced.

                           Governmental Regulation
                           -----------------------

 The production and marketing  of the Company's  products, and the  Company's
 research and development activities, are  subject to regulation for  safety,
 efficacy and  quality by  numerous governmental  authorities in  the  United
 States and other countries.   In the United  States, drug devices for  human
 use are subject  to rigorous  FDA regulation.   The Federal  Food, Drug  and
 Cosmetic Act,  as  amended (the  "FFDC  Act"), the  regulations  promulgated
 thereunder, and other  federal and  state statutes  and regulations  govern,
 among  other  things,  the  testing,  manufacture,  safety,   effectiveness,
 labeling, storage, record  keeping, approval, advertising  and promotion  of
 the Company's  products.   For  marketing  outside the  United  States,  the
 Company is  subject  to  foreign  regulatory  requirements  governing  human
 clinical  trials  and  marketing  approval  for  drugs  and   devices.   The
 requirements governing the  conduct of clinical  trials, product  licensing,
 pricing and reimbursement may vary widely from country to country.

 Food and Drug  Administration.  The  contents, labeling  and advertising  of
 many of the Company's  products are regulated  by the FDA.   The Company  is
 required to obtain FDA approval before  it can study or market any  proposed
 prescription drugs and may be required to obtain such approval for  proposed
 nonprescription  products.   This   procedure  involves  extensive  clinical
 research, and  separate FDA  approvals are  required  at various  stages  of
 product development.   The approval  process requires,  among other  things,
 presentation of substantial evidence to the FDA, based on  clinical studies,
 as to the safety and efficacy of the proposed product.

 After approval, manufacturers must continue to expend time, money and effort
 in production and quality  control to assure  continual compliance with  the
 current  Good  Manufacturing  Practices regulations.  Also,  under  the  new
 program for  harmonization between  Europe and  the U.S.  and the  ISO  9001
 Certification Program,  a company  can,  under certain  circumstances  after
 application,  have  a   new  drug  approved   under  a   process  known   as
 centralization  rather  than  having  to  go  through  a  country-by-country
 approval in the European Union.

 Certain of the Company's  wound and skin care  products are registered  with
 the FDA as "devices" pursuant to the regulations under Section 510(k) of the
 FFDC Act.  A device is a product used for a particular medical purpose, such
 as to cover a wound, with respect  to which no pharmacological claim can  be
 made.   A  device which  is  "substantially equivalent"  to  another  device
 existing in the  market prior to  May 1976 can  be registered  with the  FDA
 under Section 510(k) and marketed without  further testing.  A device  which
 is not  "substantially equivalent"  is subject  to an  FDA approval  process
 similar to that required for a  new drug, beginning with an  Investigational
 Device Exemption and culminating in a  Premarket Approval.  The Company  has
 sought and obtained  all its  device approvals  under Section  510(k).   The
 Company currently markets seven (7) products which require a prescription as
 medical devices.

 Other Regulatory Authorities.  The Company's advertising and sales practices
 are subject to regulation by the  Federal Trade Commission (the "FTC"),  the
 FDA and state agencies.  The  Company's processing and manufacturing  plants
 are subject to  federal, state  and foreign laws  and to  regulation by  the
 Bureau of Alcohol, Tobacco  and Firearms of the  Department of the  Treasury
 and by the Environmental Protection Agency  (the "EPA"), as well as the  FDA
 and USDA.

 The  Company  believes  that  it  is  in  substantial  compliance  with  all
 applicable laws and regulations relating to its operations, but there is  no
 assurance that such  laws and  regulations will not  be changed.   Any  such
 change may have a material adverse effect on the Company's operations.

 The  manufacturing,   processing,  formulating,   packaging,  labeling   and
 advertising of  products  of the  Company's  subsidiary, Caraloe,  are  also
 subject to regulation by  one or more federal  agencies, including the  FDA,
 the FTC, the  USDA and  the EPA.   These  activities are  also regulated  by
 various agencies of the  states, localities and  foreign countries to  which
 Caraloe's products are distributed and in which Caraloe's products are sold.
 The FDA,  in particular, regulates the formulation, manufacture and labeling
 of vitamin and other nutritional supplements.

 The Dietary Supplement Health  and Education Act  of 1994 ("DSHEA")  revised
 the provisions of the  FFDC Act concerning the  composition and labeling  of
 dietary supplements and, in the judgment of the Company, is favorable to the
 dietary supplement industry.  The legislation created a new statutory  class
 of "dietary  supplement" which  includes  vitamins, minerals,  herbs,  amino
 acids  and other  dietary  substances for human use  to supplement the diet.
 DSHEA grandfathered, with  certain limitations, dietary  ingredients on  the
 market before October 15, 1994.   A dietary supplement which contains a  new
 dietary ingredient, one not on the market before October 15, 1994,  requires
 evidence of a history of use  or other evidence of safety establishing  that
 it will reasonably be  expected to be  safe.  The  majority of the  products
 marketed by Caraloe are classified as dietary supplements under DSHEA.

 Both foods and dietary supplements are subject to the Nutrition Labeling and
 Education Act of 1990  (the "NLEA"), which prohibits  the use of any  health
 claim for foods, including dietary supplements,  unless the health claim  is
 supported by significant scientific agreement and is either pre-approved  by
 the FDA or the subject of substantial government scientific publications and
 a notification to the FDA.   To date, the FDA has  approved the use of  only
 limited health claims for dietary supplements.  However, among other things,
 DSHEA  amended,  for  dietary  supplements,  the  NLEA  by  providing   that
 "statements of  nutritional support"  may be  used in  labeling for  dietary
 supplements without  FDA  pre-approval if  certain  requirements,  including
 prominent disclosure on the label of the lack of FDA review of the  relevant
 statement, possession by  the marketer  of substantiating  evidence for  the
 statement and post-use notification  to the FDA, are  met.  Such  statements
 may describe how  particular nutritional supplements  affect the  structure,
 function or general well-being of  the body (e.g., "promotes  cardiovascular
 health").

 Advertising and label claims for dietary supplements and conventional  foods
 have been  regulated by  state and  federal authorities  under a  number  of
 disparate regulatory schemes.  There can  be no assurance that a state  will
 not interpret claims presumptively valid under federal law as illegal  under
 that state's regulations, or  that future FDA  regulations or FTC  decisions
 will not restrict the permissible scope of such claims.

 Governmental  regulations  in  foreign  countries  where  Caraloe  plans  to
 commence or  expand sales  may prevent  or delay  entry into  the market  or
 prevent or delay the introduction, or require the reformulation, of  certain
 of  Caraloe's  products.   Compliance   with   such   foreign   governmental
 regulations is generally  the responsibility of  Caraloe's distributors  for
 those countries.  These distributors are independent contractors over  which
 Caraloe has limited control.

 As a result  of Caraloe's  efforts to  comply with  applicable statutes  and
 regulations, Caraloe  has  from time  to  time reformulated,  eliminated  or
 relabeled certain  of its  products and  revised certain  provisions of  its
 sales and  marketing program.   Caraloe  cannot predict  the nature  of  any
 future laws,  regulations,  interpretations  or  applications,  nor  can  it
 determine what effect additional governmental regulations or  administrative
 orders,  when and  if promulgated, would have on its business in the future.
 They could, however, require the reformulation  of certain products to  meet
 new standards, the recall or discontinuance of certain products not  capable
 of reformulation, additional record  keeping, expanded documentation of  the
 properties of  certain  products,  expanded or  different  labeling,  and/or
 scientific substantiation.   Any or all  of such requirements  could have  a
 material adverse effect on the Company's results of operations and financial
 condition.

 Compliance with the  provisions of national,  state and local  environmental
 laws and regulations has not had a material adverse effect upon the  capital
 expenditures,  earnings,  financial   position,  liquidity  or   competitive
 position of the Company.

                        Patents and Proprietary Rights
                        ------------------------------

 As is  industry  practice,  the  Company has  a  policy  of  using  patents,
 trademarks and trade  secrets to  protect the  results of  its research  and
 development activities and, to the extent it may be necessary or  advisable,
 to  exclude  others from appropriating the Company's proprietary technology.
 The Company's policy is to  protect aggressively its proprietary  technology
 by seeking and enforcing patents in a worldwide program.

 The Company has obtained patents or filed patent applications in the  United
 States and approximately 26  other countries in  three series regarding  the
 compositions of acetylated mannan derivatives,  the processes by which  they
 are produced and  the methods  of their  use.   The first  series of  patent
 applications, relating to the compositions of acetylated mannan  derivatives
 and certain basic  processes of their  production, was filed  in a chain  of
 United States  patent applications  and its  counterparts  in the  other  26
 countries.  The first United States patent application in this first series,
 covering the composition  claims of acetylated  mannan derivatives,  matured
 into United States Patent No. 4,735,935 (the "935 Patent"), which was issued
 on April 5, 1988.  United States Patent No. 4,917,890 (the "890 Patent") was
 issued  on  April 17, 1990  from a divisional application to the 935 Patent.
 This divisional application pertains to most of the remaining claims in  the
 original  application  not  covered  by  the  935  Patent.  The  890  Patent
 generally relates  to the  basic processes  of producing  acetylated  mannan
 derivatives, to certain specific examples of  such processes and to  certain
 formulations  of  acetylated  mannan  derivatives.   Two   other  divisional
 applications covering the  remaining claims not  covered by  the 890  Patent
 matured into patents,  the first  on September  25, 1990,  as United  States
 Patent No. 4,959,214, and the second on  October 30, 1990, as United  States
 Patent  No.  4,966,892.   Foreign  patents  that  are  counterparts  to  the
 foregoing United States  patents have  been granted  in some  of the  member
 states of the European Economic Community and several other countries.

 The second series of patent applications related to preferred processes  for
 the production of acetylated mannan derivatives.   One of them matured  into
 United States Patent No. 4,851,224, which was issued on July 25, 1989.  This
 patent is  the  subject  of a  Patent  Cooperation  Treaty  application  and
 national foreign applications  in several countries.   An additional  United
 States patent based on the second  series was issued on September 18,  1990,
 as United States Patent No. 4,957,907.

 The third series of patent applications, relating to the uses of  acetylated
 mannan derivatives, was  filed subsequent to  the second series.   Three  of
 them matured into United States Patent  Nos. 5,106,616, issued on April  21,
 1992; 5,118,673, issued  on June 2, 1992,  and 5,308,838,  issued on  May 3,
 1994.  The Company  has filed a number  of divisional applications to  these
 patents,  each  dealing with specific uses of acetylated mannan derivatives.
 Patent Cooperation Treaty  applications based  on the  parent United  States
 applications have been filed designating a number of foreign countries where
 the applications are pending.  In addition, the Company has also obtained  a
 patent in  the United  States  relating to  a  wound cleanser,  U.S.  Patent
 No. 5,284,833, issued on February 8, 1994.

 The Company  has  obtained a  patent  in the  United  States relating  to  a
 therapeutic device  made  from freeze-dried  complex  carbohydrate  hydrogel
 (U.S. Patent No. 5,409,703, issued on April 25, 1995).  A Patent Cooperation
 Treaty application based on  the parent United  States application has  been
 filed designating a number of foreign  countries where the applications  are
 pending.

 The Company  has obtained  patents in  the United  States (U.S.  Patent  No.
 5,760,102, issued on  June 2,  1998) and  Taiwan (Taiwan  Patent No.  89390,
 issued on August 21,  1997) related to  the uses of  a denture adhesive  and
 also a patent in  the United States relating  to methods for the  prevention
 and treatment of infections in animals (U.S. Patent No. 5,703,060, issued on
 December 30, 1997).

 The  Company  obtained  a   patent  in  the   United  States  (U.S.   Patent
 No.5,902,796, issued on May 11, 1999)  related to the process for  obtaining
 bioactive material from Aloe vera L.

 The Company obtained an additional patent in the United States (U.S.  Patent
 No. 5,929,051, issued  on  July 27,  1999) related  to the  composition  and
 process  for  a new complex carbohydrate (pectin) isolated from Aloe vera L.
 Also obtained was a United States patent (U.S. Patent No. 5,925,357,  issued
 on July 20, 1999) related to the process for a new Aloe vera L. product that
 maintains the complex  carbohydrates with the  addition of other  substances
 normally provided by "Whole Leaf Aloe."

 Additionally, the  Company obtained  a Japanese  letters-patent (Patent  No.
 2888249, having a Patent Registration Date of February 19, 1999) for the use
 of acemannan (a) in  a vaccine product; (b)  in enhancing natural kill  cell
 activity and in enhancing  specific tumor cell lysis  by white cells  and/or
 antibodies; (c)  in correcting  malabsorption  and mucosal  cell  maturation
 syndromes in man or  animals; and (d) in  reducing symptoms associated  with
 multiple sclerosis.

 The Company also received the grant of European Patent Application under No.
 0611304, having the  date of  publication and mention  of the  grant of  the
 patent of September 15, 1999.   This European Letters Patent claims the  use
 of acetylated mannan for the regulation of blood cholesterol levels and  for
 the removal of plaque in blood vessels.   A patent was also issued in  South
 Korea.  Applications are pending in Canada and Japan.

 In addition, the Company obtained an  Australian Patent (Patent No.  718631,
 having an  Accepted Journal  Date of  April  20, 2000)  on Uses  of  Denture
 Adhesive Containing Aloe Extract.   On June 20,  2000 Singapore granted  the
 Company a patent on Bioactive Factors of Aloe Vera Plants (P-No. 51748).

 The Company received  the grant of  two U.S. patents  (Patent No.  6,274,548
 issued August 14, 2001,  and Patent No. 6,313,103  issued November 6,  2001)
 associated with  the  use of  pectins  for purification,  stabilization  and
 delivery of certain  growth factors.   Other U.S. PCT  applications on  Aloe
 Pectin are pending.  A U.S. patent application on growth factor and protease
 enzyme is also pending.

 The Company obtained on  September 25, 2002, a  European Patent (Patent  No.
 0884994) which was  validated in  Great Britain,  Germany (No.  69715827.6),
 France, Italy  and Portugal  associated with  the uses  of denture  adhesive
 containing Aloe Vera L. extract.

 In addition, the Company was issued  on October 13, 2002, a Canadian  Patent
 (No.  2,122,604)  associated  with  the  process  for  preparation  of  Aloe
 Products.

 The Company also obtained on June 24, 2002, a Korean Patent (No. 343293) and
 on June 5, 2002, European Patent (No. 0705113) which was validated in  Great
 Britain, France, Germany (No.  69430746.7-08), Italy and Austria  associated
 with dried Hydrogel from Hydrophilic Hygroscopic Polymer.

 The Company has filed and intends  to file patent applications with  respect
 to subsequent developments and improvements when it believes such protection
 is in the best interest  of the Company.   Although the scope of  protection
 which ultimately may be afforded by  the patents and patent applications  of
 the Company is difficult to quantify, the Company believes its patents  will
 afford adequate  protection  to  conduct  the  business  operations  of  the
 Company.  However, there can be no assurance that (i) any additional patents
 will be issued to the Company in any or all appropriate jurisdictions,  (ii)
 litigation will not be commenced seeking  to challenge the Company's  patent
 protection or such  challenges will not  be successful,  (iii) processes  or
 products of the  Company do not  or will not  infringe upon  the patents  of
 third parties  or (iv)  the scope  of  patents issued  to the  Company  will
 successfully prevent third parties  from developing similar and  competitive
 products.  It  is not  possible to predict  how any  patent litigation  will
 affect the Company's efforts to develop, manufacture or market its products.

 The Company also relies  upon, and intends to  continue to rely upon,  trade
 secrets,  unpatented  proprietary  know-how  and  continuing   technological
 innovation to develop and  maintain its competitive  position.  The  Company
 typically  enters  into  confidentiality  agreements  with  its   scientific
 consultants, and the  Company's key employees  have entered into  agreements
 with the Company  requiring that they  forbear from disclosing  confidential
 information of  the Company  and assign  to the  Company all  rights in  any
 inventions made  while in  the Company's  employ relating  to the  Company's
 activities.   Accordingly,  the Company  believes  that its  valuable  trade
 secrets and unpatented proprietary know-how are adequately protected.

 The  technology  applicable to the Company's products is developing rapidly.
 A substantial number of patents have been issued to other  biopharmaceutical
 companies.  In addition,  competitors have filed  applications for, or  have
 been issued,  patents  and may  obtain  additional patents  and  proprietary
 rights relating  to products  or processes  competitive  with those  of  the
 Company.  To the Company's knowledge,  acetylated mannan derivatives do  not
 infringe any valid, enforceable United States patents.  A number of  patents
 have been issued to others with respect to various extracts of the Aloe vera
 L. plant and their  uses and formulations, particularly  in respect to  skin
 care and cosmetic  uses.  While  the Company is  not aware  of any  existing
 patents which conflict  with its  current and  planned business  activities,
 there can be  no assurance  that holders of  such other  Aloe vera  L.-based
 patents will not claim that particular  formulations and uses of  acetylated
 mannan derivatives  in  combination  with  other  ingredients  or  compounds
 infringe, in some respect, on these other patents.  In addition, others  may
 have filed patent applications and may have been issued patents relating  to
 products and technologies potentially useful to the Company or necessary  to
 commercialize its products  or achieve their  business goals.   There is  no
 assurance that the Company will be  able to obtain licenses of such  patents
 on acceptable terms.

 The Company has given the trade name Carrasyn[R] to certain of its  products
 containing acetylated mannans.  The Company  has filed a selected series  of
 domestic and foreign trademark applications for the marks Manapol[R] powder,
 Carrisyn[R],  Carrasyn[R]  and  CarraGauze[R].   Further,  the  Company  has
 registered the trademark AVMP[R] Powder and the trade name Carrington[R]  in
 the United States.  In 1999, the Company obtained four additional registered
 trademarks in Brazil.   The Company believes that  its trademarks and  trade
 names are valuable assets.

 In June 2000 the Company obtained  registration in the United States of  its
 mark AloeCeuticals[R] for its skin care and nutritional supplement products.

 In September 2002 the Company obtained registration in the United States  of
 its mark "CaraKlenz[R]" for its proprietary wound cleanser product with that
 name.

 In addition,  applications for  the  registration marks  ISG[TM],  APEC[TM],
 GELSITE[TM] and ORAPATCH[TM] are pending in the U.S.

                                  Employees
                                  ---------

 As of February 28, 2003, the Company  employed 252 persons, of whom 45  were
 engaged in the  operation and maintenance  of its  Irving, Texas  processing
 plant, 130 were  employed at the  Company's facility in  Costa Rica and  the
 remainder  were  executive,  research,  quality  assurance,   manufacturing,
 administrative, sales,  and clerical  personnel.   Of  the total  number  of
 employees, 121 were located in  Texas, 130 in Costa  Rica and one in  Puerto
 Rico. The Company considers  relations with its employees  to be good.   The
 employees are not represented by a labor union.


 ITEM 2. PROPERTIES.
         ----------

 The Company  believes  that  all its  farming  property,  manufacturing  and
 laboratory facilities, as described below, and material farm,  manufacturing
 and laboratory equipment are in satisfactory condition and are adequate  for
 the  purposes for which they  are used,  although the  farm is not  adequate
 to supply  all  of  the  Company's  needs for  Aloe  vera  L. leaves.   (See
 "Management's Discussion and Analysis of Financial Condition and Results  of
 Operations" for  more information  regarding the  Company's arrangements  to
 purchase Aloe vera L. leaves.)

 Walnut Hill Facility.   The Company's  corporate headquarters and  principal
 U.S. manufacturing facility occupy all of the 35,000 square foot office  and
 manufacturing building (the "Walnut Hill Facility"), which is situated on an
 approximately  6.6  acre  tract  of  land located  in  the Las  Colinas area
 of  Irving,  Texas.  The  Company  owns  the  land  and  the  building.  The
 manufacturing operations  occupy approximately  19,000  square feet  of  the
 facility, and  administrative  offices occupy  approximately  16,000  square
 feet.

 Laboratory and Warehouse Facility.  The  Company has leased a 51,200  square
 foot building in close proximity to the Walnut Hill facility for a  ten-year
 term to house its  Research and Development,  Quality Assurance and  Quality
 Control Departments.  Laboratories and offices for DelSite are also  located
 in this  facility.   In addition,  the  Company utilizes  a portion  of  the
 building as warehouse space.  The Company relocated those functions to  this
 facility in the third quarter of 2001.

 Warehouse and Distribution Facility.  In February 2003, the Company leased a
 58,130 square  foot  building  for  a term  of  five  years  for  additional
 warehouse  space.  In  addition,  the  Company  relocated  its  distribution
 operations to this new facility.

 Costa Rica Facility.   The Company owns approximately  405 acres of land  in
 the Guanacaste province of  northwest Costa Rica.   This land is being  used
 for the farming of Aloe vera L. plants and for a processing plant to produce
 bulk pharmaceutical and  injectable mannans and  freeze-dried extracts  from
 Aloe vera L. used in the Company's operations.  The processing plant  became
 operational in 1993.


 ITEM 3. LEGAL PROCEEDINGS
         -----------------

 As reported in  the Company's  Form 10-Q  Quarterly Report  for the  quarter
 ended March 31, 2001, on April 3, 2001, Arthur Singer, a former employee  of
 the Company (the "Plaintiff"), filed a lawsuit in the United States District
 Court for the Eastern District of New York, Long Island Division.  The  suit
 alleges multiple  causes  of  action  against  the  Company  and  its  chief
 executive officer (the "Defendants") and seeks to recover damages in  excess
 of $4,000,000,  plus  legal fees  and  expenses.   The  Plaintiff,  who  was
 formerly employed by the  Company as a  sales representative, alleges  among
 other things that the Company failed  to pay the full amount of  commissions
 owed to him; that the Defendants breached an alleged contract of  employment
 with him;  that the  Company deprived  him of  the opportunity  to  exercise
 vested stock  options, prevented  some of  his unvested  stock options  from
 vesting and caused all of his options to expire earlier than they  otherwise
 would have; and that the Defendants misrepresented that the Company intended
 to retain him  as an  employee, fraudulently induced  him to  remain in  its
 employ and breached an implied covenant of fair dealing.

 On May 31, 2001, the Defendants filed a motion seeking to have the complaint
 dismissed or to have the case transferred to Texas.  On August 28, 2001, the
 Defendants' motion to transfer was granted, and the case was transferred  to
 the United States District Court for the Northern District of Texas,  Dallas
 Division, as Case No.  01-CV-1776.  The Defendants  and Plaintiff have  both
 filed  motions  for summary  judgment  which are pending  before the  Court.
 This case was originally scheduled for trial on March 3, 2003.  However, the
 Court has continued  the trial on  this matter until  such time  has it  has
 ruled on the outstanding motions for summary judgment.  The Company believes
 that the Plaintiff's  claims are  without merit  and intends  to defend  the
 lawsuit vigorously.

 On June 22, 2001, a lawsuit was filed by Swiss-American Products, Inc. ("the
 Plaintiff") against G.  Scott Vogel and  the Company in  the 193rd  Judicial
 District Court  of Dallas  County, Texas.   The  suit alleges,  among  other
 things, that Mr.  Vogel, the  Company's former  Vice President,  Operations,
 improperly obtained proprietary information of Swiss-American Products, Inc.
 from a  former  employer  that  manufactured  products  under  contract  for
 Plaintiff, and used that information on behalf of the Company, in breach  of
 certain common law duties and a confidentiality agreement between his former
 employer and Plaintiff.   The suit  further alleges that  Mr. Vogel and  the
 Company  ("Defendants")  conspired  to  unlawfully  disclose,  convert   and
 misappropriate Plaintiff's trade secrets.

 The suit  seeks  temporary  and permanent  injunctive  relief,  including  a
 permanent injunction  prohibiting Defendants  from  disclosing or  using  to
 Plaintiff's disadvantage any confidential proprietary information  belonging
 to Plaintiff which Mr. Vogel allegedly obtained from his former employer, or
 from developing or marketing products based on Plaintiff's formulas or other
 information allegedly taken from Mr. Vogel's former employer.  The suit also
 seeks to recover damages in an unspecified amount from Defendants.

 Defendants have  filed a  motion for  sanctions  against Plaintiff  and  its
 counsel for  filing  an  affidavit  containing  statements  that  Defendants
 believe to  be  false and  misleading  and  for making  claims  and  seeking
 injunctive relief  based  in part  on  those statements.  In  addition,  the
 Company has  filed  a counterclaim  against  Plaintiff, seeking  to  recover
 actual and  exemplary damages  for wrongful  injunction and  also seeking  a
 declaratory judgment confirming  the Company's  right to  manufacture for  a
 third party  a wound  cleanser that  is  similar to  a wound  cleanser  that
 Plaintiff has previously provided to that party.

 Following a  hearing on  July 30,  2001, the  trial court  entered an  order
 setting the  case  for trial  on  July 30,  2002  and granting  a  temporary
 injunction that prohibits  Defendants from (i)  disclosing or  using any  of
 Plaintiff's confidential,  proprietary  or trade  secret  information;  (ii)
 developing or  marketing  a wound  cleanser  product  that is  the  same  or
 substantially the same as  reflected in a  formula that is  at issue in  the
 lawsuit (although  this prohibition  expressly does  not apply  to  products
 actively manufactured and sold by the  Company before January 1, 2001  using
 the exact same formula  then in effect);  and (iii) destroying,  concealing,
 altering, removing or disposing  of any documents,  files, computer data  or
 other things  relating  to Plaintiff  or  Mr. Vogel's  former  employer,  or
 containing or  referring to  trade secrets  or confidential  or  proprietary
 information  of  Plaintiff  or  Mr.  Vogel's  former  employer.   The  Court
 continued the July  30, 2002 trial  setting; the case  is currently set  for
 trial on May  6, 2003.   The Company  believes that  Plaintiff's claims  are
 without merit  and intends  to vigorously  defend against  those claims  and
 pursue its counterclaim and motion for sanctions.


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

 The Company did not submit any matter  to a vote of security holders  during
 the fourth quarter of the fiscal year covered by this Annual Report.


                                   PART II
                                   -------

 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
         ---------------------------------------------------------------------

 The Common Stock  of the  Company is traded  on the  NASDAQ National  Market
 under the symbol "CARN."   The following table sets  forth the high and  low
 sales prices  per  share  of  the  Common Stock  for  each  of  the  periods
 indicated.


 Fiscal 2001                            High          Low
 -----------                            ----          ----
 First Quarter                         $1.38         $1.03

 Second Quarter                         1.68          1.00

 Third Quarter                          1.40          0.88

 Fourth Quarter                         1.15          0.84


 Fiscal 2002                            High          Low
 -----------                            ----          ----
 First Quarter                         $3.25         $1.07

 Second Quarter                         1.98          1.20

 Third Quarter                          1.33          0.95

 Fourth Quarter                         1.11          0.71


 At March 11,  2003, there were  972 holders of  record (including  brokerage
 firms) of Common Stock.

 The Company  has  not  paid any  cash  dividends  on the  Common  Stock  and
 presently intends to  retain all earnings  for use in  its operations.   Any
 decision by the Board of Directors of  the Company to pay cash dividends  in
 the future will depend  upon, among other  factors, the Company's  earnings,
 financial condition and capital requirements.

 In March 2001,  the Board of  Directors authorized the  repurchase of up  to
 1,000,000 shares,  or  approximately  10.3%, of  the  Company's  outstanding
 Common Stock,  dependent on  market conditions.   Under  the  authorization,
 purchases of  Common  Stock  may be  made  on  the open  market  or  through
 privately negotiated transactions at such times and prices as are determined
 jointly by the Chairman of the Board and the President of the Company.   The
 Board authorized  the  repurchase  program based  on  its  belief  that  the
 Company's stock is undervalued  in light of  the Company's future  prospects
 and that  it  would  be  in  the  best  interest  of  the  Company  and  its
 shareholders to repurchase some of its outstanding shares.  As of March  11,
 2003, the  Company had  repurchased 2,400  of its  outstanding Common  Stock
 under the program.


 ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
         ------------------------------------

 The selected consolidated financial data below should be read in conjunction
 with the consolidated financial statements of  the Company and notes thereto
 and "Item 7. Management's Discussion and Analysis of Financial Condition and
 Results of Operations."  The selected consolidated financial information for
 the  five  years  ended December 31, 2002,  is derived from the consolidated
 financial statements  of  the  Company,  of which  the Statements  have been
 audited by Ernst & Young LLP, independent public accountants.


                                                Years ended December 31,
 (Dollars and numbers of shares in    -----------------------------------------
 thousands except per share amounts)  1998    1999     2000     2001     2002
 ------------------------------------------------------------------------------
 OPERATIONS STATEMENT INFORMATION:

 Revenue:
   Net sales                        $23,625  $28,128  $22,833  $15,115  $15,571
   Royalty income                         -        -      270    2,479    2,470
                                     ------   ------   ------   ------   ------
 Total revenue                       23,625   28,128   23,103   17,594   18,041
 Costs and expenses:
 Cost of sales                       10,870   13,640   12,782    9,803   11,739
                                     ------   ------   ------   ------   ------
 Gross margin                        12,755   14,488   10,321    7,791    6,302
 Expenses:
   Selling, general and
     administrative                  10,254   10,346   10,162    5,016    6,040
   Research and development           2,589    2,434    2,979    2,442    1,701
   Research and development,
     DelSite                              -        -        -        -    1,879
   Research and development,
     Aliminase[TM] clinical trial
       expenses                           -    2,866      623        -        -
   Charges related to ACI and
     Aloe & Herbs                     1,750        -        -        -        -
   Charges related to Oregon
     Freeze Dry, Inc.                     -    1,042      223        -        -
   Interest expense (income), net      (233)    (105)     (80)     (32)      19
   Other expense (income), net            -      (62)    (110)     (13)      41
                                     ------   ------   ------   ------   ------
 Income (loss) before income taxes   (1,605)  (2,033)  (3,476)     378   (3,378)
    Provision for income taxes           10        -        -        -        -
                                     ------   ------   ------   ------   ------
 Net income (loss)                  $(1,615) $(2,033) $(3,476) $   378  $(3,378)
                                     ======   ======   ======   ======   ======
 Net income (loss) per common share
   - basic and diluted(1)           $ (0.17) $ (0.22) $ (0.36) $  0.04  $ (0.34)
                                     ======   ======   ======   ======   ======
 Weighted average shares used in
   per share computations             9,320    9,376    9,545   9,743     9,889


 BALANCE SHEET INFORMATION (as of December 31):

  Working capital                   $ 9,716  $ 7,911  $ 6,275  $ 6,315  $ 3,989
  Total assets                       24,247   23,493   20,702   21,217   22,159
  Total shareholders' investment     21,363   19,504   16,440   16,929   13,689

 (1)  For a description of the calculation of basic and diluted net income
      (loss) per share, see Note Twelve to the consolidated financial
      statements.


 ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           ---------------------------------------------------------------
           RESULTS OF OPERATIONS.
           ---------------------

                                  Background
                                  ----------

 The Company  is  a  research-based biopharmaceutical,  medical  device,  raw
 materials  and   nutraceutical   company   engaged   in   the   development,
 manufacturing and marketing of  naturally-derived complex carbohydrates  and
 other natural product therapeutics for the treatment of major illnesses, the
 dressing and management of wounds and nutritional supplements.  The  Company
 is comprised of two business segments.   See Note Thirteen to the  unaudited
 condensed consolidated financial statements for financial information  about
 these business segments.  The Company sells prescription and nonprescription
 human  and  veterinary  products  through  its  Medical  Services  Division.
 Through Caraloe, Inc., its consumer  products subsidiary, the Company  sells
 consumer  and  bulk  raw  material   products  and  also  provides   product
 development  and  manufacturing  services  to  customers  in  the  cosmetic,
 nutraceutical and  medical  markets.   The  Company's research  and  product
 portfolio are based  primarily on  complex carbohydrates  isolated from  the
 Aloe vera L. plant.

 In October 2001, the Company  incorporated, a wholly-owned subsidiary  named
 DelSite Biotechnologies, Inc. ("DelSite").   DelSite operates  independently
 from the Company's research and development  program and is responsible  for
 the  research,  development  and  marketing  of  the  Company's  proprietary
 GelSite[TM] technology  for controlled  release  and delivery  of  bioactive
 pharmaceutical ingredients.

                       Liquidity and Capital Resources
                       -------------------------------

 At December 31, 2002 and 2001, the Company held cash and cash equivalents of
 $3,636,000 and $3,454,000, respectively, an increase of $182,000.  Net  cash
 used in operating  activities in 2002  was $1,365,000, as  compared to  cash
 provided  by  operating  activities  in  2001  of  $1,275,000.  The  Company
 received royalty payments  totaling $2,875,000 in  2002 under its  licensing
 agreement with Medline.   In addition,  the Company received  an advance  on
 future royalty payments due from Medline of $2.0 million which was  recorded
 in the Company's financial  statements as a loan  to be repaid in  quarterly
 installments through September 2005.  See  Part I for discussions  regarding
 agreements with Medline.  Significant cash  outflows during 2002 included  a
 $378,000 investment  in property  and equipment  and  $1.0 million  for  the
 acquisition of  the custom  division of  CBI.   Customers  with  significant
 accounts receivable balances  at the end  of 2002  included Mannatech,  Inc.
 ($1,320,000) and  Medline  Industries  ($610,000),  and  of  these  amounts,
 $1,864,000 has been collected as of February 28, 2003.

 In March 2003  the Company received  a loan of  $500,000 from Bancredito,  a
 Costa Rica  bank,  with interest  and  principal  to be  repaid  in  monthly
 installments over eight years.  The interest rate on the loan is U.S.  Prime
 Rate plus 2.0%.  The loan  is secured by a  mortgage on an unused,  164-acre
 parcel of land owned by the Company in  Costa Rica plus a lien on  specified
 oral patch production equipment.  The proceeds  of the loan will be used  in
 the Company's operations.

 The Company had no additional material  capital commitments as of that  date
 other than its leases and agreements with suppliers.

 In July 1998 the  Company provided a $187,000  cash advance to Rancho  Aloe,
 which is evidenced by a note receivable, due in installments, with  payments
 being made monthly based  upon farm production.   The Company also  advanced
 $300,000 to  Aloe  &  Herbs in  November  1998  for the  acquisition  of  an
 irrigation system to improve production on the farm and allow harvesting  of
 leaves year-round.   The Company  was also  granted a  five-year warrant  to
 purchase 300,000 shares  of common stock  of Aloe &  Herbs.   In the  fourth
 quarter of 1998, the Company fully reserved all amounts owed to it by Aloe &
 Herbs, in the total amount  of $487,000, due to  the start-up nature of  the
 business.  In 2002, the Company received payments totaling $19,000 from Aloe
 & Herbs against the amount due.

 In November  1997, the  Company entered  into a  financing arrangement  with
 Comerica  Bank-Texas  ("Comerica").   The  arrangement  was  composed  of  a
 $3,000,000 line  of credit  structured as  a demand  note without  a  stated
 maturity  date  and with an interest rate  equal to the Comerica prime rate.
 The line of credit  is collateralized by  the Company's accounts  receivable
 and  inventory.  This  credit  facility  is  used for  operating  needs,  as
 required.  In October 2002, the Company entered into a credit agreement with
 Comerica which  further defined  the credit  arrangement, including  certain
 covenants.  As of December 31, 2002, the Company was in compliance with  all
 such covenants.   As of December  31, 2002, there  was a $1,587,000  balance
 owed to Comerica under the terms of the financing agreement.

 In December 2002,  the Company entered  into an agreement  with Medline  for
 accelerated  payment  of  $2.0  million  of  the  royalties  due  under  the
 Distributor and  License  Agreement.   The  royalty  acceleration  agreement
 provides for each of the remaining quarterly royalty payments due to be paid
 to the Company by Medline to be reduced  by equal amounts, the sum of  which
 offsets the royalty  advance.   In addition,  the Company  will pay  Medline
 interest on the  advance at the  rate of 6.5%  per year  on the  outstanding
 balance of the advance.  The  Company has accounted for this transaction  in
 its financial statement as if it were a loan.

 In December 2002, the Company acquired the assets of the custom division  of
 Cosmetic Beauty Innovations  (CBI) for $1.0  million plus a  royalty on  the
 Company's sales  to custom  division  customers for  five  years and  up  to
 $700,000 for useable inventories.  The CBI custom division provided  product
 development and manufacturing services to customers in the cosmetic and skin
 care markets.  Included in the purchase were intellectual property,  certain
 inventories and specified  pieces of equipment.   The  Company will  provide
 services to  these  customers  through the  Caraloe,  Inc.  development  and
 manufacturing services group.  The Company began producing products for  the
 transferring CBI customers in February 2003 at its Irving, Texas facility.

 The Company is seeking approximately $1.0 million in additional financing to
 be used as working capital in 2003  and 2004.  The Company anticipates  that
 such borrowings, together with the expected cash flows from operations, will
 provide the funds  necessary to  finance its  current operations,  including
 expected levels of research and development.  However, the Company does  not
 expect that its current cash resources will be sufficient to finance  future
 major clinical studies and costs of  filing new drug applications  necessary
 to develop  its products  to their  full commercial  potential.   Additional
 funds,  therefore,  may  need  to   be  raised  through  equity   offerings,
 borrowings, licensing arrangements or other means, and there is no assurance
 that the Company  will be able  to obtain such  funds on satisfactory  terms
 when they are needed.

 In March 2001, the Board of  Directors authorized the Company to  repurchase
 up to one million shares of its  outstanding Common Stock.  See "Market  for
 Registrant's Common  Equity and  Related Stockholder  Matters"  above.   The
 Company believes  it has  the financial  resources necessary  to  repurchase
 shares from time to time pursuant to the Board's repurchase authorization.

 The Company is subject to regulation by numerous governmental authorities in
 the United States and  other countries.  Certain  of the Company's  proposed
 products will require governmental  approval prior to  commercial use.   The
 approval process  applicable  to  pharmaceutical  products  and  therapeutic
 agents usually  takes  several  years  and  typically  requires  substantial
 expenditures.   The  Company and  any  licensees may  encounter  significant
 delays or excessive costs  in their respective  efforts to secure  necessary
 approvals.  Future  United States or  foreign legislative or  administrative
 acts could also prevent or delay regulatory approval of the Company's or any
 licensees' products.  Failure to obtain requisite governmental approvals  or
 failure to obtain approvals of the  scope requested could delay or  preclude
 the Company or any licensees from  marketing their products, or could  limit
 the commercial use  of the  products, and  thereby have  a material  adverse
 effect on the Company's liquidity and financial condition.

                            Results of Operations
                            ---------------------

 Fiscal 2002 Compared to Fiscal 2001
 -----------------------------------
 Total revenues were $18,041,000 in 2002, compared with $17,594,000 in  2001.
 Total sales  in the Company's Medical  Services Division were $8,394,000  in
 2002 as compared  to $10,400,000 in  2001 and total  sales in the  Company's
 Caraloe, Inc. subsidiary were $9,647,000 in  2002 as compared to  $7,194,000
 in 2001.

 Total sales  of the  Company's wound  and skin  care products  in 2002  were
 $5,855,000 as compared with $7,921,000 in 2001.  The decrease in wound  care
 revenue was primarily due to a $2.2 million decrease in orders from Medline,
 the Company's exclusive domestic distributor.  A portion of the decrease can
 be attributed to initial stocking orders  made by Medline in early 2001,  as
 the distribution  agreement was  implemented.   Additionally, the  Company's
 products are facing increasing competitive pressure from low-end, commodity-
 type products which is  eroding its market share.   Educational efforts  are
 underway  to   support   the   distributors   sales   efforts   in   product
 differentiation, performance and net cost of  therapy to the customer.   The
 Company has also initiated selective advertisements to support its brand.

 Partially offsetting  the  decrease in  domestic  wound care  sales  was  an
 increase in sales to international customers.   The Company sells its  wound
 care products to international distributors, primarily in Europe and Central
 and South  America.   Total  international wound  care  sales in  2002  were
 $534,000 as compared to $386,000 in 2001, with the increase primarily due to
 increased sales in Latin America.

 Sales of the Company's oral technology  products decreased from $129,000  in
 2001 to $56,000  in 2002  due primarily  to the  loading of  inventory by  a
 significant international customer in 2001.

 The Company recorded royalty revenue in  2002 of $2,470,000 relating to  the
 exclusive Licensing and Distribution agreement  with Medline as compared  to
 $2,479,000 in 2001.

 Of the total Caraloe, Inc. sales in 2002, $6,493,000 was related to the sale
 of bulk Manapol[R] powder.  Caraloe  currently sells bulk Manapol[R]  powder
 to a major customer under a  three-year, non-exclusive supply and  licensing
 agreement.  The  current agreement expires  in August 2003.   Sales to  this
 customer increased from $5,192,000 in 2001 to $6,366,000 in 2002.

 Caraloe also  sells its  AloeCeuticals[R] line  of immune-enhancing  dietary
 supplements containing Manapol[R],  which are available  in liquid,  capsule
 and tablet forms.  These products are sold directly to health and  nutrition
 stores and broker/distributors.   They are also  sold through the  Company's
 Internet sites.  Sales of these  products in 2001 and 2002 totaled  $538,000
 and $532,000, respectively.

 Caraloe continued  to develop  its  contract manufacturing  business  during
 2002.  Caraloe manufactures a variety  of products that can be filled  using
 the Company's current equipment including gels, creams, lotions and  drinks.
 Total  contract manufacturing  sales in 2002  were $2,622,000 compared  with
 $1,144,000 in 2001.  Of the  $1,478,000 increase, $845,000 was  attributable
 to products  the  Company produced  for  Medline under  a  supply  agreement
 entered into in  December 2000, whereby  the Company manufactures  Medline's
 own branded skin care products for them on a contract basis.

 Cost of goods sold increased from $9,803,000 in 2001 to $11,739,000 in 2002,
 or 19.7%.  As a percentage of sales,  cost of sales increased from 55.7%  to
 65.1%.   The increase  in the  cost  of goods  sold percentage  was  largely
 attributable to  a  significant  shift in  sales  mix  toward  lower  margin
 contract  manufactured  products.   The   Company  experienced   significant
 unfavorable variances  associated with  its manufacturing  processes in  its
 Irving, Texas facility  due to lower  manufacturing volumes associated  with
 the  decrease  in  its  wound  care sales.   The  Company  also  experienced
 significant  unfavorable   variances  associated   with  its   manufacturing
 processes in its Costa Rica facility due to lower manufacturing volumes  for
 Manapol[R] powder through much of the year.  Increased sales of   Manapol[R]
 powder in the fourth  quarter of 2002 prompted  the Company to increase  its
 production of Manapol[R]  at the end  of the year,  thereby eliminating  the
 unfavorable variances through the first quarter of 2003.

 Selling,  general  and   administrative  expenses   ("SG&A")  increased   to
 $6,040,000 from $5,016,000, or 20.4%.  The 2001 balance included a  one-time
 favorable adjustment  of  $211,000 to  reduce  the Company's  franchise  tax
 liability.  The Company recorded additional distribution expenses in 2002 of
 $285,000, which was primarily due to increased shipping volume and increased
 facility costs associated with the  distribution facility leased in  October
 2001.  The Company recorded additional selling expense in 2002 of  $201,000,
 primarily in the areas of salaries,  travel, literature and advertising,  in
 support  of  efforts  to  grow  total  sales.   The  Company  also  recorded
 additional administrative expenses  in 2002  of $327,000,  primarily in  the
 areas of information systems, training, professional fees and travel as part
 of an effort to  improve the infrastructure of  the Company and position  it
 for future growth.

 Research and  development  ("R&D")  expenses in  support  of  the  Company's
 ongoing operations decreased to $1,701,000 in 2002 from $2,442,000 in  2001,
 or 30.3%.  This decrease resulted from the Company's efforts to refocus  the
 activities of  this  group  toward services  in  support  of  manufacturing,
 including formulation design, formulation modifications and  re-engineering,
 technology  transfer  to  the  manufacturing  suite  and stability  studies.
 DelSite operates independently from  the Company's research and  development
 program and is responsible  for the research,  development and marketing  of
 the Company's proprietary Gelsite[TM] technology for controlled release  and
 delivery of bioactive pharmaceutical ingredients.  DelSite began  operations
 in January  2002  and  its  expenses in  support  of  this  mission  totaled
 $1,879,000 in  2002.   Combined research  and development  expenses  totaled
 $3,580,000 in 2002, an increase of 46.6% over 2001.

 Net interest expense  of $41,000 was  recorded in 2002  versus net  interest
 income of $32,000 in 2001, with the variance primarily due to lower interest
 rates earned on investments in 2002 and increased Company borrowings.

 There was  no  provision for  income  taxes in  2002  due to  the  Company's
 utilization of net operating loss carryforwards.  The Company has provided a
 valuation allowance against all deferred tax asset balances at December  31,
 2002 and 2001 due to uncertainty regarding realization of the asset.

 The Company's  net loss  for 2002  was $3,378,000,  versus a  net income  of
 $378,000 for 2001.   The  2002 net  loss was  due to  reduced gross  margins
 resulting from the mix of products sold and from plant operating  variances,
 as well as additional operating expenses  incurred in defense of  litigation
 and in support of positioning business  for future growth.  Results in  2001
 benefited from  higher  unit volume  sales  of wound  care  products,  lower
 production costs  and  a one  time  gain  of $211,000  from  adjustments  to
 franchise tax liabilities booked  in prior periods.   The loss per share  in
 2002 was $0.34, compared to earnings per share of $0.04 in 2001.

 Fiscal 2001 Compared to Fiscal 2000
 -----------------------------------
 Total revenues were $17,594,000 in 2001, compared with $23,103,000 in  2000.
 Total sales  of  the Company's  wound and skin  care products  in 2001  were
 $7,921,000 as compared to  $11,971,000 in 2000.   The decrease in wound  and
 skin care revenue was primarily effected by the distribution agreement  with
 Medline which significantly lowered the  Company's selling prices for  these
 products in exchange for Medline assuming all of the selling, marketing  and
 distribution activities  and the  related costs,  and paying  the Company  a
 royalty.   The Company  recorded  royalty income  of  $2.5 million  in  2001
 related to this agreement.  Partially offsetting this revenue reduction  due
 to pricing was a 10% increase in unit volume in 2001 as compared to 2000.

 The Company also sells products to international distributors, primarily  in
 Europe, and Central and  South America.  Total  international sales in  2001
 were $1,315,000 as  compared to $1,343,000  in 2000.   Included in the  2001
 amount were sales of $386,000 of  wound care products, which was a  decrease
 of $153,000 from 2000.

 Sales of the Company's  oral technology products  increased from $68,000  in
 2000 to $129,000  in 2001 because  of significantly increased  sales of  the
 product to an international  customer.  Included in  this line are  products
 for the management of oral mucositis/stomatitis and oral lesions and ulcers.

 Of the 2001 total Caraloe sales, $5,367,000 was related to the sale of  bulk
 Manapol[R] powder. Caraloe currently sells bulk Manapol[R] powder to a major
 customer  under  a three-year, non-exclusive supply and licensing agreement.
 The current agreement has been extended  and expires in August 2003.   Sales
 to this customer decreased from $8,794,000 in 2000 to $5,192,000 in 2001.

 In July  1999, Caraloe  launched its  new AloeCeuticals[R]  line of  immune-
 enhancing dietary supplements containing Manapol[R], which are available  in
 liquid, capsule  and tablet  forms.   These products  are sold  directly  to
 health and nutrition  stores and broker/distributors.   They  are also  sold
 through the Company's Internet sites.   Sales of these products in 2000  and
 2001 totaled $446,000 and $538,000, respectively.

 Caraloe also continued to develop its contract manufacturing business during
 2001.  Caraloe manufactures a variety  of products that can be filled  using
 the Company's current equipment including gels, creams, lotions and  drinks.
 Total  contract manufacturing  sales in 2001  were $1,144,000 compared  with
 $779,000 in 2000.

 Cost of sales decreased from $12,782,000  in 2000 to $9,803,000 in 2001,  or
 23.3%.  As  a percentage of  sales, cost of  sales increased  from 55.3%  to
 55.7%.   The increase  in the  cost  of goods  sold percentage  was  largely
 attributable to lower  wound care pricing  as a result  of the  distribution
 agreement with Medline. Offsetting this was  a change in product mix  caused
 by the  decline  in lower  margin  Manapol[R]  sales as  well  as  increased
 efficiency in  the operation  of the  Company's manufacturing  plant in  the
 United States.

 Selling,  general  and   administrative  expenses   ("SG&A")  decreased   to
 $5,016,000 from $10,162,000,  or 50.6%.   Included  in this  decrease was  a
 $4,550,000 reduction  in  selling  and marketing  expenses  for  wound  care
 products directly related to the Medline Agreement and Medline's acquisition
 of   the   Company's   sales  force  that   existed  on  December  1,  2000.
 Additionally, the  Company  took  advantage of  the  reduced  administrative
 burdens of supporting the sales force  by reducing costs in all  departments
 affected by the reduction in sales personnel.  The Company also  recorded  a
 one-time favorable adjustment  of $211,000 to  adjust its accrued  franchise
 tax liability to actual.

 Research and development  ("R&D") expenses decreased  to $2,442,000 in  2001
 from $3,602,000 in 2000, or 32.2%.   This decrease was primarily the  result
 of  a  reduction   of  $623,000   in  expenditures   for  the   unsuccessful
 Aliminase[TM] clinical trial  as well as  refocusing efforts and  priorities
 within the department.  The Company continued its efforts in basic  research
 during 2001,  including  work  on a  new  and  unique  complex  carbohydrate
 (CR1013) which has potential near-term utility in the area of drug delivery.
 Also  included  in  total R&D  activities  during 2001  were  various  small
 clinical trials  designed  to  collect data  in  support  of  the  Company's
 products.

 Net interest income of $32,000 was realized in 2001 versus $80,000 in  2000,
 with the variance primarily due to lower interest rates in 2001.

 There was  no  provision for  income  taxes in  2001  due to  the  Company's
 utilization of net operating loss carryforwards.  The Company has provided a
 valuation allowance against all deferred tax asset balances at December  31,
 2001 and 2000 due to uncertainty regarding realization of the asset.

 The Company's  net  income for  2001  was $378,000,  versus  a net  loss  of
 $3,476,000  for  2000.  The  2001  net  income  was  due  to  the  operating
 efficiencies occurring  as  a  result of  the  distribution  agreement  with
 Medline Industries, lower production costs as  well as increased unit  sales
 in 2001  of  the Company's  wound  and skin  care  products.   2001  results
 benefited from a  one time gain  of $200,000 from  adjustments to state  tax
 liabilities  booked  in  prior periods.  The  loss  in  2000  was  primarily
 attributable to  lower selling  prices for  wound  care products  and  lower
 volumes of Manapol[R] sales, high selling and marketing costs for wound care
 products and final costs for the  Aliminase Clinical Trial.  The net  income
 per share was $0.04 in 2001,  compared to a net loss  per share of $0.36  in
 2000.

 Impact of Inflation
 -------------------
 The Company does not believe that inflation has had a material impact on its
 results of operations.

                         Critical Accounting Policies
                         ----------------------------

 Management has identified the following accounting policies as critical. The
 Company's accounting policies are  more fully described in  Note Two of  the
 Financial Statements.  The preparation of consolidated financial  statements
 requires the  Company  to  make estimates  and  judgments  that  affect  the
 reported amounts of assets, liabilities, revenues and expenses, and  related
 disclosure of contingent assets  and liabilities. On  an ongoing basis,  the
 Company evaluates  its  estimates,  including  those  related  to  revenues,
 product returns, bad debts and inventories. The Company bases its  estimates
 on historical experience and on various other assumptions that are  believed
 to be reasonable  under the  circumstances, the  results of  which form  the
 basis  for  making  judgments  about  the  carrying  values  of  assets  and
 liabilities  that  are  not readily  apparent  from  other  sources.  Actual
 results may  differ  from these  estimates  under different  assumptions  or
 conditions.

 The Company records estimated reductions to revenue for incentive  offerings
 including promotions and other volume-based incentives as well as  estimates
 for returns based upon recent history.  If market conditions were to decline
 or inventory was in danger of expiring or becoming obsolete, the Company may
 take actions to increase customer incentive offerings possibly resulting  in
 an incremental reduction of  revenue at the time  the incentive is  offered.
 Additionally, if  demand  for  the  Company's  product  were  to  drop,  the
 Company's distributors may request  return of product  for credit causing  a
 need to re-evaluate and possibly increase  the reserve for product  returns.
 The Company maintains allowances for doubtful accounts for estimated  losses
 resulting from the inability of its customers to make required payments.  If
 the financial  condition of  the Company's  customers were  to  deteriorate,
 resulting in an  impairment of their  ability to  make payments,  additional
 allowances may  be  required. The  Company  writes down  its  inventory  for
 estimated obsolescence  or unmarketable  inventory equal  to the  difference
 between the cost  of inventory  and the  estimated market  value based  upon
 assumptions about future  demand and market  conditions.   If actual  market
 conditions are less favorable than those projected by management, additional
 inventory write-downs may be required.

                          Forward Looking Statements
                          --------------------------

 All statements other than  statements of historical  fact contained in  this
 report, including  but  not  limited  to  statements  in  this  Management's
 Discussion and Analysis  of Financial  Condition and  Results of  Operations
 (and similar statements  contained in  the Notes  to Consolidated  Financial
 Statements) concerning the Company's financial position, liquidity,  capital
 resources and results of operations, its prospects for the future and  other
 matters, are forward-looking statements.  Forward-looking statements in this
 report generally include or are accompanied  by words such as  "anticipate",
 "believe", "estimate",  "expect",  "intend", "will",  "would",  "should"  or
 words of similar import.  Such  forward-looking statements include, but  are
 not limited to, statements regarding the ability of local suppliers of  Aloe
 vera L. leaves in Costa  Rica to supply the  Company's need for leaves;  the
 condition,  capacity  and  adequacy  of  the  Company's  manufacturing   and
 laboratory facilities and equipment; the adequacy of the protection that the
 Company's patents provide  to the conduct  of its  business operations;  the
 adequacy of the  Company's protection of  its trade  secrets and  unpatented
 proprietary know-how; the Company's belief that the claims of the Plaintiffs
 identified under Item  3 of Part  I of this  report are  without merit;  the
 adequacy of the Company's  cash resources and cash  flow from operations  to
 finance its current operations; and the Company's intention, plan or ability
 to repurchase shares of its outstanding Common Stock, to initiate,  continue
 or complete clinical and other research  programs, to obtain financing  when
 it is needed, to fund its  operations from revenue and other available  cash
 resources, to enter  into licensing agreements,  to develop  and market  new
 products and  increase  sales of  existing  products, to  obtain  government
 approval to market new products, to file additional patent applications,  to
 rely on  trade secrets,  unpatented proprietary  know-how and  technological
 innovation, to reach  satisfactory resolutions  of its  disputes with  third
 parties, to reach a satisfactory agreement with its supplier of freeze-dried
 products, to acquire sufficient quantities of Aloe vera L. leaves from local
 suppliers at significant savings, to collect  the amounts owed to it by  its
 distributors, customers and  other third parties,  and to use  its tax  loss
 carryforwards before they expire, as well as various other matters.

 Although the  Company  believes  that  the  expectations  reflected  in  its
 forward-looking statements are  reasonable, no assurance  can be given  that
 such  expectations  will  prove  correct.   Factors  that  could  cause  the
 Company's results to differ  materially from the  results discussed in  such
 forward-looking statements include but are not limited to the  possibilities
 that the Company may be unable to obtain the funds needed to carry out large
 scale clinical trials and other research and development projects, that  the
 results of the Company's clinical trials may not be sufficiently positive to
 warrant continued development and marketing of the products tested, that new
 products may not  receive required approvals  by the appropriate  government
 agencies or may not meet with adequate customer acceptance, that the Company
 may not be able to obtain financing when needed, that the Company may not be
 able to obtain appropriate licensing agreements for products that it  wishes
 to market  or products  that it  needs assistance  in developing,  that  the
 Company's efforts  to improve  its sales  and reduce  its costs  may not  be
 sufficient to  enable it  to  fund its  operating  costs from  revenues  and
 available cash resources, that one or more of the customers that the Company
 expects to purchase significant quantities of  products from the Company  or
 Caraloe may  fail to  do  so, that  competitive  pressures may  require  the
 Company to lower the  prices of or increase  the discounts on its  products,
 that the  Company's  sales of  products  it is  contractually  obligated  to
 purchase from suppliers  may not  be sufficient  to enable  and justify  its
 fulfillment of those  contractual purchase obligations,  that other  parties
 who owe the Company substantial amounts of  money may be unable to pay  what
 they owe the Company, that the Company's patents may not provide the Company
 with adequate protection, that the Company's manufacturing facilities may be
 inadequate to meet demand, that the Company's distributors may be unable  to
 market the Company's products successfully, that the Company may not be able
 to resolve its disputes  with third parties in  a satisfactory manner,  that
 the Company  may  be unable  to  reach  a satisfactory  agreement  with  its
 supplier of freeze-dried  products or with  other important suppliers,  that
 the Company may not be  able to use its  tax loss carryforwards before  they
 expire, that  the  Company  may  not  have  sufficient  financial  resources
 necessary to repurchase shares of its outstanding Common Stock, and that the
 Company may be unable  to produce or  obtain, or may  have to pay  excessive
 prices for, the raw materials or products it needs.

 All forward-looking statements  in this  report are  expressly qualified  in
 their entirety by the cautionary statements in the two immediately preceding
 paragraphs.


 ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
           ----------------------------------------------------------

                               Foreign Currency
                               ----------------

 The Company's manufacturing operation in Costa  Rica accounted for 37.5%  of
 cost of  sales for  the year  ended December  31, 2002.   As  a result,  the
 Company's financial results could be significantly affected by factors  such
 as changes  in foreign  currency exchange  rates or  economic conditions  in
 Costa Rica.  When the U.S. Dollar strengthens against the Costa Rica  Colon,
 the cost  of sales  decreases.   During 2002,  the exchange  rate from  U.S.
 Dollars to Costa  Rica Colones  increased by 11.3%  to 340  at December  31,
 2002.  The effect  of an additional  10% strengthening in  the value of  the
 U.S. Dollar relative to the Costa  Rica Colones in 2002 would have  resulted
 in an  increase of  $66,300  in gross  profit.   The  Company's  sensitivity
 analysis of the effects of changes in foreign currency rates does not factor
 in a potential change in sales levels or local currency prices.

 Sales  of  products  to foreign  markets comprised 7.9%  of sales  for 2002.
 These sales are generally denominated in U.S. Dollars.  The Company does not
 believe that changes  in foreign currency  exchange rates  or weak  economic
 conditions in foreign markets in which the Company distributes its  products
 would have a significant effect on  operating results.  If sales to  foreign
 markets increase in future periods, the effects could become significant.

 For quantitative and  qualitative disclosures about  market risk related  to
 the supply of Aloe vera L. leaves, see "Business."


 ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
          -------------------------------------------

 The response to Item 8 is submitted as a separate section of this Form 10-K.
 See Item 15.


 ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          ---------------------------------------------------------------
          FINANCIAL DISCLOSURE.
          --------------------

 There were no  changes in or  disagreements with  the Company's  independent
 public accountants on accounting matters or financial disclosure.


                                   PART III
                                   --------

 ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
           --------------------------------------------------

 The information required by Item 10  of Form 10-K is hereby incorporated  by
 reference from the  information appearing  under the  captions "Election  of
 Directors," "Executive  Officers" and  "Section 16(a)  Beneficial  Ownership
 Reporting Compliance" in the  Company's definitive Proxy Statement  relating
 to its 2002 annual meeting of shareholders, which will be filed pursuant  to
 Regulation 14A  within  120  days after  the  Company's  fiscal  year  ended
 December 31, 2002.


 ITEM 11.  EXECUTIVE COMPENSATION.
           ----------------------

 The information required by Item 11  of Form 10-K is hereby incorporated  by
 reference from  the  information  appearing  under  the  caption  "Executive
 Compensation" in the  Company's definitive Proxy  Statement relating to  its
 2003 annual  meeting  of  shareholders, which  will  be  filed  pursuant  to
 Regulation 14A  within  120  days after  the  Company's  fiscal  year  ended
 December 31, 2002.


 ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
           --------------------------------------------------------------

 The information required by Item 12  of Form 10-K is hereby incorporated  by
 reference from  the  information  appearing  under  the  captions  "Security
 Ownership of  Management"  and  "Principal Shareholders"  in  the  Company's
 definitive  Proxy  Statement  relating  to   its  2002  annual  meeting   of
 shareholders, which will be filed pursuant to Regulation 14A within 120 days
 after the Company's fiscal year ended December 31, 2002.


 ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
           ----------------------------------------------

 The information,  if  any,  required by  Item  13  of Form  10-K  is  hereby
 incorporated by reference from the  information appearing under the  caption
 "Certain Transactions", if any, in the Company's definitive Proxy  Statement
 relating to its  2003 annual meeting  of shareholders, which  will be  filed
 pursuant to Regulation 14A within 120  days after the Company's fiscal  year
 ended December 31, 2002.


 ITEM 14.  CONTROLS AND PROCEDURES
           -----------------------

 With the participation of management, the Company's Chief Executive  Officer
 and its Chief Financial Officer evaluated the Company's disclosure  controls
 and procedures within 90 days of the filing  of this report.  Based on  that
 evaluation,  the  Chief  Executive  Officer  and  Chief  Financial   Officer
 concluded that the  Company's disclosure controls  and procedures have  been
 designed and  are  being  operated in  a  manner  that  provides  reasonable
 assurance that the information  required to be disclosed  by the Company  in
 reports filed  under  the  Securities Exchange  Act  of  1934  is  recorded,
 processed, summarized and reported within the time periods specified in  the
 SEC's rules and forms.  A controls  system, no matter how well designed  and
 operated, cannot  provide  absolute assurance  that  the objectives  of  the
 controls system are met, and no evaluation of controls can provide  absolute
 assurance that all control issues and instances of fraud, if any, within  an
 entity have  been detected.   Subsequent  to  the date  of the  most  recent
 evaluation of the  Company's internal  controls, there  were no  significant
 changes in the Company's  internal controls or in  other factors that  could
 significantly affect the internal controls, including any corrective actions
 with regard to significant deficiencies and material weaknesses.


                                   PART IV
                                   -------

 ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
           ---------------------------------------------------------------

 (a)(1)    Financial Statements.

           Reference is made  to the  index on  page F-1  for a  list of  all
           financial statements filed as a part of this Annual Report.

    (2)    Financial Statement Schedules.

           Reference is made  to the  index on  page F-1  for a  list of  one
           financial statement  schedule  filed  as a  part  of  this  Annual
           Report.

    (3)    Exhibits.

           Reference is made to  the Index to Exhibits  on pages E-1  through
           E-7 for a list of all exhibits to this report.

 (b)       Reports on Form 8-K.

           The Company filed a  Form 8-K Report dated  December 23, 2002,  to
           report  the Acquisition of certain  assets of the Custom  Division
           of Creative Beauty Innovations, Inc.

<PAGE>

                        CARRINGTON LABORATORIES, INC.
           INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES


 Consolidated Financial Statements of the Company:

      Consolidated Balance Sheets --
           December 31, 2001 and 2002                           F  - 2

      Consolidated Statements of Operations -- years ended
           December 31, 2000, 2001 and 2002                     F  - 3

      Consolidated Statements of Shareholders' Equity --
           years ended December 31, 2000, 2001 and 2002         F  - 4

      Consolidated Statements of Cash Flows -- years ended
           December 31, 2000, 2001 and 2002                     F  - 5

      Notes to Consolidated Financial Statements                F  - 6

      Financial Statement Schedule
           Valuation and Qualifying Accounts                    F - 17

      Report of Ernst & Young LLP, Independent Auditors         F - 18


<PAGE>

 Consolidated Balance Sheets
 (Amounts in thousands, except share and per share amounts)

                                                          December 31,
                                                        2001        2002
                                                      -------     -------
 Assets:
 Current Assets:
   Cash and cash equivalents                         $  3,454     $ 3,636
   Accounts receivable, net of allowance for
    doubtful accounts of $100 and $110 December 31,
    2001 and 2002, respectively                         1,622       2,370
   Inventories, net                                     5,338       4,333
   Prepaid expenses                                       189         603
                                                      -------     -------
 Total current assets                                  10,603      10,942

 Property, plant and equipment, net                    10,404      10,065
 Customer relationships, net                                -         893
 Other assets, net                                        210         259
                                                      -------     -------
 Total assets                                        $ 21,217    $ 22,159
                                                      =======     =======
 Liabilities and Stockholders' Equity:
 Current Liabilities:
   Line of credit                                    $    763     $ 1,587
   Accounts payable                                     1,099       1,458
   Accrued liabilities                                    884       1,256
   Current portion of long-term debt and
    capital lease obligations                               -         730
   Deferred revenue                                     1,542       1,922
                                                      -------     -------
 Total current liabilities                              4,288       6,953

 Long-term debt and capital lease obligations               -       1,517

 Stockholders' equity:
   Common stock, $.01 par value, 30,000,000 shares
    authorized, 9,809,087 and 9,967,938 shares
    issued at December 31, 2001 and 2002,
    respectively                                           98         100
   Capital in excess of par value                      52,429      52,568
   Accumulated Deficit                                (35,598)    (38,976)
   Treasury stock at cost, 0 and 2,400 shares at
    December 31,  2001 and 2002, respectively               -          (3)
                                                      -------     -------
 Total stockholders' equity                            16,929      13,689
                                                      -------     -------
 Total liabilities and stockholders' equity          $ 21,217     $22,159
                                                      =======     =======

     The accompanying notes are an integral part of these balance sheets.

<PAGE>

 Consolidated Statements of Operations
 (Amounts in thousands, except per share amounts)


                                                 Years Ended December 31,
                                              -----------------------------
                                                2000       2001       2002
                                               ------     ------     ------
 Revenues:
   Net product sales                          $22,833    $15,115    $15,571
   Royalty income                                 270      2,479      2,470
                                               ------     ------     ------
 Total revenues                                23,103     17,594     18,041
 Cost of sales                                 12,782      9,803     11,739
                                               ------     ------     ------
 Gross margin                                  10,321      7,791      6,302

 Expenses:
   Selling, general and administrative         10,162      5,016      6,040
   Research and development                     2,979      2,442      1,701
   Research and development, DelSite                -          -      1,879
   Research and development,
    Aliminase[TM] clinical trial expenses         623          -          -
   Charges related to Oregon Freeze Dry,
    Inc.                                          223          -          -
   Other expense (income)                        (110)       (13)        19
   Interest expense (income), net                 (80)       (32)        41
                                               ------     ------     ------
 Net income (loss) before income taxes         (3,476)       378     (3,378)
 Provision for income taxes                         -          -          -
                                               ------     ------     ------
 Net income (loss)                            $(3,476)   $   378    $(3,378)
                                               ======     ======     ======

 Basic and diluted earnings (loss) per
   share                                      $ (0.36)   $  0.04    $ (0.34)
                                               ======     ======     ======
 Basic and diluted average shares
   outstanding                                  9,545      9,743      9,889
                                               ======     ======     ======

     The accompanying notes are an integral part of these statements.

<PAGE>
<TABLE>

 Consolidated Statements of Shareholders' Equity
 For the Years Ended December 31, 2000, 2001 and 2002
 (Amounts in thousands)



                       Common Stock    Capital in                Treasury Stock
                      --------------   Excess of   Accumulated   --------------
                      Shares  Amount   Par Value     Deficit     Shares  Amount   Total
                      ------   -----     ------      -------     ------   -----   ------
 <S>                   <C>    <C>       <C>         <C>          <C>     <C>     <C>
 January 1, 2000       9,395  $   94    $51,910     $(32,500)         -  $    -  $19,504
 Issuance of common
  stock for employee
  stock purchase plan    170       2        173            -          -       -      175
 Issuance of common
  stock for stock
  option plan             94       1        236            -          -       -      237
 Net loss                  -       -          -       (3,476)         -       -   (3,476)
                      ------   -----     ------      -------      -----   -----   ------
 December 31, 2000     9,659      97     52,319      (35,976)         -       -   16,440
 Issuance of common
  stock for employee
  stock purchase plan    150       1        110            -          -       -      111
 Net income                -       -          -          378          -       -      378
                      ------   -----     ------      -------      -----   -----   ------
 December 31, 2001     9,809      98     52,429      (35,598)         -       -   16,929
 Issuance of common
  stock for employee
  stock purchase plan    149       2        126            -          -       -      128
 Issuance of common
  stock for stock
  option plan             10       -         13            -          -       -       13
 Treasury stock
  purchase                 -       -          -            -          2     (3)       (3)
 Net loss                  -       -          -       (3,378)         -       -   (3,378)
                      ------   -----     ------      -------      -----   -----   ------
 December 31, 2002     9,968  $  100    $52,568     $(38,976)         2 $   (3)  $13,689
                      ======   =====     ======      =======      =====   =====   ======

           The accompanying notes are an integral part of these statements.

</TABLE>
<PAGE>

 Consolidated Statements of Cash Flows
 (Amounts in thousands)

                                                    Years Ended December 31,
                                                   ---------------------------
                                                    2000       2001      2002
                                                   ------     ------    ------
 Operating activities:
 Net income (loss)                                $(3,476)   $   378   $(3,378)
 Adjustments to reconcile net income (loss)
  to net cash provided by (used in)
  operating activities:
   Provision for bad debts                            116         55        38
   Provision for inventory obsolescence               316         91       135
   Depreciation and amortization                    1,043      1,050     1,087
   Loss on disposal of assets                          65          -        21
   Charge related to Oregon Freeze Dry, Inc.          223          -         -
   Changes in operating assets and liabilities:
     Accounts receivable, net                       1,392        504      (786)
     Inventories                                      294       (706)      870
     Prepaid expenses                                 390         (6)     (414)
     Other assets                                     515       (117)      (49)
     Accounts payable and accrued liabilities      (1,328)      (849)      731
     Deferred revenue                                 667        875       380
                                                   ------     ------    ------
   Net cash provided by (used in) operating
     activities                                       217      1,275    (1,365)

 Investing activities:
   Cash paid in purchase of business, net of
     cash acquired                                      -          -    (1,001)
   Purchases of property, plant and equipment        (445)    (1,132)     (378)
                                                   ------     ------    ------
 Net cash used in investing activities               (445)    (1,132)   (1,379)

 Financing activities:
   Borrowings on line of credit                       563          -       824
   Proceeds from debt issuances                         -          -     2,000
   Principal payments on debt and capital
     lease obligations                                  -          -       (36)
   Issuances of common stock                          412        111       141
   Treasury stock purchased                             -          -        (3)
                                                   ------     ------    ------
 Net cash provided by financing activities            975        111     2,926
                                                   ------     ------    ------
 Net increase in cash and cash equivalents            747        254       182
 Cash and cash equivalents at beginning of year     2,453      3,200     3,454
                                                   ------     ------    ------
 Cash and cash equivalents at end of year         $ 3,200    $ 3,454   $ 3,636
                                                   ======     ======    ======
 Supplemental Disclosure of Cash Flow
   Information
   Cash paid during the year for interest         $    40   $    58    $    61
   Cash paid during the year for income taxes           -         -          -


     The accompanying notes are an integral part of these statements.

<PAGE>

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


 NOTE ONE.  BUSINESS

 Carrington  Laboratories,   Inc.  (the   "Company")  is   a   research-based
 biopharmaceutical, medical device, raw  materials and nutraceutical  company
 engaged in the development, manufacturing and marketing of naturally-derived
 complex  carbohydrates  and  other  natural  product  therapeutics  for  the
 treatment of  major illnesses,  the dressing  and management  of wounds  and
 nutritional supplements.

 The Company's Medical Services Division offers a comprehensive line of wound
 management  products  to  hospitals,  alternative  care  facilities,  cancer
 centers  and  the  home  health  care  market.   The   Company  and  Medline
 Industries,  Inc.  ("Medline")  entered  into  a  Distributor   and  License
 Agreement dated November 3, 2000, under which the Company granted to Medline
 the exclusive right,  subject to certain  limited exceptions, to  distribute
 all of the Company's  wound and skin care  products (the "Products") in  the
 United States, Canada, Puerto Rico and the Virgin Islands for a term of five
 years that began December 1, 2000.   The agreement provides  that Carrington
 will continue to manufacture its existing line of Products and sell  them to
 Medline at specified prices.  The  prices, which are generally firm  for the
 first two years of the contract  term, are thereafter subject  to adjustment
 not more than once each year to reflect increases in manufacturing cost.

 The agreement also grants Medline a  nonexclusive license to use  certain of
 the Company's trademarks in  connection with the marketing of the  Products.
 In addition, it permits Medline, if it so elects, to use those trademarks in
 connection with the marketing of various Medline products and other products
 not manufactured by the Company (collectively, "Other Products").

 The agreement requires Medline  to pay the Company  a base royalty  totaling
 $12,500,000 in quarterly installments  that began on December  1, 2000.   In
 addition to the base royalty, if  Medline elects to market any of  the Other
 Products under any of the Company's trademarks, Medline must pay the Company
 a royalty of  between one percent  and five  percent of Medline's  aggregate
 annual net sales of  the Products and the  Other Products, depending on  the
 amount of the  net sales,  except that the  royalty on  certain high  volume
 commodity products will be two percent.

 Caraloe, Inc., a subsidiary, markets or licenses consumer products  and bulk
 raw material  products.   Principal sales  of Caraloe,  Inc.,  are bulk  raw
 material products which are sold to United States manufacturers  who include
 the  high  quality  extracts from Aloe  vera L. in  their finished products.
 Caraloe also  provides product  development  and manufacturing  services  to
 Customers in the cosmetic, nutraceutical and medical markets.

 The Company formed a  subsidiary, DelSite Biotechnologies, Inc.,  in October
 2001 as a vehicle  to further the development  and commercialization of  its
 new proprietary complex carbohydrate (Gelsite[TM] polymer) that  the Company
 is developing for use as a drug and vaccine delivery system.

 In December 2002 the  Company entered into an  agreement to acquire  certain
 assets of the Custom Division of Creative Beauty Innovations,  Inc. ("CBI"),
 including  specialized  manufacturing  customer   information,  intellectual
 property and equipment.   CBI is a privately  held manufacturer of skin  and
 cosmetic products with operations in Carrollton, Texas.

 Under the agreement, the Company paid CBI $501,000 at closing  and deposited
 $500,000 in escrow,  which was released  to CBI  on February  28, 2003.   In
 addition, Carrington agreed (i) to purchase  inventory of CBI for  an amount
 not greater than $700,000, to be  paid six months after closing and  (ii) to
 pay CBI an  amount equal to  9.0909% of  Carrington's net  sales up to  $6.6
 million per year and  8.5% of Carrington's net  sales over $6.6 million  per
 year  of CBI products to CBI's  existing customers for the next five  years.
 The acquired assets include equipment and other physical property previously
 used by CBI's Custom Division to compound and package  cosmetic formulations
 of liquids,  creams, gels and lotions into bottles, tubes or cosmetic  jars.
 Carrington intends  to use these assets  in a substantially similar  manner.
 The Company will provide  services to these  customers through the  Caraloe,
 Inc. development and  manufacturing services  group.   The Company  recorded
 $100,000 for the  purchase of  equipment and  $901,000 for  the purchase  of
 customer relationship intangibles  in connection with  the acquisition.   No
 inventory had been purchased as of December 31, 2002.

 The Company's products are produced at its plants in Irving, Texas and Costa
 Rica.  A  portion of  the Aloe  vera L.  leaves used  for manufacturing  the
 Company's products are  grown on a  Company-owned farm in  Costa Rica.   The
 remaining leaves are purchased from other producers in Costa Rica.


 NOTE TWO.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 PRINCIPLES OF CONSOLIDATION.  The consolidated financial  statements include
 the accounts of Carrington Laboratories, Inc., and its subsidiaries,  all of
 which are wholly  owned.   All intercompany accounts  and transactions  have
 been eliminated in consolidation.

 CASH  EQUIVALENTS.    The  Company's  policy  is  that  all   highly  liquid
 investments purchased with  a maturity of  three months or  less at date  of
 acquisition  are  considered  to   be  cash  equivalents  unless   otherwise
 restricted.

 INVENTORY.  Inventories are recorded at the lower of cost  (first-in, first-
 out) or market.

 PROPERTY, PLANT AND EQUIPMENT.   Property, plant and equipment  are recorded
 at cost less  accumulated depreciation.   Land  improvements, buildings  and
 improvements,  furniture  and  fixtures  and  machinery  and  equipment  are
 depreciated  on the straight-line method over their estimated useful  lives.
 Leasehold improvements and equipment under capital leases are amortized over
 the terms of  the respective leases  or the estimated  lives of the  assets,
 whichever is less.

 LONG-LIVED ASSETS.   In  October 2001,  the  Financial Accounting  Standards
 Board  issued  a  Statement  of  Financial  Accounting  Standards  No.  144,
 Accounting  for the  Impairment  or Disposal of  Long-Lived Assets (FAS144).
 The Company adopted FAS 144 on January 1, 2002.  In accordance with FAS 144,
 the Company  reviews long-lived  assets, including  finite-lived  intangible
 assets for impairment whenever  events or changes in  circumstances indicate
 that the carrying amount may not be recoverable.  If the sum of the expected
 future undiscounted  cash flows  is less  than the  carrying  amount of  the
 asset, a loss is  recognized for the difference  between the fair value  and
 carrying value of the asset.  There have been no impairment charges recorded
 in the years presented.

 CUSTOMER RELATIONSHIPS.  In connection with the CBI acquisition described in
 Note One, the Company recorded  a finite-lived intangible asset  of $901,000
 for  customer  relationships  acquired.   The  Company  will  amortize  this
 intangible  asset  over  five  years,  which  is  based  on   the  estimated
 contractual life of the agreement.  Future amounts paid to the sellers based
 on a percentage of sales  of CBI products as  described in Note One  will be
 recorded as  an expense  in  the same  period  the corresponding  sales  are
 recorded.  The Company recorded amortization expense of $8,000 in 2002.

 DEFERRED REVENUE.  Deferred revenue is related to the licensing  and royalty
 agreement with Medline Industries and represents amounts received  in excess
 of amounts amortized to royalty income.

 TRANSLATION  OF   FOREIGN  CURRENCIES.      The  functional   currency   for
 international  operations  (primarily  Costa  Rica)  is  the  U.S.   Dollar.
 Accordingly, such foreign entities translate monetary assets and liabilities
 at year-end  exchange  rates, while  non-monetary  items are  translated  at
 historical  rates.   Revenue and  expense  accounts  are translated  at  the
 average rates  in  effect  during  the year,  except  for  depreciation  and
 amortization,  which   are  translated  at  historical  rates.   Translation
 adjustments  and  transaction  gains   or  losses  are  recognized   in  the
 consolidated statement of operations in the year of occurrence.

 REVENUE RECOGNITION.  The  Company recognizes revenue  for product sales  at
 the time of shipment when title to the goods transfers and collectibility is
 reasonably assured.   Royalty income is  recognized over  the period of  the
 licensing and royalty agreement.

 FEDERAL INCOME TAXES. The  Company uses the  liability method of  accounting
 for income taxes.  Under this method, deferred income taxes are  recorded to
 reflect the tax consequences of differences between the tax basis  of assets
 and liabilities and the financial reporting basis.  Valuation allowances are
 provided against net deferred  tax assets when it  is more likely than  not,
 based on available evidence, that assets may not be realized.

 RESEARCH AND DEVELOPMENT.   Research and development  costs are expensed  as
 incurred.   Certain   laboratory  and  test  equipment  determined  to  have
 alternative future uses  in other  research and  development activities  has
 been capitalized and is depreciated as research and development expense over
 the life of the equipment.

 ADVERTISING.  Advertising expense  is charged to operations  in the year  in
 which such costs are incurred.  Advertising expense has not been significant
 for 2000, 2001 or 2002.

 STOCK-BASED COMPENSATION.  The  Company accounts for employee  stock options
 in accordance  with Accounting  Principles Board  Opinion No.  25 (APB  25),
 Accounting for Stock Issued to Employees  and Financial Accounting Standards
 Board Interpretation No. 44,  Accounting for Certain Transactions  involving
 Stock Compensation, an interpretation of APB Opinion No. 25.  Under  APB 25,
 the Company  recognizes  no  compensation expense  related  to  employee  or
 director stock options when options are granted with exercise prices  at the
 estimated fair value of the stock on the date of grant, as determined by the
 Board of Directors.

 The Company  has  adopted the  disclosure-only  provisions of  Statement  of
 Financial Accounting Standards  No. 123  (FAS1 123),  Accounting for  Stock-
 Based Compensation  and Statement of Financial Accounting Standards  No. 148
 (FAS  148),  Accounting  for  Stock-Based  Compensation  -   Transition  and
 Disclosure - An Amendment of FASB  Statement No. 123.  Under  the provisions
 of FAS 123,  pro forma  compensation expense  related to  options issued  to
 employees is disclosed based on the fair value of options on the grant date.

 The following table (in thousands) illustrates the effect on net loss if the
 Company had applied the fair value recognition provision of FAS 123 to stock
 based compensation:

 --------------------------------------------------------------------------
                                              2000        2001        2002
 --------------------------------------------------------------------------
 Net income (loss) (in thousands):
      As reported                           $(3,476)    $   378     $(3,378)
      Less:  Stock-based compensation
       expense determined under fair
       value-based method                    (1,174)       (461)       (331)
                                             ------      ------      ------
      Pro forma                             $(4,650)    $   (83)    $(3,709)
                                             ======      ======      ======
 Net income (loss)
   per share:
      As reported                           $ (0.36)     $ 0.04      $(0.34)
      Pro forma                             $ (0.49)     $(0.01)     $(0.38)
 --------------------------------------------------------------------------

 Because options vest over  a period of several  years and additional  awards
 are generally made each year, the  pro forma information presented  above is
 not necessarily  indicative of  the effects  on reported  or  pro forma  net
 earnings or losses for future years.

 The Company follows the provisions of FAS 123 and Emerging Issues Task Force
 No. 96-19, Accounting for Equity Instruments  That Are Issued to  Other Than
 Employees for Acquiring or in Connection with Selling Goods or Services, for
 equity instruments granted to non-employees.  The Company expenses  the fair
 value of these equity instruments over the respective vesting term.

 NET INCOME (LOSS) PER SHARE.  Basic net income (loss) per share  is based on
 the weighted average number of shares of common stock outstanding during the
 year.  Diluted net income (loss) per share includes the effects  of options,
 warrants and convertible securities unless the effect is antidilutive.

 USE OF ESTIMATES.   The  preparation of financial  statements in  conformity
 with accounting principles generally accepted in the United  States requires
 management to  make  estimates  and assumptions  that  affect  the  reported
 amounts of assets and  liabilities 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.

 RECLASSIFICATIONS.  Certain  prior year  amounts have  been reclassified  to
 conform to the current year presentation.

 NEW PRONOUNCEMENTS.  In July 2002, the Financial Accounting  Standards Board
 issued Statement of  Financial Accounting Standards  No. 146 Accounting  for
 Costs Associated with  Exit or  Disposal Activities ("SFAS  146"), which  is
 effective for exit or disposal activities initiated after December 31, 2002,
 with earlier application encouraged.   The Company  does not anticipate  any
 impact on the results of operations or financial position from  the adoption
 of SFAS 146.


 NOTE THREE.  INVENTORIES

 The following summarizes the  components of inventory  at December 31,  2001
 and 2002, in thousands:

                                                  2001         2002
 ------------------------------------------------------------------
 Raw materials and supplies                     $2,041       $1,776
 Work-in-process                                   910          624
 Finished goods                                  2,387       $1,933
 ------------------------------------------------------------------
 Total                                          $5,338       $4,333
 ------------------------------------------------------------------

 The inventory balances  are net  of $516,000  and $632,000  of reserves  for
 obsolete  and  slow  moving  inventory  at  December  31,  2001   and  2002,
 respectively.


 NOTE FOUR.  PROPERTY, PLANT AND EQUIPMENT

 Property, plant and  equipment consisted  of the following  at December  31,
 2001 and 2002, in thousands:

                                                      Estimated
                                  2001      2002      Useful Lives
 ------------------------------------------------------------------
 Land and improvements          $ 1,391    $1,391
 Buildings and improvements       8,618     8,984     7 to 25 years
 Furniture and fixtures             603       593     4 to  8 years
 Machinery and equipment          7,800     8,094     3 to 10 years
 Leasehold improvements             783       782     1 to  3 years
 Equipment under capital leases     114       197           4 years
 ------------------------------------------------------------------
 Total                           19,309    20,041
 Less accumulated depreciation
   and amortization               8,905     9,976
 ------------------------------------------------------------------
 Property, plant and
   equipment, net               $10,404   $10,065
 ------------------------------------------------------------------

 The net book value of property, plant and equipment in Costa Rica at
 December 31, 2001 and 2002 was $3,847,000 and $3,716,000, respectively.


 NOTE FIVE.  ACCRUED LIABILITIES

 The following summarizes  significant components  of accrued liabilities  at
 December 31, 2001 and 2002, in thousands:

                                             2001           2002
 ------------------------------------------------------------------
 Accrued payroll                             $270           $343
 Accrued insurance                             81             81
 Accrued taxes                                230            278
 Accrued professional fees                     70            247
 Other                                        233            307
 ------------------------------------------------------------------
 Total                                       $884         $1,256
 ------------------------------------------------------------------


 NOTE SIX.  LINE OF CREDIT

 The Company has a line of credit with a bank that provides for borrowings of
 up to $3  million based on  the level of  qualified accounts receivable  and
 inventory.  The line of credit is collateralized by accounts  receivable and
 inventory.  Borrowings under the line of credit bear interest at  the bank's
 prime rate (4.25%  at December  31, 2002  plus 0.5%).   The  line of  credit
 requires the Company to  maintain certain financial  ratios and the  Company
 was in  compliance with  these requirements  at December  31, 2002.   As  of
 December 31, 2002 there was $1,587,000  outstanding on the credit  line with
 $433,000 credit available for operations.


 NOTE SEVEN.  LONG-TERM DEBT

 Medline advanced the Company  $2,000,000 on December 16,  2002.  The  amount
 bears interest at 6.5% and will be repaid by reducing each quarterly royalty
 payment due from Medline through September 2005 by $200,000.

 The following summarizes annual maturities at December 31, 2002, in
 thousands:

 ------------------------------------------------------------------
    2003                                                       $684
    2004                                                        734
    2005                                                        582
 ------------------------------------------------------------------
   Total                                                     $2,000
 ------------------------------------------------------------------


 NOTE EIGHT.  COMMON STOCK

 SHARE PURCHASE RIGHTS  PLAN  The  Company has a  share purchase rights  plan
 which provides, among  other rights,  for the  purchase of  common stock  by
 existing common  stockholders at  significantly  discounted amounts  in  the
 event a person or group acquires  or announces the intent to acquire  15% or
 more of the Company's common  stock.  The rights  expire in 2011 and  may be
 redeemed at any time at the option  of the Board of Directors for  $.001 per
 right.

 EMPLOYEE STOCK PURCHASE PLAN.   The Company has  an Employee Stock  Purchase
 Plan under which employees may purchase common stock at a price equal to the
 lesser of 85% of the market price of the Company's common stock  on the last
 business day preceding the enrollment date  (defined as January 1,  April 1,
 July 1 or October 1 of any plan year) or 85% of the market price on the last
 business day of each month.   A maximum of 1,000,000 shares of  common stock
 was reserved for purchase under this Plan.  As of December 31, 2002, a total
 of 625,000 shares  had been purchased  by employees  at prices ranging  from
 $0.77 to $29.54 per share.

 STOCK OPTIONS.   The Company has  an incentive stock  option plan which  was
 approved by the shareholders in 1995 under which incentive stock options and
 nonqualified stock options may be granted to employees, consultants and non-
 employee directors.  Options are granted at a price no less than  the market
 value of the shares on the  date of the grant, except for  incentive options
 to employees  who  own more  than  10% of  the  total  voting power  of  the
 Company's common stock, which must be  granted at a price no less  than 110%
 of the market value.  Employee options are normally granted for terms  of 10
 years.  Options granted prior to  December 1998 normally vested at  the rate
 of  25% per  year  beginning  on the  first anniversary  of the  grant date.
 Options granted from December 1998 through March 2001 normally vested at the
 rate of 33-1/3%  per year beginning  on the first  anniversary of the  grant
 date, but certain options granted in December 1998, 1999 and 2001  were 25%,
 50% or 100%  vested on the  grant date,  with the  remainder of each  option
 vesting in equal installments on  the first, second and  third anniversaries
 of the grant date.  Options  granted subsequent to March 2001  normally vest
 at the rate of 50% per year beginning on the first anniversary  of the grant
 date. Options to non-employee directors have terms of ten years and are 100%
 vested on the  grant date.   The Company  has reserved  2,250,000 shares  of
 common stock for issuance under this plan.  As of December 31, 2002, options
 to purchase 614,000 shares were available for future grants under the plan.

 The following summarizes stock option activity  for each of the  three years
 in the period ended December 31, 2002 (shares in thousands):

                                                             Weighted
                                                             Average
                                                             Exercise
                               Shares    Price Per Share      Price
 -------------------------------------------------------------------
 Balance, January 1, 2000       1,407    $ 2.06 to $28.75      $4.05
    Granted                       263    $ 1.31 to $ 2.03      $1.35
    Lapsed or canceled           (333)   $ 2.06 to $28.75      $3.35
    Exercised                     (94)   $ 2.50 to $ 4.81      $2.58
 -------------------------------------------------------------------
 Balance, December 31, 2000     1,243    $ 1.31 to $28.75      $3.78
    Granted                       345    $ 1.05 to $ 1.37      $1.17
    Lapsed or canceled           (215)   $ 1.25 to $27.00      $3.94
 -------------------------------------------------------------------
 Balance, December 31, 2001     1,373    $ 1.05 to $28.75      $3.11
    Granted                       381    $ 1.05 to $ 1.50      $1.28
    Lapsed or canceled           (227)   $ 1.05 to $12.75      $3.62
    Exercised                     (10)   $ 1.31 to $ 2.06      $1.38
 -------------------------------------------------------------------
 Balance, December 31, 2002     1,517    $ 1.05 to $28.75      $2.58
 -------------------------------------------------------------------
 Options exercisable at
    December 31, 2000             605    $ 2.03 to $28.75      $4.86
 -------------------------------------------------------------------
 Options exercisable at
    December 31, 2001             902    $ 1.31 to $28.75      $3.78
 -------------------------------------------------------------------
 Options exercisable at
    December 31, 2002           1,092    $ 1.05 to $28.75      $3.12
 -------------------------------------------------------------------

 The following table summarizes information about stock options outstanding
 at December 31, 2002:

                          Options Outstanding       Options Exercisable
                    ------------------------------  -------------------
                             Weighted
                             Average     Weighted            Weighted
                   Shares   Remaining    Average   Shares    Average
    Range of        (In     Contractual  Exercise    (In     Exercise
 Exercise Prices thousands)    Life       Price   thousands)  Price
  ---------------------------------------------------------------------
 $27.00 to $28.75      8    3.4 years    $28.64        8     $28.64
 $10.25 to $12.75      5    1.2 years    $11.38        5     $11.38
 $ 5.25 to $ 8.25     94    4.2 years    $ 6.74       94     $ 6.74
 $ 4.50 to $ 4.81    246    5.2 years    $ 4.79      246     $ 4.79
 $ 2.03 to $ 3.63    319    5.6 years    $ 2.38      319     $ 2.38
 $ 1.05 to $ 1.50    845    8.9 years    $ 1.25      420     $ 1.31
                   -----                           -----
                   1,517    6.4 years    $ 2.58    1,092     $ 3.12
                   =====                           =====

 The fair value of each option granted was estimated on the date of the grant
 using the Black-Scholes  option pricing model  with the following  weighted-
 average assumptions used for  grants to employees in  2000, 2001, and  2002,
 respectively: risk-free interest rates  of 5.99%, 5.09% and  3.00%; expected
 dividend yields of 0%;  expected volatility of 89.3%,  89.7% and 105.2%  and
 expected lives of  10 years for  2000 and 2001  and 5 years  for 2002.   The
 weighted average fair values of options granted were $0.85, $0.84  and $1.00
 in 2000, 2001, and 2002, respectively.

 STOCK WARRANTS.   From time  to time, the  Company has  granted warrants  to
 purchase common  stock  to  the Company's  research  consultants  and  other
 persons rendering  services to  the Company.   The  exercise  price of  such
 warrants was normally the market price  or in excess of the market  price of
 the common stock  at date  of issuance.   The  following summarizes  warrant
 activity for  each of  the years  in  the period  ending December  31,  2002
 (shares in thousands):

                                                         Weighted
                                                          Average
                                                         Exercise
                             Shares    Price Per Share      Price
 ----------------------------------------------------------------
 Balance, December 31, 1999,
  2000 and 2001               55       $ 3.50 to $20.13   $ 5.01
 Lapsed or canceled            5       $20.13             $20.13
 ----------------------------------------------------------------
 Warrants exercisable at
   December 31, 2002          50       $ 3.50             $ 3.50
 ----------------------------------------------------------------

 Warrants outstanding at December 31, 2002 had a weighted average remaining
 contractual life of 1.6 years.

 COMMON STOCK RESERVED  At December 31, 2002 the Company had reserved a total
 of 2,556,000  common shares  for future  issuance relating  to the  employee
 stock purchase plan, stock option plan and stock warrants disclosed above.


 NOTE NINE.  COMMITMENTS AND CONTINGENCIES

 The Company  conducts  a significant  portion  of  its operations  from  two
 office/ warehouse/distribution   facilities   under  operating  leases.   In
 addition, the Company leases certain office equipment under operating leases
 and certain manufacturing and transportation equipment under capital leases.
 Future  minimum lease payments under noncancelable operating leases  and the
 present value of future  minimum capital lease payments  as of December  31,
 2002 were as follows, in thousands:

                                                   Capital  Operating
                                                   Leases    Leases
 --------------------------------------------------------------------
 2003                                             $   62    $  738
 2004                                                 64       770
 2005                                                 62       795
 2006                                                 64       778
 2007                                                 14       771
 Thereafter                                           34     2,238
 --------------------------------------------------------------------
 Total minimum lease payments                        300    $6,090
                                                             =====
 Amounts representing interest                       (53)
                                                   -----
 Present value of capital lease obligations          247
 Less current portion of capital lease obligations   (46)
                                                   -----
 Obligations under capital lease agreements,
  excluding the current portion                   $  201
                                                   =====

 Total rental  expense  under operating  leases  was $661,000,  $666,000  and
 $667,000 for the years ended December 31, 2000, 2001 and 2002, respectively.

 In 2000  the Company  expensed  $223,000 related  to  a 1995  commitment  to
 purchase freeze-dried products from Oregon  Freeze Dried, Inc.   The Company
 had no further losses related to this commitment.

 From  time  to  time in the normal course of business, the Company  is party
 to  various  matters  involving  claims  or possible litigation.  Management
 believes the ultimate resolution of these  matters will not have  a material
 adverse effect on the Company's financial position or results of operations.

 The Company has  outstanding a letter  of credit in  the amount of  $800,000
 which is used  as security  on the lease  for the  Company's laboratory  and
 warehouse facility.  The Company has  outstanding a letter of credit  in the
 amount of  $100,000  which  is used  as  security  on a  capital  lease  for
 equipment.


 NOTE TEN.  INCOME TAXES

 The tax effects  of temporary  differences that  gave rise  to deferred  tax
 assets and deferred tax  liabilities at December 31,  2001 and 2002 were  as
 follows, in thousands:

                                             2001          2002
 ---------------------------------------------------------------
 Net operating loss carryforward          $ 12,965       $14,282
 Research and development
    and other credits                          478           254
 Property, plant and equipment                 340           333
 Inventory                                     394           399
 Other, net                                     78            92
 Bad debt reserve                              452           448
 Deferred income                               524           653
 ACI Stock Valuation                           204           204
 Accrued liability                              89            93
 Less - Valuation allowance                (15,524)      (16,758)
                                            ------        ------
                                           $     0       $     0
                                            ======        ======

 The Company  has  provided a  valuation  allowance  against the  entire  net
 deferred tax asset at December 31,  2001 and 2002 due to the  uncertainty as
 to the realization of the asset.

 The provision (benefit) for income taxes  for the three years in  the period
 ended December 31, 2002 was offset by changes in the valuation reserve.

 At December 31, 2002,  the Company had net  operating loss carryforwards  of
 approximately $42.0 million for federal income tax purposes, which  begin to
 expire in 2003,  and research  and development tax  credit carryforwards  of
 approximately $748,000, which  begin to  expire in  2003, all  of which  are
 available to  offset  federal  income taxes  due  in  future  periods.   Net
 operating loss carryforwards of $3.2  million expired during the  year ended
 December 31, 2002 and  $1.5 million will expire  in the year ended  December
 31, 2003.  The Company has approximately $28,000 in alternative  minimum tax
 credits which do not expire.


 NOTE ELEVEN.  CONCENTRATIONS OF CREDIT RISK

 Financial instruments that potentially expose the Company  to concentrations
 of  credit  risk  consist  primarily  of  trade  accounts  receivable.   The
 Company's customers are not  concentrated in any specific  geographic region
 but are concentrated in  the health care industry.   Significant sales  were
 made to three customers.  Owens  & Minor accounted for 10% of  the Company's
 net sales in 2001.   Sales to Mannatech,  Inc., accounted for 38%,  30%, and
 35%  of  the  Company's  net sales  in  2000, 2001  and 2002,  respectively.
 Accounts  receivable  from  Mannatech  represented  53%  of  gross  accounts
 receivable at  December  31,  2002.   Sales  to  Medline  Industries,  Inc.,
 accounted for  35% and  34% of  the Company's  sales during  2001 and  2002,
 respectively.   Accounts  receivable from  Medline  represented 25%  of  the
 Company's gross  accounts receivable  at December  31,  2002.   The  Company
 performs ongoing credit  evaluations of  its customers' financial  condition
 and  establishes  an  allowance  for  doubtful  accounts  based  on  factors
 surrounding the credit risk of specific customers and historical  trends and
 other information.


 NOTE TWELVE.  NET INCOME (LOSS) PER SHARE

 Basic net  income (loss)  available to  common  shareholders per  share  was
 computed by dividing  net income (loss)  by the  weighted average number  of
 common shares outstanding.

 In calculating the diluted net income  (loss) per share for the  three years
 ended 2002, no effect was given  to options or warrants, because  the effect
 of including these  securities would have  been antidilutive.   In 2001  all
 options and warrants  had exercise  prices which exceed  the average  market
 price of the common stock during the year.


 NOTE THIRTEEN.  REPORTABLE SEGMENTS

 The Company  operates  in  two reportable  segments:  human  and  veterinary
 products sold through  its Medical  Services Division and  Caraloe, Inc.,  a
 consumer products  subsidiary,  which  sells bulk  raw  materials,  consumer
 beverages and nutritional  and skin  care products.   Caraloe also  provides
 product development and manufacturing services to Customers in the cosmetic,
 nutraceutical and medical markets.

 The Company evaluates performance and allocates resources based on profit or
 loss from operations before  income taxes.  The  accounting policies of  the
 reportable segments  are the  same  as those  described  in the  Summary  of
 Significant Accounting Policies (Note Two).

 Corporate income (loss) before income taxes set forth in the following table
 includes research  and  development  expenses  which  were  related  to  the
 development of  pharmaceutical products  not associated  with the  reporting
 segments.  Assets which  are used in more  than one segment are  reported in
 the segment  where the  predominant use  occurs.   The Company's  production
 facility in Costa Rica,  which provides bulk  ingredients for all  segments,
 and total cash for the Company are included in the Corporate Assets figure.

 Reportable Segments (in thousands)

                           Medical  Caraloe,
                          Services    Inc.    Corporate    Total
 ----------------------------------------------------------------
 2001
 ----------------------------------------------------------------
 Sales to unaffiliated
   customers               $10,400   $7,194    $    -     $17,594
 Income (loss) before
   income taxes              1,333    1,121    (2,076)        378
 Identifiable assets        12,481    1,420      7,316     21,217
 Capital expenditures           -        -       1,132      1,132
 Depreciation and
   amortization                586       -         464      1,050
 ----------------------------------------------------------------
 2002
 ----------------------------------------------------------------
 Sales to unaffiliated
   customers                $8,394   $9,647    $    -     $18,041
 Income (loss) before
   income taxes               (10)    (552)    (2,916)     (3,378)
 Identifiable assets        15,006    1,960      5,193     22,159
 Capital expenditures           -        -         378        378
 Depreciation and
   amortization                634       -         453      1,087
 ----------------------------------------------------------------


 NOTE FOURTEEN.      RELATED PARTY TRANSACTIONS

 At December 31, 2002, the Company had a 23% interest in a  company which was
 formed in 1998 to acquire  and develop a 5,000  acre tract of land  in Costa
 Rica to be used  for the production  of Aloe vera  L. leaves, the  Company's
 primary raw material.  The  Company's initial investment was  written-off in
 1998 and no  additional investments  have been made  or are  expected to  be
 made.  The Company is accounting for its investment on the cost  basis.  The
 Company purchases  Aloe vera  L.  leaves from  this  company at  prices  the
 Company believes are competitive with other sources.  Such purchases totaled
 $417,000, $450,000 and $468,000 in 2000, 2001 and 2002, respectively.


 NOTE FIFTEEN.  SUBSEQUENT EVENT

 In March 2003  the Company received  a loan of  $500,000 from Bancredito,  a
 Costa Rica  bank,  with  interest and  principal  to  be repaid  in  monthly
 installments over eight years.  The interest rate on the loan is  U.S. Prime
 Rate plus 2.0%.  The loan  is secured by a  mortgage on an unused,  164 acre
 parcel of land owned by the Company  in Costa Rica plus a lien  on specified
 oral patch production equipment.  The  proceeds of the loan will be  used in
 the Company's operations.


 NOTE SIXTEEN.  UNAUDITED SELECTED QUARTERLY FINANCIAL DATA

 The unaudited selected  quarterly financial  data below  reflect the  fiscal
 years ended December 31, 2001 and 2002, respectively.

 (Amounts in thousands, except shares and per share amounts)


 --------------------------------------------------------------------------
 2001                    1st Quarter  2nd Quarter  3rd Quarter  4th Quarter
 --------------------------------------------------------------------------
 Revenue                   $4,657       $4,330       $4,381        $4,226
 Gross profit               2,000        1,866        2,040         1,885
 Net income                   226           60           77            15(1)
 Diluted income per
   share                    $0.02        $0.01        $0.01         $0.00
 Weighted average
   common shares        9,728,000    9,734,000    9,747,000     9,809,000

 --------------------------------------------------------------------------
 2002                    1st Quarter  2nd Quarter  3rd Quarter  4th Quarter
 --------------------------------------------------------------------------
 Revenue                   $3,736       $4,346       $5,093        $4,866
 Gross profit               1,145        1,472        2,042         1,643
 Net loss                  (1,042)        (858)        (541)         (937)
 Diluted loss per
   share                   $(0.11)      $(0.09)      $(0.05)       $(0.09)
 Weighted average
   common shares        9,819.000    9,849,000    9,908,000     9,944,000
 --------------------------------------------------------------------------

 (1)  The fourth-quarter results benefited from a  one-time gain of $326,000,
      partially reversing  a charge taken  earlier in the  year as a  pricing
      reserve  related  to  a  strategic  sales  and  marketing  partnership.
      Fourth-quarter and full-year results benefited from  a one-time gain of
      $211,000  from adjustments  to state  tax liabilities  booked in  prior
      periods.

<PAGE>

 Financial Statement Schedule
 Valuation and Qualifying Accounts
 (In thousands)


  Description                         Additions
                                   ----------------
                         Balance   Charged  Charged
                           at         to      to                   Balance
                        Beginning  Cost and  Other                 at End
                        of Period  Expenses Accounts  Deductions  of Period
 --------------------------------------------------------------------------
 2000
 --------------------------------------------------------------------------
 Bad debt reserve         $  304    $  116   $   -     $  322      $   98
 Inventory reserve           430       316       -        304         441
 Rebates                     340     4,508       -      4,576         272
 Reserve for ACI
   and Aloe & Herbs
   non-current notes and
   investments included
   in other assets         1,292         -       -         27       1,265
 Oregon Freeze Dry, Inc.     699       223       -        922           -

 --------------------------------------------------------------------------
 2001
 --------------------------------------------------------------------------
 Bad debt reserve         $   98    $   55   $   -     $   53      $  100
 Inventory reserve           441        91       -         16         516
 Rebates                     272         -       -        272           -
 Reserve for ACI
   and Aloe & Herbs
   non-current notes and
   investments included
   in other assets         1,265         -       -         31       1,228

 --------------------------------------------------------------------------
 2002
 --------------------------------------------------------------------------
 Bad debt reserve         $  100    $   38   $   -     $   28      $  110
 Inventory reserve           516       135       -         19         632
 Reserve for ACI
   and Aloe & Herbs
   non-current notes and
   investments included
   in other assets         1,228         -       -          19      1,209

<PAGE>


                        REPORT OF INDEPENDENT AUDITORS



 Shareholders and Board of Directors
   Carrington Laboratories, Inc.


 We have audited the  accompanying consolidated balance sheets  of Carrington
 Laboratories, Inc. and subsidiaries as of December 31, 2001 and 2002 and the
 related consolidated statements of operations, shareholders' equity and cash
 flows for each of the  three years in the  period ended  December 31,  2002.
 Our audits  also included  the financial  statement schedule  listed in  the
 Index  at  Item  15(a)  for  the  same periods.   These financial statements
 and schedule   are  the  responsibility   of the Company's  management.  Our
 responsibility is to express  an opinion on  these financial statements  and
 schedule based on our audits.

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

 In our  opinion, the  consolidated financial  statements  referred to  above
 present  fairly,  in  all  material  respects,  the  consolidated  financial
 position of Carrington  Laboratories, Inc. and  subsidiaries as of  December
 31, 2001 and  2002, and  the consolidated  results of  their operations  and
 their cash flows for  each of the three  years in the period  ended December
 31, 2002 in conformity with accounting principles generally accepted  in the
 United States.   Also,  in  our  opinion,  the related  financial  statement
 schedule, when  considered in  relation to  the  basic financial  statements
 taken as a whole, presents fairly  in all material respects  the information
 set forth therein.


                                         Ernst & Young LLP



 Dallas, Texas
 February 28, 2003, except for Note Fifteen
 as to which the date is March 10, 2003

<PAGE>

                                  SIGNATURES


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

                                    CARRINGTON LABORATORIES, INC.



 Date: March 27, 2003               By:/s/ Carlton E. Turner
                                    ----------------------------------
                                    Carlton E. Turner, Ph.D.,D.Sc.
                                    President, Chief Executive Officer
                                    and Director

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



          Signatures                      Title                    Date
 -------------------------   -----------------------------    --------------

 /s/ Carlton E. Turner          President, Chief Executive    March 27, 2003
 -------------------------         Officer and Director
 Carlton E. Turner, Ph.D.,    (principal executive officer)
 D.Sc.

 /s/ Robert W. Schnitzius        Vice President and Chief     March 27, 2003
 -------------------------          Financial Officer
 Robert W. Schnitzius            (principal financial and
                                   accounting officer)


 /s/ R. Dale Bowerman                    Director             March 27, 2003
 -------------------------
 R. Dale Bowerman


 /s/ George DeMott                       Director             March 27, 2003
 -------------------------
 George DeMott


 /s/ Thomas J. Marquez                   Director             March 27, 2003
 -------------------------
 Thomas J. Marquez


 /s/ Selvi Vescovi                       Director             March 27, 2003
 -------------------------
 Selvi Vescovi


<PAGE>

                                CERTIFICATION

   I, Carlton E. Turner, President and Chief  Executive Officer of Carrington
 Laboratories, Inc., certify that:

 1.   I have  reviewed this  annual  report   on  Form  10-K  of   Carrington
 Laboratories, Inc.;

 2.   Based on my knowledge, this annual  report does not contain  any untrue
 statement of a material fact or  omit to state a material fact  necessary to
 make the statements  made, in light  of the  circumstances under which  such
 statements were made, not misleading with  respect to the period  covered by
 this annual report;

 3.   Based on my  knowledge, the financial  statements, and other  financial
 information included in this annual  report, fairly present in  all material
 respects the financial condition,  results of operations  and cash flows  of
 the registrant as of, and for, the periods presented in this annual report;

 4.   The registrant's other  certifying officer  and I  are responsible  for
 establishing and maintaining disclosure controls and procedures  (as defined
 in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

      a)   Designed such disclosure  controls and  procedures to ensure  that
 material information relating to the registrant, including  its consolidated
 subsidiaries,  is  made  known  to  us  by  others  within  those  entities,
 particularly during  the  period  in  which  this  annual  report  is  being
 prepared;

      b)   Evaluated  the  effectiveness   of  the  registrant's   disclosure
 controls and procedures as of a date within 90 days prior to the filing date
 of this annual report ("Evaluation Date"); and

      c)   Presented  in  this  annual  report  our  conclusions   about  the
 effectiveness of  the  disclosure  controls  and  procedures  based  on  our
 evaluation as of the Evaluation Date;

 5.   The registrant's other certifying  officer and I have  disclosed, based
 on our most recent  evaluation, to the registrant's  auditors and the  audit
 committee of the registrant's board of directors (or persons  fulfilling the
 equivalent function):

      a)   All  significant  deficiencies  in  the  design  or  operation  of
 internal controls which could  adversely affect the registrant's  ability to
 record, process, summarize and report financial data and have identified for
 the registrant's auditors any material weaknesses in internal controls; and

      b)   Any fraud, whether  or not material,  that involves management  or
 other employees who  have a  significant role in  the registrant's  internal
 controls; and

      6.   The registrant's other certifying officer and I have  indicated in
 this annual report whether or not there were significant changes in internal
 controls or  in  other  factors that  could  significantly  affect  internal
 controls subsequent to the date of our most recent evaluation, including any
 corrective actions  with regard  to  significant deficiencies  and  material
 weaknesses.



 Dated:  March 27, 2003         /s/ Carlton E. Turner
                                -----------------------------------
                                Carlton E. Turner,
                                President & Chief Executive Officer
                                (principal executive officer)

<PAGE>

                                CERTIFICATION

      I, Robert W. Schnitzius, Vice President and Chief Financial  Officer of
 Carrington Laboratories, Inc., certify that:

 1.   I  have  reviewed  this  annual  report  on  Form  10-K  of  Carrington
 Laboratories, Inc.;

 2.   Based on my knowledge, this annual  report does not contain  any untrue
 statement of a material fact or  omit to state a material fact  necessary to
 make the statements  made, in light  of the  circumstances under which  such
 statements were made, not misleading with  respect to the period  covered by
 this annual report;

 3.   Based on my  knowledge, the financial  statements, and other  financial
 information included in this annual  report, fairly present in  all material
 respects the financial condition,  results of operations  and cash flows  of
 the registrant as of, and for, the periods presented in this annual report;

 4.   The registrant's other  certifying officer  and I  are responsible  for
 establishing and maintaining disclosure controls and procedures  (as defined
 in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

      a)   Designed such disclosure  controls and  procedures to ensure  that
 material information relating to the registrant, including  its consolidated
 subsidiaries,  is  made  known  to  us  by  others  within  those  entities,
 particularly during  the  period  in  which  this  annual  report  is  being
 prepared;

      b)   Evaluated  the  effectiveness   of  the  registrant's   disclosure
 controls and procedures as of a date within 90 days prior to the filing date
 of this annual report ("Evaluation Date"); and

      c)   Presented  in  this  annual  report  our  conclusions   about  the
 effectiveness of  the  disclosure  controls  and  procedures  based  on  our
 evaluation as of the Evaluation Date;

 5.   The registrant's other certifying  officer and I have  disclosed, based
 on our most recent  evaluation, to the registrant's  auditors and the  audit
 committee of the registrant's board of directors (or persons  fulfilling the
 equivalent function):

      a)   All  significant  deficiencies  in  the  design  or  operation  of
 internal controls which could  adversely affect the registrant's  ability to
 record, process, summarize and report financial data and have identified for
 the registrant's auditors any material weaknesses in internal controls; and

      b)   Any fraud, whether  or not material,  that involves management  or
 other employees who  have a  significant role in  the registrant's  internal
 controls; and

 6.   The registrant's other certifying officer and I have indicated  in this
 annual report  whether or  not there  were significant  changes in  internal
 controls or  in  other  factors that  could  significantly  affect  internal
 controls subsequent to the date of our most recent evaluation, including any
 corrective actions  with regard  to  significant deficiencies  and  material
 weaknesses.



 Dated:  March 27, 2003         /s/ Robert W. Schnitzius
                                -------------------------------------------
                                Robert W. Schnitzius
                                Vice President and Chief Financial Officer
                                (principal financial and accounting officer)

<PAGE>

                          INDEX TO EXHIBITS

                                                                  Sequentially
 Exhibit                                                            Numbered
 Number                        Exhibit                                Page
 ------     -----------------------------------------------------     ----
  3.1       Restated Articles of Incorporation of Carrington
            Laboratories, Inc. (incorporated by reference to Exhibit
            3.1 to Carrington's 1999 Annual Report on Form 10-K).

  3.2       Statement of Change of Registered Office and Registered
            Agent of Carrington Laboratories, Inc. (incorporated by
            reference to Exhibit 3.2 to Carrington's 1999 Annual
            Report on Form 10-K).

  3.3       Statement of Resolution Establishing Series D Preferred
            Stock of Carrington Laboratories, Inc. (incorporated by
            reference to Exhibit 3.3 to Carrington's 1999 Annual
            Report on Form 10-K).

  3.4       Bylaws of Carrington Laboratories, Inc., as amended
            through March 3, 1998 (incorporated herein by reference
            to Exhibit 3.8 to Carrington's 1997 Annual Report on
            Form 10-K).

  4.1       Form of certificate for Common Stock of Carrington
            Laboratories, Inc. (incorporated herein by reference to
            Exhibit 4.5 to Carrington's Registration Statement on
            Form S-3 (No. 33-57360) filed with the Securities and
            Exchange Commission on January 25, 1993).

  4.2       Rights Agreement dated as of September 19, 1991 between
            Carrington Laboratories, Inc. and Ameritrust Company
            National Association (incorporated by reference to
            Exhibit 4.2 to Carrington's 1999 Annual Report on Form
            10-K).

  4.3       Amendment No. 1 to Rights Agreement dated October 21,
            1998 (incorporated herein by reference to Exhibit 4 to
            the Company's Form 8-A/A Post-Effective Amendment No. 1).

 10.1+      Retirement and Consulting Agreement dated August 14,
            1997 between Carrington Laboratories, Inc. and David
            Shand (incorporated herein by reference to Exhibit 4.1
            to Carrington's quarterly report on Form 10-Q for the
            quarter ended September 30, 1997).

 10.2+      First Amendment to Retirement and Consulting
            Agreement dated September 30, 1997 between Carrington
            Laboratories, Inc. and David G. Shand (incorporated
            herein by reference to Exhibit 4.2 to Carrington's
            quarterly report on Form 10-Q for the quarter ended
            September 30, 1997).

 10.3       Contract Research Agreement dated as of August 8,
            1991 between Carrington Laboratories, Inc. and Texas
            Agriculture Experimental Station, as agent for the Texas
            A&M University System (incorporated herein by reference
            to Exhibit 10.55 to Carrington's 1991 Annual Report on
            Form 10-K).

 10.4 +     Employee Stock Purchase Plan of Carrington Laboratories,
            Inc., as amended through June 15, 1995 (incorporated by
            reference to Exhibit 10.9 to Carrington's 1999 Annual
            Report on Form 10-K).

 10.5       Common Stock Purchase Warrant dated September 14, 1993
            issued by Carrington Laboratories, Inc. to E. Don
            Lovelace (incorporated by reference to Exhibit 10.10
            to Carrington's 1999 Annual Report on Form 10-K).

 10.6       Common Stock Purchase Warrant dated September 14, 1993,
            issued by Carrington Laboratories, Inc., to Jerry L.
            Lovelace (incorporated by reference to Exhibit 10.11
            to Carrington's 1999 Annual Report on Form 10-K).

 10.7       Lease Agreement dated June 15, 1994 between DFW Nine,
            a California limited partnership, and Carrington
            Laboratories, Inc. (incorporated by reference to Exhibit
            10.12 to Carrington's 1999 Annual Report on Form 10-K).

 10.8       Lease Amendment dated August 23, 1994 amending Lease
            Agreement listed as Exhibit 10.12 (incorporated by
            reference to Exhibit 10.13 to Carrington's 1999 Annual
            Report on Form 10-K).

 10.9       Production Contract dated February 13, 1995 between
            Carrington Laboratories, Inc. and Oregon Freeze Dry,
            Inc. (incorporated by reference to Exhibit 10.14 to
            Carrington's 1999 Annual Report on Form 10-K).

 10.10      Modification Number One dated February 19, 1996 to the
            Production Contract dated February 13, 1995 between
            Carrington Laboratories, Inc. and Oregon Freeze Dry,
            Inc. (incorporated by reference to Exhibit 10.15 to
            Carrington's 1999 Annual Report on Form 10-K).

 10.11      Modification Number Two dated November 11, 1996 to the
            Production Contract dated February 13, 1995 between
            Carrington Laboratories, Inc. and Oregon Freeze Dry,
            Inc. (incorporated by reference to Exhibit 10.16 to
            Carrington's 1999 Annual Report on Form 10-K).

 10.12      Modification Number Three to the Production Contract
            dated February 13, 1995 between Carrington Laboratories,
            Inc. and Oregon Freeze Dry, Inc.  (incorporated herein
            by reference to Exhibit 10.89 to Carrington's 1998
            Annual Report on Form 10-K).

 10.13+     1995 Management Compensation Plan (incorporated herein
            by reference to Exhibit 4.1 to Form S-8 Registration
            Statement No. 33-64403 filed with the Commission on
            November 17, 1995).

 10.14      Trademark License Agreement dated August 14, 1997
            between Caraloe, Inc. and Mannatech, Inc. (incorporated
            herein by reference to Exhibit 10.2 to Carrington's
            quarterly report on Form 10-Q for the quarter ended
            September 30, 1997).

 10.15      Supply Agreement dated August 14, 1997 between Caraloe,
            Inc. and Mannatech, Inc.(incorporated herein by
            reference to Exhibit 10.3 to Carrington's quarterly
            report on Form 10-Q for the quarter ended September 30,
            1997).

 10.16      Letter of Agreement dated January 12, 2000 extending
            Trademark License Agreement and Supply Agreement between
            Caraloe, Inc. and Mannatech, Inc. (incorporated by
            reference to Exhibit 10.21 to Carrington's 1999 Annual
            Report on Form 10-K).

 10.17      Trademark License and Product Supply Agreement dated
            July 22, 1997 between Caraloe, Inc., and Nu Skin
            International, Inc. (incorporated herein by reference to
            Exhibit 10.1 to Carrington's quarterly report on Form
            10-Q for the quarter ended September 30, 1997).

 10.18      Non-exclusive Sales and Distribution Agreement dated
            August 22, 1995 between Innovative Technologies Limited
            and Carrington Laboratories, Inc. (incorporated herein
            by reference to Exhibit 10.6 to Carrington's Third
            Quarter 1995 Report on Form 10-Q).

 10.19      Supplemental Agreement dated October 16, 1995 to Non-
            exclusive Sales and Distribution Agreement between
            Innovative Technologies Limited and Carrington
            Laboratories, Inc.(incorporated herein by reference to
            Exhibit 10.7 to Carrington's Third Quarter 1995 Report
            on Form 10-Q).

 10.20      Product Development and Exclusive Distribution Agreement
            dated November 10, 1995 between Innovative Technologies
            Limited and Carrington Laboratories, Inc.(incorporated
            herein by reference to Exhibit 10.8 to Carrington's
            Third Quarter 1995 Report on Form 10-Q).

 10.21      Form of Stock Purchase Agreement dated April 5, 1995
            between Carrington Laboratories, Inc. and persons named
            in Annex I thereto (incorporated herein by reference to
            Exhibit 2.1 to Carrington's Registration Statement 33-
            60833 on Form S-3).

 10.22      Form of Registration Rights Agreement dated June 20,
            1995 between Carrington Laboratories, Inc. and persons
            named in Annex I thereto (incorporated herein by
            reference to Exhibit 2.2 to Carrington's Registration
            Statement 33-60833 on Form S-3).

 10.23      Supply and Distribution Agreement dated March 22,
            1996 between Farnam Companies, Inc. and Carrington
            Laboratories, Inc. (incorporated herein by reference to
            Exhibit 10.76 to Carrington's 1995 Annual Report on Form
            10-K).

 10.24+     Carrington Laboratories, Inc. 1995 Stock Option Plan,
            As Amended and Restated Effective January 15, 1998
            (incorporated herein by reference to Exhibit 10.3 to
            Carrington's Quarterly Report on Form 10-Q for the
            quarter ended March 31, 1998).

 10.25+     Form of Nonqualified Stock Option Agreement with Outside
            Director, relating to the Registrant's 1995 Stock Option
            Plan, as amended (incorporated herein by reference to
            Exhibit 10.3 to Carrington's Quarterly Report on Form
            10-Q for the quarter ended June 30, 1998).

 10.26+     Form of Incentive Stock Option Agreement for Employees
            (incorporated herein by reference to Exhibit 4.4 to
            Carrington's Second Quarter 1996 Report on Form 10-Q).

 10.27      Sales Distribution Agreement dated December 20, 1996
            between Recordati, S.P.A. and Carrington Laboratories,
            Inc. and Carrington Laboratories Belgium
            N.V.(incorporated by reference to Exhibit 10.55 to
            Carrington's 1996 Annual Report on Form 10-K).

 10.28      Sales Distribution Agreement dated December 4, 1996
            between Darrow Laboratorios S/A and Carrington
            Laboratories, Inc. (incorporated by reference to Exhibit
            10.59 to Carrington's 1996 Annual Report on Form 10-K).

 10.29      Supply Agreement dated February 13, 1997 between Aloe
            Commodities International, Inc. and Caraloe, Inc.
            (incorporated by reference to Exhibit 10.63 to
            Carrington's 1996 Annual Report on Form 10-K).

 10.30      Sales Distribution Agreement dated November 1, 1995
            between Laboratories PiSA S.A. DE C.V. and Carrington
            Laboratories, Inc. (incorporated by reference to Exhibit
            10.70 to Carrington's 1996 Annual Report on Form 10-K).

 10.31      Sales Distribution Agreement dated January 1, 1998
            between Carrington Laboratories, Inc. and Carrington
            Laboratories Belgium N.V. and Henry Schein U.K.
            Holdings, Ltd., (incorporated herein by reference to
            Exhibit 10.1 to Carrington's Quarterly Report on Form
            10-Q for the quarter ended March 31, 1998).

 10.32      Sales Distribution Agreement dated January 5, 1998
            between Carrington Laboratories, Inc. and Carrington
            Laboratories Belgium N.V. and Saude 2000 (incorporated
            herein by reference to Exhibit 10.2 to Carrington's
            Quarterly Report on Form 10-Q for the quarter ended
            March 31, 1998).

 10.33      Sales Distribution Agreement dated March 27, 1998
            between Carrington Laboratories, Inc. and Carrington
            Laboratories Belgium N.V. and Hemopharm GmbH
            (incorporated herein by reference to Exhibit 10.4 to
            Carrington's Quarterly Report on Form 10-Q for the
            quarter ended March 31, 1998).

 10.34      Promissory Note of Aloe Commodities International,
            Inc.,dated June 17, 1998, payable to the order of the
            Registrant in the principal amount of $200,000
            (incorporated herein by reference to Exhibit 10.4 to
            Carrington's Quarterly Report on Form 10-Q for the
            quarter ended June 30, 1998).

 10.35      Letter agreements dated September 30, 1998 and November
            4, 1998 between Aloe Commodities International, Inc.
            and the Registrant amending due date of Promissory Note
            dated June 17, 1998 from Aloe Commodities International,
            Inc. to the Registrant (incorporated herein by reference
            to Exhibit 10.2 to Carrington's Quarterly Report on Form
            10-Q for the quarter ended September 30, 1998).

 10.36      Letter Agreement dated February 4, 1999 between Aloe
            Commodities International, Inc. and the Registrant
            amending due date of Promissory Note dated June 17,
            1998 from Aloe Commodities International, Inc. to the
            Registrant (incorporated herein by reference to Exhibit
            10.98 to Carrington's 1998 Annual Report on Form 10-K).

 10.37      Promissory Note dated July 1, 1998 of Rancho Aloe,
            (C.R.) S.A. payable to the order of the Registrant in
            the principal amount of $186,655.00 (incorporated herein
            by reference to Exhibit 10.1 to Carrington's Quarterly
            Report on Form 10-Q for the quarter ended September 30,
            1998).

 10.38      Wound and Skin Care Purchase Agreement dated August 27,
            1998 between American Association for Homes & Services
            for the Aging and Carrington Laboratories, Inc.
            (incorporated herein by reference to Exhibit 10.2 to
            Carrington's Quarterly Report on Form 10-Q for the
            quarter ended September 30, 1998).

 10.39      Purchase Agreement dated October 1, 1998 between Vencor,
            Inc. and Carrington Laboratories, Inc. (incorporated
            herein by reference to Exhibit 10.3 to Carrington's
            Quarterly Report on Form 10-Q for the quarter ended
            September 30, 1998).

 10.40      Promissory Note of Aloe & Herbs International, Inc.
            dated November 23, 1998 payable to the order of the
            Registrant in the principal amount of $300,000
            (incorporated herein by reference to Exhibit 10.92
            to Carrington's 1998 Annual Report on Form 10-K).

 10.41      Clinical Services Agreement dated January 25, 1999
            between Carrington Laboratories, Inc. and PPD Pharmaco,
            Inc. (incorporated herein by reference to Exhibit 10.96
            to Carrington's 1998 Annual Report on Form 10-K).

 10.42      Common Stock Purchase Warrant dated November 23,
            1998, issued by Aloe and Herbs International, Inc. to
            Carrington Laboratories, Inc.  (incorporated herein by
            reference to Exhibit 10.99 to Carrington's 1998 Annual
            Report on Form 10-K).

 10.43      Letter dated February 25, 1999 from Aloe Commodities,
            Inc. to  Carrington Laboratories, Inc. (incorporated
            herein by reference to Exhibit 10.1 to Carrington's
            Quarterly Report on Form 10-Q for the quarter ended
            March 31, 1999).

 10.44      Exclusive Sales Representative Agreement dated April 13,
            1999, between Caraloe, Inc. and Classic Distributing
            Company (incorporated herein by reference to Exhibit
            10.1 to Carrington's Quarterly Report on Form 10-Q for
            the quarter ended June 30, 1999).

 10.45      Terms Sheet for Lease of Rancho Aloe Farm Land to Sabila
            Industrial dated April 20, 1999 (incorporated herein by
            reference to Exhibit 10.1 to Carrington's Quarterly
            Report on Form 10-Q for the quarter ended June 30, 1999).

 10.46      Terms Sheet for Maintenance of Sabila Industrial Plants
            on Leased Land dated April 20, 1999 (incorporated herein
            by reference to Exhibit 10.1 to Carrington's Quarterly
            Report on Form 10-Q for the quarter ended June 30, 1999).

 10.47      Exclusive Sales and Trademark Agreement dated June 11,
            1999, between Caraloe, Inc. and Nutra Vine (incorporated
            herein by reference to Exhibit 10.1 to Carrington's
            Quarterly Report on Form 10-Q for the quarter ended
            September 30, 1999).

 10.48      Lease Agreement dated September 23, 1999 between Rancho
            Aloe and Sabila Industrial, S.A. (incorporated herein by
            reference to Exhibit 10.1 to Carrington's Quarterly
            Report on Form 10-Q for the quarter ended September 30,
            1999).

 10.49      Letter Agreement dated September 29, 1999 between
            Aloe Commodities International, Inc. and Carrington
            Laboratories, Inc. (incorporated herein by reference to
            Exhibit 10.1 to Carrington's Quarterly Report on Form
            10-Q for the quarter ended September 30, 1999).

 10.50      Sales Distribution Agreement dated October 26, 1999.
            between Carrington Laboratories, Inc. and E-Wha
            International, Inc. (incorporated by reference to
            Exhibit 10.78 to Carrington's 1999 Annual Report on
            Form 10-K).

 10.51      Supplier Agreement dated August 6, 1999 between
            Novation, LLC and Carrington Laboratories, Inc. MS 91022
            (incorporated by reference to Exhibit 10.80 to
            Carrington's 1999 Annual Report on Form 10-K).

 10.52      Supplier Agreement dated August 6, 1999 between
            Novation, LLC and Carrington Laboratories, Inc. MS 91032
            (incorporated by reference to Exhibit 10.81 to
            Carrington's 1999 Annual Report on Form 10-K).

 10.53      Distributor and License Agreement dated November 3, 2000
            between Carrington Laboratories, Inc. and Medline
            Industries, Inc.  (Exhibits A, B and C to this agreement
            have been excluded pursuant to a request for
            confidential treatment submitted by the registrant to
            the Securities and Exchange Commission)(incorporated by
            reference to Exhibit 10.82 to Carrington's 1999 Annual
            Report on Form 10-K).

 10.54      Supply Agreement dated November 3, 2000 between
            Carrington Laboratories, Inc. and Medline Industries,
            Inc.  (Exhibit A to this agreement has been excluded
            pursuant to a request for confidential treatment
            submitted by the registrant to the Securities and
            Exchange Commission, (incorporated by reference to
            Exhibit 10.83 to Carrington's 1999 Annual Report on
            Form 10-K).

 10.55      Lease Agreement dated January 22, 2001 between
            Plazamerica, Inc and Carrington Laboratories, Inc.

 10.56+     Employee Stock Purchase Plan of Carrington Laboratories,
            Inc., as amended through May 17, 2001 (incorporated by
            reference to Exhibit 10.1 to Carrington's Quarterly
            Report on Form 10-Q for the quarter ended June 30,
            2001).

 10.57+     1995 Stock Option Plan of Carrington Laboratories, Inc.,
            as amended and Restated Effective January 15, 1998 and
            further amended through May 17, 2001 (incorporated by
            reference to Exhibit 10.2 to Carrington's Quarterly
            Report on Form 10-Q for the quarter ended June 30,
            2001).

 10.58+     Employee Stock Purchase Plan of Carrington Laboratories,
            Inc., as amended through November 15, 2001 (incorporated
            by reference to Exhibit 10.87, filed on Carrington's
            Form 8-K on March 20, 2002).

 10.59 *    Lease Agreement dated February 28, 2003 between
            Maintenance Warehouse/America Corp and Carrington
            Laboratories, Inc.

 21.1 *     Subsidiaries of Carrington

 23.1 *     Consent of Independent Auditors

 99.1 *     CEO Certification of SEC Reports Pursuant to 18 U.S.C.
            Section 1350, As Adopted Pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002

 99.2 *     CFO Certification of SEC Reports Pursuant to 18 U.S.C.
            Section 1350, As Adopted Pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002


 *    Filed herewith.
 +    Management contract or compensatory plan.