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, 1997
                       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)      Preferred Share Purchase Rights
          (Title of class)                      (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  common  stock  held by non-
   affiliates  of  the  Registrant  on  March 23, 1998, was $38,038,379.
   (This  figure  was computed on the basis of the closing price of such
   stock  on  the  NASDAQ  National  Market  on March 23, 1998 using the
   aggregate  number  of shares held on that date by, or in nominee name
   for,  shareholders  who are not officers, directors or record holders
   of  10%  or  more  of the Registrant's outstanding voting stock.  The
   characterization  of such officers, directors and 10% shareholders as
   affiliates is for purposes of this computation only and should not be
   construed  as  an  admission  for  any other purpose that any of such
   persons are, in fact, affiliates of the Registrant.)

     Indicate   the   number  of  shares  outstanding  of  each  of  the
   Registrant's  classes  of  common stock, as of the latest practicable
   date:  9,315,236  shares  of  Common Stock, par value $.01 per share,
   were outstanding on March 23, 1998.
<PAGE>


                    DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's proxy statement for its annual meeting
   of  shareholders  to  be  held  on  May  14, 1998 are incorporated by
   reference into Part III hereof, to the extent indicated herein.

                                      PART I

   ITEM 1.  BUSINESS.

                                  General

   Carrington  Laboratories,  Inc.  ("Carrington" or the "Company") is a
   research-based  pharmaceutical  and medical device company engaged in
   the  development,  manufacturing  and  marketing of naturally derived
   complex  carbohydrate  and other natural product therapeutics for the
   treatment  of  major  illnesses  and  the  dressing and management of
   wounds.    The  Company comprises three business divisions.  See Note
   Thirteen  to  the  consolidated  financial  statements in this Annual
   Report for financial information about these business divisions.  The
   Company  sells,  using  a  network  of  distributors, nonprescription
   products  through its Wound and Skin Care Division, consumer and bulk
   products through its consumer products subsidiary, Caraloe, Inc., and
   veterinary medical devices and pharmaceuticals through its Veterinary
   M e dical  Division,  which  relies  on  third  party  licensees  for
   distribution  of  its  products.   The Company's research and product
   portfolio  are  based  primarily  on  complex carbohydrate technology
   derived from the Aloe vera plant.

   The Company was incorporated in Texas in 1973, as Ava Cosmetics, Inc.
   In  1986,  the  Company  sold  the  direct sales business it was then
   operating and changed its name to Carrington Laboratories, Inc.

                        Wound and Skin Care Division

   Carrington's Wound and Skin Care Division offers a comprehensive line
   of    wound   management  products  to  hospitals,  alternative  care
   facilities  and  the home health care market.  The Company's products
   are  designed  to  maintain  a moist wound environment which aids the
   healing  process  and to maintain the integrity of contiguous healthy
   skin.    Carrington  products  are  used in a wide range of acute and
   chronic  wound  and  skin  conditions and for incontinence and ostomy
   care.

   The Company is committing significant resources to its wound and skin
   care  business.    Primary  marketing  emphasis  is  directed  toward
   hospitals,  managed care organizations, alternate care facilities and
   home  health  care providers, with wound and skin care products being
   promoted   primarily   to  physicians  and  specialty  nurses,  e.g.,
   enterostomal therapists.  Opportunities in the growing alternate care
   and home health care markets are also addressed through telemarketing
   efforts and a National Accounts Coordinator.
<PAGE>
   The    Company   currently   has   56   employees   and   independent
   representatives  engaged  in the sales and marketing of the Company s
   products.  The Company's field sales force currently employs 28 sales
   representatives,  each  assigned to a specific geographic area in the
   United  States,  five regional sales managers and a representative in
   Puerto Rico.  The Company also uses eight independent sales companies
   employing  14  sales  representatives  to  sell  its  products  on  a
   commission  basis.   In addition to this field sales force, the Wound
   and  Skin  Care  Division  employs  two  telemarketers  who  focus on
   alternative  care  facilities  and  the  home health care market, one
   person  in  its  National  Accounts  Department and five employees in
   customer service and executive management.

   The  Company's  products  are  primarily  sold  through  a network of
   distributors.    Three  of  the Company's largest distributors in the
   hospital  market are McKesson General ("McKesson"), Owens & Minor and
   Bergen  Brunswig.   During fiscal 1995, 1996 and 1997, sales of wound
   and  skin  care  products  to  McKesson  represented 7%, 9%, and 12%,
   respectively,  of  the  Company's  total net sales.  Sales to Owens &
   Minor represented 14%, 11%, and 11%, respectively, of total net sales
   during  the  same periods.  Sales to Bergen Brunswig represented 10%,
   12%,  and  9%,  respectively,  of  total  net  sales  during the same
   periods.

   The  Company  currently  has 18 distribution and licensing agreements
   for  the  promotion  and sale of its products.  In November 1995, the
   Company  signed a Sales Distribution Agreement with Laboratorios PiSA
   S.A.  de  C.V., a Mexican corporation, for the exclusive distribution
   rights  to  sell  the  Company's   wound  care  products  in  Mexico,
   Guatemala, Nicaragua, Panama, El Salvador, and the Dominican Republic
   for a period of five years.

   In  May  1996,  the  Company  entered  into an agreement with Trudell
   Medical  Group  ("Trudell")   granting   Trudell  exclusive  Canadian
   distribution rights for the Company's wound care products.

   In  May  1996,  the Company granted Ching Hwa Pharmaceutical Company,
   Ltd.  ("CHP"),  exclusive distribution rights to market the Company s
   wound  care  products  in  the Republic of China.  CHP is required to
   register the Company's products for sale in Taiwan within a specified
   time.

   In  September  3, 1996, the Company signed an exclusive contract with
   Faulding  Pharmaceuticals to market the Company's wound care products
   in  Australia  and  New  Zealand.   On January 12, 1998, Faulding and
   Carrington executed Amendment Number One to the existing Distribution
   Agreement  between  the  parties.   This Amendment adds the following
   countries   to   the  "Territories"  covered  under  that  Agreement:
   Thailand,  Vietnam, Singapore, the Philippines, Malaysia and Myanmar.
   Pursuant  to  the  Amendment, various terms and conditions associated
   with  the  launch of products for each country must be agreed upon on
   or before June 30, 1998.
<PAGE>
   In  December  1996,  the  Company entered into an agreement with Suco
   International  Corp.  ("Suco")  whereby the Company appointed Suco as
   exclusive  distributor of certain of the Company's products in Haiti,
   Columbia,  Venezuela,  Uruguay,  Bolivia, Peru, Paraguay, and Ecuador
   for  a  five-year  term,  subject  to early termination under certain
   circumstances.   The agreement requires Suco to register the products
   covered by the agreement in each of those countries.

   In  December 1996, the Company and Darrow Laboratories S/A ("Darrow")
   entered  into  a  Sales  Distribution  Agreement  whereby the Company
   appointed  Darrow  as  a  marketer  and distributor of certain of the
   Company's   wound  care  products  for a term of 10 years (subject to
   early  termination  under  certain  circumstances)  in Brazil, with a
   limited  right  of  first  refusal  to  distribute  those products in
   Argentina,  Uruguay,  Paraguay,  and  Chile.   The agreement requires
   Darrow  to  register  in  the  Company's   name such of the Company's
   products  as the Company directs, at the Company's expense, in Brazil
   and  each other country where Darrow is authorized to distribute such
   products.

   In December 1996, the Company and its Belgian subsidiary entered into
   an  agreement  with Recordati Industria Chimica & Farmaceutica S.P.A.
   ("Recordati")  whereby the Company and its subsidiary jointly granted
   exclusive  distribution  rights  to  Recordati  for  certain  of  the
   Company's   products in Italy, Vatican City and San Marino for a term
   of 10 years, subject to automatic renewal for an additional two years
   unless  either  party elects to terminate the agreement at the end of
   the  initial  term,  and  subject  to early termination under certain
   circumstances.    In return for the grant of the distribution rights,
   Recordati  made an initial payment to the Company and is obligated to
   make  two additional payments contingent on the occurrence of certain
   events.    Under  the  agreement,  the  Company  applied  for and was
   granted,  in  February  1998,  the  CE  mark, a quality certification
   recognized  by members of the European Economic Community and certain
   other countries.

   In  1997,  sales  of  the  Company  related  to  the  above mentioned
   international  agreements  were  less  than  $150,000.    The Company
   presently   estimates  the   expected  sales  associated  with  these
   agreements in 1998 to be between $500,000 and $1,000,000.

                              Consumer Health

   Caraloe,  Inc.,  a  subsidiary of the Company ("Caraloe"), markets or
   licenses   consumer  products  and  bulk  ingredients  utilizing  the
   Company's  patented  complex  carbohydrate technology.  Attention has
   been  focused on three goals, the first of which is to sell Caraloe's
   bulk  raw ingredients to manufacturers who desire the highest quality
   aloe  extracts  for  their  finished products.  The second goal is to
   develop the contract manufacturing business by providing high quality
   products  for  nutritional and skin care markets, and the third is to
   expand the Aloe Nutritional brand and establish it as a leading brand
   in the health food market.
<PAGE>
   In February 1996, Caraloe signed an agreement with Mannatech granting
   it  an  exclusive license in the United States for Manapol[R] powder.
   This  agreement,  including  the grant of the exclusive license,  was
   terminated  by  Mannatech effective March 31, 1997, and Caraloe began
   to  market Manapol[R] powder to other third parties as well as use it
   in  Caraloe's   products.    In  August  1997,  Caraloe  signed a new
   nonexclusive  supply  agreement  with Mannatech, Inc., to supply bulk
   Manapol[R] powder.  This agreement is effective through July 2000 and
   contains  monthly  minimum  purchase requirements.  During 1995, 1996
   and  1997,  sales  of  bulk  Manapol[R]  powder  to  Mannatech,  Inc.
   represented  10%,  15%  and 16%, respectively, of the Company's total
   consolidated net sales.

       A  supply  agreement  for  bulk  Manapol[R]  powder was signed in
   December  1997  with  Met-Trim,  Inc.  The agreement contains minimum
   quarterly purchase requirements.

   In   October  1996,  Caraloe  made  a  $200,000  investment  in  Aloe
   Commodities  International,  Inc. ("ACI").  In February 1997, Caraloe
   entered  into  a  Supply  Agreement  with  ACI for a term of 10 years
   (subject  to  early  termination  under  certain circumstances).  The
   agreement  contemplates  that  ACI  will purchase from Caraloe all of
   certain  bulk  raw  materials  that  ACI  needs  for drinks and other
   consumer  products.    In  December  1997, Caraloe made an additional
   investment  in ACI of $400,000.  Carrington owns less than 10% of the
   total  outstanding shares of ACI.

   In  February 1997, Caraloe entered into a Supply Agreement with Light
   Resources  Unlimited ("LRU"), and effective March 1, 1997, Carrington
   entered  into  a  related  Trademark License Agreement with LRU.  The
   terms of the Supply Agreement and the Trademark License Agreement end
   on  May 12, 2002, and May 4, 2002, respectively, and the term of each
   agreement   is   subject   to   early   termination   under   certain
   circumstances.    The Supply Agreement provides that during the first
   three  months  of the term, LRU will purchase from Caraloe quantities
   of  bulk  AVMP[R][R]  Powder  and/or  bulk Manapol[R] Gold[TM] Powder
   ("Product")  to  be mutually agreed upon, and beginning May 12, 1997,
   LRU  will  purchase  from  Caraloe  annually  at  least  the  minimum
   quantities  of  Product  specified  in  the  agreement.    The Supply
   Agreement   also  contemplates  that  LRU  will  be   Caraloe's  sole
   distributor  of  Product  to natural health care practitioners in the
   United  States and Canada, subject to Caraloe's right to sell "simple
   purchase  bulk  Product"  to  natural  health  care  practitioners in
   quantities exceeding certain specified limits.  The Trademark License
   Agreement  grants  LRU  a non-exclusive license to use the trademarks
   AVMP[R][R]  Powder  and Manapol[R] Gold[TM] Powder in connection with
   the  advertising and sale of Product to the targeted group.  Sales to
   LRU in 1997 under this agreement were $167,000.
<PAGE>

                        Veterinary Medical Division

   The    Carrington   Veterinary   Medical  Division  ("CVMD")  markets
   "Acemannan  Immunostimulant",  a  vaccine adjuvant, and several wound
   and   skin  care  products  to  the  veterinary  market.    Acemannan
   Immunostimulant  was  conditionally  approved  by  the  United States
   Department  of  Agriculture  ("USDA") in November 1991, for use as an
   aid  in  the  treatment  of canine and feline fibrosarcoma, a form of
   soft  tissue  cancer  that  affects  dogs  and  cats.   A conditional
   approval  means that efficacy and potency tests are required, and the
   product's label must specify that these studies are in progress.  The
   "conditional"  aspect  of  the approval is renewed on an annual basis
   and  will  be  removed  upon completion and acceptance by the USDA of
   additional  potency testing.  However, there can be no assurance that
   these tests will result in the removal of the conditional restriction
   on the USDA's approval of Acemannan Immunostimulant.

   In  September  1990,  the  Company granted Solvay Animal Health, Inc.
   ("Solvay")  an  exclusive,  worldwide  license to use and sell a bulk
   pharmaceutical mannan adjuvant for poultry disease.  In January 1992,
   Solvay   received   approval  from   the  USDA  to  market  the  bulk
   pharmaceutical  mannan  as  an  adjuvant  to  a  vaccine  for Marek's
   disease,  a virus infection that kills chickens or renders them unfit
   for  human  consumption.    On  March  1,  1997,  Fort  Dodge  Animal
   Health ("Fort  Dodge"),  a   division   of   American  Home  Products
   Corporation,  acquired  the  business and assets of Solvay, including
   the  License  Agreement  dated  September  20,  1990  and an Addendum
   thereto  between  Carrington  and Solvay granting Solvay an exclusive
   world-wide  field  of  use  license  to  use  and sell acemannan as a
   component/adjuvant  to  enhance  the performance of poultry vaccines.
   Fort  Dodge  notified  Carrington  in  the  summer  of  1997 that, as
   successor in interest to Solvay, it intended to terminate the License
   Agreement.     Discussions  concerning  that  termination  have  been
   ongoing,  and  the  parties have agreed in principle to terminate the
   License Agreement in 1998.

   In March 1996, the Company signed an agreement with Farnam Companies,
   Inc., a leading veterinary marketing company, to promote and sell the
   Carravet[R][TM]  product  line,  including Acemannan Immunostimulant.
   The Carravet[R][TM] product line currently consists of nine products.

<PAGE>
                          Research and Development

                                  General

   Carrington  has  developed  a  proprietary process for extracting and
   purifying  a material that has been designated as bulk pharmaceutical
   mannan  ("BPM").    This  material is a natural product mixture which
   contains  a  high  percentage  of  complex carbohydrate.  The Company
   intends  to  seek  approval  of the Food and Drug Administration (the
   "FDA")  and  other  regulatory  agencies  to  sell  drugs and medical
   devices  derived  from  BPM  in  the  United  States  and  in foreign
   countries:    (i)  to  treat  various  forms of cancer; (ii) to treat
   inflammatory   bowel   diseases,   including  ulcerative  colitis,  a
   widespread,  chronic,  inflammatory  disease  of  the colon; (iii) to
   treat  non-healing  and other wounds; and (iv) for use as an adjuvant
   to  various  vaccines.  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  $5,370,000,  $5,927,000,  and
   $3,006,000  on  research  and  development  in fiscal 1995, 1996, and
   1997,  respectively.    The Company has adopted a focused approach to
   its  research  and  development  efforts.  As the result of this keen
   focus on specific goals, the Company estimates that in fiscal 1998 it
   will   spend   essentially  the  same  on  preclinical  research  and
   development as in 1997.

   The  Company initiated a program in 1996 which continued through 1997
   to  restructure  research  and development to meet the challenges and
   demands  for  drug  development  in  the 21st century.  This entailed
   establishing  a strong nucleus or infrastructure for chemistry, assay
   development and formulation development with outsourcing capabilities
   for  high thoughput drug screening, and preclinical and clinical drug
   and device development.  This approach allows the Company to maximize
   its  opportunities in a timely and cost effective manner.  Currently,
   the  Company's   research  staff comprises eight full-time employees.
   Dr.  Robert A. Fildes, a director of the Company, has been serving as
   part-time, interim Executive Vice President, Research and Development
   since  the  resignation  of  Dr.  David  G.  Shand  as  the Company s
   permanent, full-time officer in charge of research and development on
   September  30.  1997.    The Company is currently seeking a full-time
   successor to Dr. Shand to lead the Company's research and development
   efforts.
<PAGE>
                            Preclinical Research

   The Company's main preclinical research and development objective for
   1997  was  to  assess the viability of the ulcerative colitis program
   following  the  reported  Phase  III  trial  failure of Aliminase[TM]
   capsules  to  demonstrate  efficacy.    After  extensive internal and
   external  audits  of  the  clinical  trial  and extensive preclinical
   testing,  a  series  of  animal  studies were conducted to assess the
   activity  of  BPM as the drug substance and the previous formulations
   used.    BPM demonstrated a dose-dependent response in these studies,
   and  based  on  these results, a new drug product formulation project
   was  initiated  for Aliminase[TM].  A decision regarding new clinical
   trials for ulcerative colitis will be made by mid-1998.

   Other preclinical studies conducted in the Company's laboratories and
   in  outside  laboratories  have  shown  that certain of the Company's
   complex  carbohydrates  stimulate  macrophages  and other white blood
   cells  to  produce  cytokines, including interleukin-1, interleukin-6
   and   tumor  necrosis  factor  alpha,  which  regulate  other  cells.
   Interleukin-1  stimulates  fibroblasts,  which are essential to wound
   healing.    Tumor  necrosis  factor  alpha acts against tumors in the
   body.    In addition, laboratory experiments conducted by the Company
   have  shown  that  some Aloe vera components have both pro- and anti-
   inflammatory  actions  as shown in animal models of wound healing and
   in  inflammation  of  the  lung,  colon,  joint and ear.  The Company
   believes  that  its  products'  pharmacological  actions  and lack of
   toxicity  make  them  excellent candidates for further development as
   therapeutic  agents for the treatments and uses for which the Company
   intends to seek regulatory approvals (see "Research and Development -
   -  General" above).  There is no assurance, however, that the Company
   will be successful in its efforts.

   The  Company  sponsors a research and development laboratory at Texas
   A&M  in association with the College of Veterinary Medicine to expand
   preclinical  research  in  various  wound  healing  applications  and
   mechanisms  of action.  Pursuant to this arrangement, the Company has
   access  to  leading  authorities in immunology, as well as facilities
   and  equipment to engage in experimentation and analysis at the basic
   research level.

   Filtered  BPM, including CarraVex[TM] injectable (formerly CARN 750),
   are  immunomodulating  agents  that  increase  circulating  levels of
   interleukin-1  and  tumor  necrosis factor alpha.  A series of animal
   studies  conducted at Texas A&M University in 1988 and 1989 indicated
   that a single intraperitoneal dose caused significant tumor reduction
   in  a  statistically  significant  percentage  of animals with highly
   malignant  tumors.   This effect in many instances was dramatic, with
   complete  regression  of  the  tumor  and  with  continuing immunity.
   Recovered  animals  were  resistant to syngeneic tumor reimplantation
   for up to six months after initial tumor regression.
<PAGE>
   In  1991, the USDA granted the Company conditional approval to market
   an  injectable form of a complex carbohydrate as an aid to surgery in
   the  treatment  of  canine  and  feline  fibrosarcoma, a form of soft
   tissue cancer, under the name Acemannan Immunostimulant.  The product
   was conditionally approved based on safety and efficacy studies.  The
   Company  continues  to  work  on developing a suitable cost-effective
   potency  assay  that  will  meet USDA requirements for the purpose of
   removal  of  the  conditional  status.    Of  course, there can be no
   assurance  as to whether or when the USDA will remove the conditional
   restriction on its approval of this product.

   An  extensive  series  of  animal  studies  were initiated in 1997 to
   assess  the  direct and adjunct effects of CarraVex[TM] and Acemannan
   Immunostimulant.    The  purpose  of  these studies was to identify a
   suitable  model  to  evaluate  new  product  formulations (see "Human
   Studies" below) and to evaluate an in vitro potency test developed to
   meet  USDA requirements.  These studies are planned for completion in
   1998.

   Human Studies

   Evaluation of Aliminase[TM] (formerly CARN 1000) Oral Capsules in the
   Treatment of Ulcerative Colitis.  In late 1996, the Company placed on
   hold  its testing of Aliminase[TM] oral capsules for the treatment of
   ulcerative   colitis,  pending  an  in-depth  evaluation  of  product
   formulation,  dosage form, timing and frequency of dosing, and method
   of   administration.   (See   "Preclinical    Research"   above   and
   "Management's   Discussion  and  Analysis  of Financial Condition and
   Results of Operations" below.)

   Evaluation  of  CarraVex[TM]  injectable  (formerly  CARN 750) in the
   Treatment  of  Solid  Tumors  in  Humans.   The Company believes that
   CarraVex[TM] injectable may be broadly useful in cancer therapy, with
   potential  application  in  the  treatment  of  major  solid  tumors,
   including  melanoma,  breast  carcinoma,  prostate  carcinoma,  colon
   carcinoma,  hypernephroma  and  soft  tissue  sarcoma.    The Company
   initiated  a  Phase I human clinical trial of CarraVex[TM] injectable
   in  certain  solid  tumor indications.  The trial began in the United
   States  in late 1995 and continued until mid-1997.  Eighteen patients
   have  completed the study with no safety concerns noted.  The product
   required  filtration at the bedside which the Company believes is not
   the best delivery approach for CarraVex[TM].  A program for improving
   the  formulation  has  been  initiated  (see  "Preclinical  Research"
   above), and a decision on further clinical trials will be made by the
   end of 1998.
<PAGE>
   Evaluation  of  Carrasyn[R]  in  Wound Healing.  In 1993, a study was
   conducted  at M.D. Anderson Cancer Center to determine if Carrasyn[R]
   Hydrogel  was of benefit in treating radiation-induced skin reactions
   in an animal model.  These studies clearly showed that, when compared
   to    controls,  Carrasyn[R]  Hydrogel  could  significantly  reduce
   radiation-induced  inflammation  and  tissue damage in animals.  As a
   result  of  this  work, a small clinical trial was performed in 1994,
   studying  the radiation-sparing effects of Carrasyn[R] Hydrogel wound
   dressing  in  four  oncology  patients.    These  studies  led to the
   development  of  RadiaCare[TM]  Gel  for  the management of radiation
   dermatitis.   In 1996, a study was begun at the Texas Oncology Center
   of  Dallas  to  determine  if  RadiaCare[TM]  Gel  was  of benefit in
   managing  radiation dermatitis in humans.  The study was completed in
   the  fall  of  1997,  and statistical analysis is currently underway.
   The results of this study should be known by the end of 1998.

   Evaluation of Carrasyn[R] Freeze-Dried Gel (CarraSorb[TM] M) in Wound
   Healing.    Following   the   submission   of   a  510(k)  pre-market
   notification for a preservative-free freeze-dried gel for wound care,
   the  FDA  cleared  Carrington  to  market CarraSorb[TM] M, and it was
   launched  in  early  1996.    The Company is sponsoring a small pilot
   clinical  study  at the University of Wales to evaluate the effect of
   CarraSorb[TM]  M  on  wound  macrophages.   The results of this study
   should be known in 1999.

   Evaluation  of  RadiaCare[TM]  Oral Wound Rinse.  In March  1997, the
   FDA  cleared  Carrington to market RadiaCare[TM] Oral Wound Rinse for
   the  management  and relief of pain associated with all types of oral
   wounds,  including  mucositis.   The Company is sponsoring individual
   case  studies  and  co-sponsoring  a  50  patient controlled trial in
   radiation-induced oral ulcers.  Results will be known in 1999.

<PAGE>
   Summary.  The following table outlines the status of the products and
   potential indications of the Company's aloe-based 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

   Cleansers                   Wounds                             Marketed

   Anti-fungal                 Candida                            Marketed

   Hydrocolloids               Wounds                             Marketed

   Alginates                   Wounds                             Marketed

   Oral
   Human Anti-inflammatory     Ulcerative Colitis                 On hold

   Pain                        Mucositis                          Marketed

   Injectable Human            Melanoma, Breast, Prostate,        Phase I
   Anticancer                  Colon, Hypernephroma, and          Clinical
                               Soft Tissue Sarcoma                 Trial
                                                                  Completed

   Veterinary
   Anticancer                  Fibrosarcoma                       Marketed

   Dental
   Pain reduction              Aphthous Ulcers, Oral Wounds       Marketed

   Vaccine Adjuvant--
   Veterinary
   Poultry Vaccines            Marek's Disease                    Marketed

<PAGE>

                             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 of 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  for  specific  indications  or  in  a particular
   country or region.

   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  effectively.    If  the  Company is unable to enter into such
   agreements,  it  may undertake to market 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 Aloe barbadensis Miller, popularly known as
   Aloe  vera  L.  Through patented processes, the Company produces bulk
   pharmaceutical  and  injectable mannans and freeze-dried aloe extract
   from  the  central  portion of the Aloe vera L leaf known as the gel.
   Bulk  pharmaceutical mannan, in the form of a hydrogel, is used as an
   ingredient  in certain of the Company's wound and skin care products.
   Through  additional  processing, bulk mannans may be produced in both
   oral and injectable dosage forms.

   In  May 1990, the Company purchased a 405-acre farm in the Guanacaste
   province  of  northwest  Costa Rica which currently has approximately
   210  acres  planted  with  Aloe vera.  The Company's current need for
   leaves  exceeds  the  supply of harvestable leaves from the Company s
   farm,  requiring the purchase of leaves from other sources in Central
   America  at  considerably  higher  prices.   Additional quantities of
   harvestable  leaves  from the Company's farm will become available in
   the  second  quarter  of  1998, but will not completely eliminate the
   Company's dependence on other sources of leaves.  Due to economic and
   political  instability  in the Central American region, the supply of
   imported  leaves  cannot  be  guaranteed.  The Company plans to plant
   additional  acreage or secure local  contract production of leaves as
   the demand for Aloe vera L leaves increases.
<PAGE>

                               Manufacturing

   During the last quarter of 1994 and the first three quarters of 1995,
   the  Company  moved  its  wound-  and skin-care product manufacturing
   operations  from  a leased facility in Dallas, Texas to the Company s
   headquarters  in  Irving,  Texas.   In connection with this move, the
   Company   upgraded   and   expanded  its  manufacturing  capacity  by
   installing higher capacity equipment and upgraded its capabilities to
   produce   injectable-grade  pharmaceutical  products.    The  Company
   believes  that  the plant's capacity will provide sufficient capacity
   for  the  present  line  of products and 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  bulk pharmaceutical mannans, bulk injectable
   mannans  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.    Finished oral and injectable dosage forms will be produced
   by  outside  vendors  until  in-house production becomes economically
   justified.


                                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 bulk pharmaceutical mannans
   and bulk injectable mannans.  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.
<PAGE>
   Wound  and  Skin Care Division, Caraloe, Inc., and CVMD.  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 is
   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,  drugs  for human use are subject to rigorous FDA regulation.
   The  Federal Food, Drug and Cosmetic Act, as amended, 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.

   In  order  to  initiate human clinical trials on a product, extensive
   basic  research  and development information must be submitted to the
   FDA  in  an  investigational  new  drug ("IND") application.  The IND
   application  contains  a  general investigational plan, a copy of the
   investigator's  brochure  (a  comprehensive  document provided by the
   drug  manufacturer),  copies  of  the  initial protocol for the first
   study,   a  review  of  the  chemistry,  manufacturing  and  controls
   information  for  the  drug, pharmacology and toxicology information,
   any  previous  human experience with the drug, results of preclinical
   studies and any other information requested by the FDA.
<PAGE>
   If  permission is obtained to proceed to clinical trials based on the
   IND  application, initial trials, usually categorized as Phase I, are
   instituted.    The  initial  or  Phase I trials typically involve the
   administration of small, increasing doses of the investigational drug
   to  healthy volunteers, and sometimes patients, in order to determine
   the  general  overall  safety  profile  of  the  drug  and  how it is
   metabolized.  Once the safety of the drug has been established, Phase
   II  efficacy  trials  are conducted in which the expected therapeutic
   doses of the drug are administered to patients having the disease for
   which  the drug is indicated, and a therapeutic response is sought as
   compared  to  the  expected  progression of the underlying disease or
   compared  to  a  competitive product or placebo.  Information also is
   sought  on  any  possible  short-term  side  effects of the drug.  If
   efficacy  and  safety  are observed in the Phase II trials, Phase III
   trials  are  undertaken  on  an  expanded group in which the patients
   receiving the drug are compared to a different group receiving either
   a  placebo or some form of accepted therapy in order to establish the
   relative  safety  and  efficacy  of  the  new  drug compared with the
   control  group.  Data are also collected to provide an adequate basis
   for future physician prescribing information.

   If  Phases  I  through  III are successfully completed, the data from
   these  trials are compiled into a new drug application ("NDA"), which
   is  filed with the FDA in an effort to obtain marketing approval.  In
   general,  an  NDA will include a summary of the components of the IND
   application,  a clinical data section reviewing in detail the studies
   from  Phases  I  through  III  and  the  proposed  description of the
   benefits,  risks and uses, or labeling, of the drug, and how both the
   drug substance and drug product will be manufactured and controlled.

   In  general,  a  more  comprehensive  NDA and a more prolonged review
   process  are required for drugs not previously approved for marketing
   by  the  FDA.  If a second indication for an already approved product
   is sought, since many of the components of the review process are the
   same,  a  shortened  review  process  generally  can  be anticipated.
   However,  the FDA gives high priority to novel drugs providing unique
   therapeutic  benefits  and  a correspondingly lower priority to drugs
   similar  to or providing comparable benefits to others already on the
   market.

   In  addition  to  submitting  safety  and  efficacy data derived from
   clinical   trials   for  FDA  approval,  NDA  approval  requires  the
   manufacturer  of  the  drug  to  demonstrate  the  identity, potency,
   quality and purity of the active ingredients of the product involved,
   the   stability   of   these   ingredients   and  compliance  of  the
   manufacturing  facilities,  processes  and  quality  control with the
   FDA's  current  Good  Manufacturing  Practices  regulations.    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.
<PAGE>
   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  Federal  Food, Drug and Cosmetic Act, as amended.  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).  With respect to certain of
   its  wound  and  skin  care  products, the Company intends to develop
   claims for which IDE and PLA submissions will be required.

   Department  of  Agriculture.  Certain products being developed by the
   Company  for  animal health indications must be approved by the USDA.
   The   procedure   involves  extensive  clinical  research,  and  USDA
   approvals are required at various stages of product development.  The
   approval  process  requires,  among  other  things,  presentation  of
   substantial evidence to the USDA as to the safety and efficacy of the
   proposed product.  Furthermore, even if approval to test a product is
   obtained,  there is no assurance that ultimate approval for marketing
   the  product  will  be  granted.    USDA  approval  procedures can be
   protracted.

   Other  Regulatory  Authorities.   The Company's advertising and sales
   practices  are subject to regulation by the Federal Trade Commission,
   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 as well as the FDA.

   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  the  Company's subsidiary Caraloe, products are also
   subject  to regulation by one or more federal agencies, including the
   FDA,  the  Federal  Trade  Commission  (the "FTC"), the United States
   Department  of  Agriculture  and the Environmental Protection Agency.
   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.
<PAGE>
   On  October  25,  1994,  the  President  signed  into law the Dietary
   Supplement  Health and Education Act of 1994 ("DSHEA").  This new law
   revised  the  provisions  of the Federal Food, Drug, and Cosmetic Act
   (the  "FFDC  Act") concerning the composition and labeling of dietary
   supplements and, in the judgement of the Company, is favorable to the
   dietary supplement industry.  The legislation creates a new statutory
   class  of  "dietary  supplement."   This new class includes vitamins,
   minerals,  herbs,  amino acids and other dietary substances for human
   use  to  supplement  the diet, and the legislation grandfathers, with
   certain limitations, dietary ingredients on the market before October
   15,  1994.    A  dietary  supplement  which  contains  a  new dietary
   ingredient,  one  not on market before October 15, 1994, will require
   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 the FFDC Act.

   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,
   the DSHEA amends, for dietary supplements, the NLEA by providing that
   "statements  of  nutritional  support"  may  be  used in labeling for
   dietary  supplements without FDA preapproval 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 your cardiovascular health").

   The  FDA issued final dietary supplement labeling regulations in 1997
   that  may  require  Caraloe  to  revise most of its product labels by
   1999.    The  regulations  also  currently  require Caraloe to submit
   notification to the FDA of all "statements of nutritional support," a
   process that Caraloe has not fully completed.

   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 whom the Company has limited control.
<PAGE>
   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
   c a pable  of  reformulating,  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.  See also "Business
   -- Legal Matters" and "-- Regulatory Matters."


                       Patents and Proprietary Rights

   As  is  industry  practice, the Company has a policy of using patent,
   trademark  and  trade secret protection with a view to preserving its
   right  to  exploit  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.
<PAGE>
   The  Company has obtained patents or filed patent applications in the
   United  States  and  approximately 24 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 24 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.  This patent application is the subject of a Patent Cooperation
   Treaty  application  designating  a number of foreign countries where
   the applications are pending.

   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  Treaty   application   based  on  the  parent  United  States
   application  has been filed designating a number of foreign countries
   where the applications are pending.
<PAGE>
   The  Company has obtained a patent in Taiwan related to the uses of a
   denture  adhesive  containing  aloe  extract (Taiwan Patent No. 89390
   issued  on  August  21,  1997) 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  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.
<PAGE>
   The  Company  has  given the trade name Carrasyn[R] to certain of its
   products  containing  acetylated  mannans.    A  selected  series  of
   domestic  and  foreign  trademark  applications  exists for the marks
   Manapol[R],  Carrisyn[R]  and  Carrasyn[R].  Further, the Company has
   registered  the trademark AVMP[R] and the trade name Carrington[R] in
   the  United  States.    The  Company believes that its trademarks and
   trade names are valuable assets.

                                 Employees

   As  of  March  5,  1998, the Company employed 278 persons, of whom 22
   were   engaged  in  the  operation  and  maintenance  of  its  Irving
   processing  plant,  160  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, 86 were located in
   Texas,  160  in  Costa  Rica and one in Puerto Rico.  In addition, 31
   sales  personnel  were  located  in  25  other  states.   The Company
   considers relations with its employees to be good.  The employees are
   not represented by a labor union.

                                 Financing

   In  November  1997,  the Company entered into a financing arrangement
   with Comerica Bank-Texas ("Comerica").  The agreement was composed of
   a  $3,000,000  line  of  credit  structured  as a demand note without
   expiration  with  an  interest rate equal to the Comerica prime rate.
   The  line  of  credit  is  collateralized  by  the Company's accounts
   receivable  and  inventory.    As  of  December 31, 1997 there was no
   outstanding balance owed to Comerica under the terms of the financing
   agreement.


   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.

   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  Facility.      The  Company  leases 24,000 square feet of
   office,  manufacturing   and   laboratory   space   (the  "Laboratory
   Facility")  in  Irving,  Texas  pursuant  to  a lease that expires in
   January  2000.    The Company's in-house research and development and
   quality assurance activities are conducted at the Laboratory Facility
   for    the   production  of  injectable  dosage  forms  of  Acemannan
   Immunostimulant.
<PAGE>
   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  plants  and for a
   processing  plant  to  produce  bulk  pharmaceutical  and  injectable
   mannans  and  freeze-dried  Aloe  vera extracts used in the Company s
   operations.    Construction  of  the  processing  plant was completed
   during  the  second quarter of 1993, and the plant became operational
   in  June  1993.   Development of this facility was partially financed
   with  borrowings under a five-year, U.S. dollar-denominated loan from
   Corporacion  Privada de Inversiones de CentroAmerica, S.A., a private
   bank operating in San Jose, Costa Rica.  The loan was paid off in May
   1995.    During  the  first  quarter of 1994, the Company initiated a
   project  in  Costa  Rica  to  upgrade  the  production  plant to meet
   regulatory  requirements  for  the  production of bulk pharmaceutical
   oral  and injectable mannans as required for IND s.  This project was
   completed in the fourth quarter of 1994.



   ITEM 3.  LEGAL PROCEEDINGS.

   On March 2, 1996, Dianna Gold (the "Plaintiff"), a former employee of
   the  Company,  filed  an  action  styled  Dianna  Gold vs. Carrington
   Laboratories,  Inc.,  and  Fireman's  Fund Insurance Company with the
   Workers  Compensation Appeals Board for the State of California (Case
   No.  SFO  394660).  On March 27, 1996, Plaintiff filed an Application
   for  Discrimination Benefits Pursuant to Labor Code Section 132(a) in
   that  case.    On  March  3, 1998, the Judge in this matter signed an
   Order of Nonsuit that dismissed the case with prejudice.

   On June 26, 1996, Robert W. Brown ("Brown"), a former employee of the
   Company,  filed  a  lawsuit  styled  Robert  W.  Brown vs. Carrington
   Laboratories,  Inc.,  Cause No. 96-6469-L in the 193rd District Court
   of  Dallas  County,  Texas,  alleging  breach of contract, promissory
   estoppel,   fraud,   negligent   misrepresentation   and  slander  in
   connection  with his employment and the termination of his employment
   with the Company.  Brown sought to recover unspecified common law and
   statutory  damages,  punitive  damages, interest, attorneys  fees and
   cost of suit.

   On  December  6,  1996, the Judge signed an Order of Nonsuit in Cause
   No.  96-6469-L that dismissed the suit without prejudice to any party
   and ordered each party to bear its own costs and attorneys  fees.

   On  November  3, 1996, Brown filed a Charge of Discrimination against
   the Company with the Equal Employment Opportunity Commission ("EEOC")
   alleging  age discrimination.  The Company received a notification of
   this charge dated February 13, 1997 from the EEOC.  In a letter dated
   March  21, 1997, the EEOC Dallas District Office notified the Company
   that it had terminated its investigation of the Company under the Age
   Discrimination in Employment Act.

   On October 8, 1996, Allison Kindt ("Kindt"), a former employee of the
   Company,  filed  a  Charge of Discrimination against the Company with
   the  EEOC,  Charge  No.  141970008,  alleging  sex discrimination and
   retaliation  in  violation  of  Title  VII of the Civil Rights Act of
   1964,  as  amended.    On March 14, 1997 the EEOC, Raleigh NC office,
   notified  the Company that it had terminated its investigation of the
   Company under the Civil Rights Act of 1964, as amended.
<PAGE>
   On  June  12,  1997,  Kindt  filed  a lawsuit styled Allison Kindt v.
   Carrington Laboratories, Inc., Civil Action No. 5-97-CV-469-BO(1), in
   the  United  States  District Court for the Eastern District of North
   Carolina,  Western   Division,   alleging   sex   discrimination  and
   retaliation  and  employment  action  in  violation  of public policy
   against sex discrimination in connection with her employment with the
   Company.    Kindt  seeks  to recover such additional compensation and
   other  benefits of employment and back pay as she would have received
   had her employment not been terminated.  The Company has responded to
   these allegations and is vigorously defending this action.

   On  February  3,  1997, Megan Kent ("Kent"), a former employee of the
   Company,  filed  a  civil  action  styled  Megan  Kent  v. Carrington
   Laboratories,  Inc. (Docket No. DC-681-97) with the Superior Court of
   New  Jersey  Law  Division,  County of Burlington, Special Civil Part
   alleging certain violations of the New Jersey statutes, 2A:61A-1, et.
   seq.,  entitled  "Sales  Representatives Rights".  On March 12, 1997,
   the Company agreed to settle the matter by means of an $8,000 payment
   to Kent, and the Judge signed a Stipulation of Settlement and Note of
   Dismissal with Prejudice.

   In  November  1997,  the  Company  received  a  letter from the Texas
   Department of Licensing and Regulation (the "TDLR") alleging that the
   Company's   Walnut  Hill Facility in Irving, Texas had been inspected
   and   found   in   non-compliance   with   provisions  of  the  Texas
   Architectural   Barriers  Act  (the  "Act")  and  regulations  issued
   thereunder.    The  Act  and  the  related regulations contain design
   requirements  to  ensure that disabled persons can make use of public
   facilities.  An inspection report describing the alleged deficiencies
   was enclosed with the letter.  The letter stated that the Walnut Hill
   Facility  was  required  to  be  brought  into compliance and written
   verification  furnished  to  the  TDLR  within  30 days, and that the
   Company  should   contact   the  TDLR  if  compliance  could  not  be
   accomplished  within  that time.  The letter also stated that failure
   to respond to the letter would result in the matter being referred to
   the  TDLR's   Enforcement  Division,  which could result in a maximum
   administrative penalty of $1,000 per violation per day.

   The  Company responded to that letter through the architects that the
   Company  had  engaged  to design and supervise the work on the Walnut
   Hill  Facility when the Company moved its wound and skin care product
   manufacturing operations to that location in 1995.  The response from
   the  architects  to  the  TDLR proposed that the Company make certain
   changes,  suggested  that a number of the claimed deficiencies do not
   constitute  violations  of  the regulations, and sought variances for
   certain items.  In mid-March 1998, the Company received a letter from
   the  TDLR  stating  that  the  matter  would  be  turned  over to its
   Enforcement Division unless the Company either informed the TDLR that
   the  Walnut  Hill Facility was in compliance with the Act and related
   regulations  or  specified  a  date by which the Company would comply
   with  a  plan  of  action.    In  the  Company's opinion, this letter
   indicated  that the TDLR did not receive the architects  response, so
   the  Company promptly sent another copy of that response to the TDLR.
   As  far  as the Company is aware, the TDLR has not turned this matter
   over  to its Enforcement Division or made any claims for penalties to
   date.   Until the Company receives a response to the proposal made by
   its architects for resolving the alleged deficiencies, the Company is
   unable to estimate the cost of resolving this matter.

<PAGE>
   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 of the Common Stock for each of the periods
   indicated.

   Fiscal 1996                   High               Low
   --------------             ----------         ---------
   First Quarter              $ 34  1/2          $23  1/2
   Second Quarter               50  7/8           21
   Third Quarter                26  3/4           17  1/2
   Fourth Quarter               23  1/4            6  7/8

   Fiscal 1997                   High               Low
   -----------                ----------         ---------
   First Quarter              $  8  1/8          $ 5  1/4
   Second Quarter                8  3/4            4 11/16
   Third Quarter                 6  1/2            4 13/16
   Fourth Quarter                6  5/16           3  1/2

   At  March  23,  1998,  there  were  949  holders of record (including
   brokerage firms and other nominees) 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.

   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,  1997,  is  derived from the consolidated financial statements of
   the  Company,  of which the years 1993 through 1996, and the month of
   December  1994, have been audited by Arthur Andersen LLP, independent
   public  accountants,  and  the  year 1997 has been audited by Ernst &
   Young  LLP,  independent  public accountants.  The earnings per share
   amounts  prior  to 1997 have been restated as required to comply with
   Statement  of  Financial  Accounting  Standards No. 128, Earnings Per
   Share.    For further discussion of earnings per share and the impact
   of  Statement  No.  128,  see the notes to the consolidated financial
   statements beginning on page F-6.
<PAGE>
<TABLE>

Years Ended November 30,  1993, and 1994,
Month Ended December 31, 1994 and Years
Ended December 31, 1995, 1996 and 1997

(Dollars  and numbers of shares in        November 30         December 31
thousands except per share amounts)     1993      1994        1994         1995         1996          1997
<S>                                  <C>        <C>        <C>          <C>          <C>
Operations Statement Information:
   Net Sales                         $21,184    $ 25,430   $   1,781    $  24,374    $ 21,286      $  23,559
  Cost and expenses:
    Cost of sales                      5,289       6,415         516        7,944      10,327          9,530
    Selling, general and
         administrative                9,371      11,968         985       12,442      10,771         10,814
    Research and development           5,397       5,334         327        5,370       5,927          3,006
    Interest expense (income), net       218         133          23          115        (304)           (37)
    Income (loss) before income taxes    909       1,580         (70)      (1,497)     (5,435)           246
         Provision for income taxes      104         159        -             131          88             20
    Net income (loss)                $   805    $  1,421   $     (70)    $ (1,628)    $(5,523)      $    226
    Net income (loss) per common
      share - basic and diluted  (1) $   .09    $    .18   $    (.01)    $   (.22)    $  (.74)      $    .02

    Weighted average shares
    used in per share computations     7,324       7,341       7,344        7,933       8,798          8,953


BALANCE SHEET INFORMATION:

    Working capital                  $ 5,292    $  4,720   $   4,472    $   9,095    $ 13,910      $   9,484
    Total assets                      16,305      19,797      18,899       27,934      31,202         26,163
    Long-term debt,

    net of current portion             2,168       2,035       1,997           88          46             10
    Total shareholders investment    $11,041    $ 12,509   $  12,439    $  22,399    $ 27,757      $  22,826



(1) For a description of the calculation of basic and diluted net income (loss) per share, see Note 12 to Consolidated
 Financial Statements.  All net income (loss) per share amounts presented conform to the requirements of Financial
 Accounting Standards Board Statement No. 128, Earnings Per Share.

</TABLE>
<PAGE>



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

   Background

   The  Company  is  a  research-based pharmaceutical and medical device
   company  engaged  in  the development, manufacturing and marketing of
   naturally  occurring  complex carbohydrate and other natural products
   for therapeutics in the treatment of major illnesses and the dressing
   and  management  of  wounds  and  other skin conditions.  The Company
   sells  nonprescription  products  through  its  wound  and  skin care
   division;  veterinary  medical  devices  and  pharmaceutical products
   through  its  veterinary  medical division; and consumer products and
   bulk  ingredients  through its consumer products subsidiary, Caraloe,
   Inc.  (see Note Thirteen to the consolidated financial statements for
   financial  information  on  each  of  the  segments).   The Company s
   research   and  product  portfolio  is  primarily  based  on  complex
   carbohydrate technology derived naturally from the Aloe vera plant.

   Liquidity and Capital Resources

   At  December  31,  1997  and  1996,  the  Company  held cash and cash
   equivalents   of  $4,023,000  and  $11,406,000,  respectively.    The
   decrease  in  cash  of  $7,383,000  was  largely  attributable to the
   repurchase of 100% of the Series E shares outstanding (see Note Seven
   to the consolidated financial statements), which totalled $7,785,000.
   Also  contributing  to  the  decrease  in  cash  was  the  payment of
   approximately  $150,000  in  cancellation  fees related to the second
   Phase  III  clinical study for Aliminase[TM] oral capsules (described
   below).    Additionally,  the  Company  has  invested in inventory to
   support   the  launch  of  several  new  product  lines  during  1997
   (described below) and to support sales of bulk products to Mannatech,
   Inc.,  and  Aloe  Commodities  International,  Inc.  Receivables from
   these  two  customers totaled $781,000 and $591,000, respectively, as
   of  December 31, 1997.  As of March 13, 1998, $1,107,000 of the above
   balances  has been collected.  These decreases in cash were partially
   offset  by  private  placement of common stock (see Note Eight to the
   consolidated  financial  statements)  which was completed on June 20,
   1997.  -Total proceeds, net of issuance costs, were $2,454,000.

   While  wound  care sales grew at a rate of 4% to $17,990,000 in 1997,
   the  consumer  products  and  bulk ingredients sales through Caraloe,
   Inc.  grew  by 47% to $5,444,000.  Much of this growth was the result
   of the decision to significantly grow the bulk ingredients segment of
   the  business, where sales grew from $3,328,000 in 1996 to $4,683,000
   in  1997.    This had a direct impact on the utilization of the Costa
   Rica  plant  (discussed below) as well as on inventory levels both in
   Costa  Rica  and in Irving, Texas, where  bulk ingredient inventories
   grew  by  $308,000  and  $154,000,  respectively,  during  1997.   In
   addition,   finished   goods   inventory  grew  $501,000  as  initial
   quantities  of  products launched in 1997 were produced or brought in
   from outside manufacturers.
<PAGE>
   The  Company  adopted Statement of Financial Accounting Standards No.
   121,  "Accounting  for  the  Impairment  of Long-Lived Assets and for
   Long-Lived  Assets  to  be  Disposed  Of"  ("SFAS 121"), in the first
   quarter  of  1996.  SFAS 121 requires that long-lived assets held and
   used  by  an  entity  be  reviewed  for impairment whenever events or
   changes  in  circumstances  indicate that the carrying amounts of the
   assets may not be recoverable.  At the time of adoption, there was no
   impairment  of  asset  values  in  the  Company  based  on historical
   production  levels and future capacity requirements needed to produce
   the  Company's   drug  Aliminase[TM],  then  under  initial Phase III
   clinical  trials  (see  discussion below).  In late October 1996, the
   Company  received the results of the initial Phase III clinical trial
   for  the  testing  of Aliminase[TM] oral capsules, which indicated no
   statistically significant differences that would support a conclusion
   that  Aliminase[TM] oral capsules provide a therapeutic effect in the
   treatment of ulcerative colitis.  As a result, the Company terminated
   the  second  large scale clinical trial and placed further testing of
   Aliminase[TM] oral capsules on hold.

   These results triggered a new assessment of the recoverability of the
   costs of the Costa Rica plant's assets using the methodology provided
   by SFAS 121 in the fourth quarter of 1996.  The net book value of the
   Costa Rica Plant assets as of December 31, 1996, was $3,958,000.  The
   Company  evaluated the value of Costa Rica produced components in its
   current  product  mix  to  determine  the  amount  of  net  revenues,
   excluding  Manapol[R]  powder  sales  to Mannatech (see discussion of
   Caraloe  sales  to  Mannatech  below), attributable to the Costa Rica
   plant.    Cash inflows for 1997 and future years were estimated using
   management's current forecast and business plan.  All direct costs of
   the facility, including certain allocations of Company overhead, were
   considered  in  the  evaluation  of cash outflows.  Results indicated
   there was no impairment of value under SFAS 121.

   In  addition,  the increase in bulk ingredients sales discussed above
   prompted  the  Company  to  announce  in  December  1997  that it was
   increasing  production  at  the  Costa Rica plant in 1998 through the
   installation  of  a  high  speed  filling line for health maintenance
   drinks  and  that  it  was planning for the acquisition of additional
   acreage to be used for production of Aloe Vera L.  As a result of the
   increased  production levels, the Company believes that the risk of a
   future  impairment  of  value for the Costa Rica plant under SFAS 121
   has  been  greatly  diminished.   However, there is no assurance that
   future  changes  in product mix or the content of Costa Rica produced
   components  in the current products will generate sufficient revenues
   to recover the costs of the plant under SFAS 121 methodology.
<PAGE>
   As  of March 6, 1998, the Company had no material capital commitments
   other  than  its  leases  and agreements with suppliers.  In February
   1995,  the  Company entered into a supply agreement with its supplier
   of  freeze-dried  products.   The agreement required that the Company
   establish  a  letter  of  credit equal to 60% of the minimum purchase
   commitment of $2,500,000, but allowed for the amount of the letter of
   credit  to  be  reduced  by  60%  of  the  purchases  made  under the
   agreement.  In July 1997, the letter of credit was reduced under this
   provision  of  the  agreement  to $1,250,000.  The supplier currently
   produces  the CarraSorb[TM] M Freeze Dried Gel and the Carrington[TM]
   (Aphthous  Ulcer)  Patch  for  the  Company.   Both of these products
   represent  new  technology  and  are  still  in  the  early  phase of
   marketing.  The Company had approximately $340,000 of CarraSorb[TM] M
   and  Carrington[TM]  (Aphthous  Ulcer)  Patch inventory on hand as of
   December 31, 1997.

   The  supply  agreement  also  requires  the  Company  to make minimum
   monthly purchases of $30,000.  In February 1998, the supply agreement
   was amended to allow for unmet monthly minimum purchase amounts to be
   met  by  prepayments,  to  be  applied  to future purchases under the
   agreement,  which  allows  the  Company  to  keep inventory at levels
   appropriate  for sales demand.  Current sales of both items are lower
   than  the minimum purchase requirement, but the Company believes that
   as licensing, acceptance and demand for the new technology increases,
   demand will exceed the aggregate minimum purchase requirement.  As of
   March   6,   1998,   the  Company  has  purchased  products  totaling
   approximately  $515,000  from  this supplier.  The Company is in full
   compliance  with  the  agreement  and,  as  of March 6, 1998, has the
   available resources to meet all future minimum purchase requirements.

   In  November  1995,  the  Company signed a licensing agreement with a
   supplier  of  calcium alginates and other wound care products.  Under
   the  agreement,  the  Company  has exclusive marketing rights for ten
   years  to  advanced  calcium  alginate  products  for North and South
   America  and in the People's Republic of China.  Under the agreement,
   the  Company  made an up-front payment to the supplier of $500,000 in
   November 1995, and in July 1997 and October 1997, additional payments
   of  $166,000  and  $167,000, respectively, were paid to this supplier
   upon  delivery  of  the  Carrasmart[TM]  Hydrocolloid,  a new product
   launched  in  the  third quarter of 1997.  These payments resulted in
   increasing other assets of the Company.  As of December 31, 1997, the
   net  book  value of this agreement was $710,000.  Additional payments
   totaling  $167,000  will  be made to the supplier as new products are
   delivered.
<PAGE>
   The  Company  began  a  large  scale  clinical trial during the third
   quarter  of  1995  for the testing of its Aliminase[TM] oral capsules
   for  the treatment of acute flare-ups of ulcerative colitis. The cost
   of  this  clinical  trial was approximately $2,300,000.  All expenses
   related  to  this  trial have been recognized and paid.  In the third
   quarter  of  1996,  the  Company  began a second large scale clinical
   trial  for  the  testing  of  Aliminase[TM]  oral  capsules  for  the
   treatment of ulcerative colitis.  The cost of this trial was expected
   to  be  approximately $2,500,000, of which approximately $212,000 was
   required  as an initial payment when the research contract was signed
   on  September  19,  1996.  The full amount of the initial payment was
   expensed  in  the  third  quarter.  In late October 1996, the Company
   received  the results of the initial Phase III clinical trial for the
   testing  of  Aliminase[TM]  oral  capsules,  which  indicated that no
   statistically   significant  differences  were  found  to  support  a
   therapeutic  effect.   As a result, the Company terminated the second
   large   scale   clinical   trial   and   placed  further  testing  of
   Aliminase[TM]  oral  capsules  on  hold.    Approximately $150,000 in
   cancellation  fees  was recorded in relation to this termination.  In
   1997,  the  Company began efforts to reformulate Aliminase[TM] into a
   reconstitutable  powder  form.   The reformulation was completed, and
   the Company began collecting sufficient data to submit to the FDA for
   permission   to   conduct   a   new  Phase  III  clinical  study  for
   Aliminase[TM].   As of March 6, 1998 the Company has not yet met with
   the FDA on this matter.

   In  late  1995,  the  Company  began  an  initial Phase I study using
   CarraVex[TM]    injectable  (formerly  CARN  750)  in cancer patients
   involving  six  cancer  types.    The estimated cost of this study is
   $475,000,  of  which  approximately  $295,000 had been expensed as of
   December  31, 1997.  Expenses totaling $94,000 were recorded in 1997.
   No expenses have been incurred in the first quarter of 1998.

   In  October  1996,  the  Company  completed  a  $6,600,000  financing
   involving  the  private  placement  of Series E Convertible Preferred
   Stock  (the  "Series E Shares").  At that time, plans called for much
   of  the  proceeds  from this sale to be used to continue Carrington s
   clinical  research  programs  (see  Note  Seven  to  the consolidated
   financial  statements).    On October 31, 1996, the Company announced
   the  results  of  the  first  Phase  III  trial of Aliminase[TM] oral
   capsules.    Due  to  the  unfavorable results of the first Phase III
   trial,  the  Aliminase[TM] project was placed on hold.  Additionally,
   the Company's management canceled the second Phase III clinical trial
   then  under  contract.  This event resulted in significant changes in
   the Company's planned uses of and need for these funds.
<PAGE>
   In  addition to the change in the Company's needs, the decline in the
   market  price  of the Company's Common Stock had increased the extent
   of  the  dilution  that  would  have  occurred if all of the Series E
   Shares  then outstanding were converted into Common Stock.  For these
   and other reasons, the Company's Board of Directors concluded that it
   was in the best interest of the Company and its shareholders that the
   Company  repurchase  the  Series  E  Shares  (see  Note  Seven to the
   consolidated  financial  statements).   On March 4, 1997, the Company
   completed a repurchase of 50% of the Series E Shares for a premium of
   13%  over  the  original  purchase.  On  May  21,  1997  the  Company
   repurchased   the  remaining  Series  E  Shares  from  the  Series  E
   shareholders  for  a  total  cash  purchase  price  of  approximately
   $3,852,000.    For  both  transactions,  amounts  paid  to  preferred
   shareholders  in excess of par totaled $70,000 more than the embedded
   deemed  dividend recognized in 1996.  This additional deemed dividend
   was  used in the earnings per share calculation in 1997 to reduce net
   income available to common shareholders.

   In November 1997, the Company entered into an agreement with Comerica
   Bank-Texas  for  a  $3,000,000  line  of  credit, secured by accounts
   receivable  and  inventory.    This  credit facility will be used for
   operating  needs,  as  required,  and to secure the reissuance of the
   letter  of  credit  described  above.  This will result in freeing an
   additional  $1,250,000  in  operating  funds,  as  the certificate of
   deposit currently serving as collateral will no longer be required.

   The  Company  believes that its available cash resources and expected
   cash  flows  from  operations  will  provide  the  funds necessary to
   finance its current operations.  However, the Company does not expect
   that  its  current  cash  resources will be sufficient to finance the
   major  clinical  studies  and  costs  of filing new drug applications
   necessary to develop its products to their full commercial potential.
   Additional  funds,  therefore,  may  have 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.

   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 prescription
   pharmaceutical  products  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.

<PAGE>
   Impact of Inflation

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

   Fiscal 1997 Compared to Fiscal 1996

   Net  sales  were  $23,559,000  in  1997, compared with $21,286,000 in
   1996.    This  increase  of  $2,273,000,  or  10.7%, resulted from an
   increase  of  $1,750,000,  or  47.4%,  in sales of Caraloe, Inc., the
   Company's  consumer products subsidiary, and an increase of $688,000,
   or  4.0%,  in  sales  of  the Company's wound and skin care products.
   Total  sales  of  the  Company's wound and skin care products in 1997
   were  $17,990,000  as compared to $17,302,000 in 1996, an increase of
   $688,000,  or  4%.    New  products  introduced in 1997 accounted for
   $682,000 in wound and skin care sales during 1997.

   In  the  past,  the  Company's wound and skin care products have been
   marketed  primarily  to  hospitals  and  select acute care providers.
   This  market  has  become  increasingly  competitive  as  a result of
   pressures  to  control health care costs.  Hospitals and distributors
   have reduced their inventory levels and the number of suppliers used.
   Also,  health care providers have formed group purchasing consortiums
   to  leverage  their  buying  power.    This  environment required the
   Company  to  offer  greater  discounts  and  allowances  to  maintain
   customer  accounts.  Additionally, in the fourth quarter of 1995, the
   Medicare/ Medicaid reimbursement rate for hydrogels was significantly
   reduced  (from 1 ounce per day to 3 ounces per month).  These changes
   significantly  reduced  the demand for hydrogels in the market place.
   In  February  1996,  the  Company  revised  its  price  list  to more
   accurately reflect current market conditions.  Overall wound and skin
   care prices were lowered by a weighted average of 19.1%.  In addition
   to  these  cost  pressures,  over  the last several years the average
   hospital  stay  has  decreased  over  50%, resulting in more patients
   being  treated  at  alternative  care  facilities and at home by home
   health  care  providers.    This  also had a negative impact on sales
   since  the  Company's  sales  force had been primarily focused on the
   hospital  market.   To counter the market changes, the sales force is
   now  also  aggressively pursuing the alternative and home health care
   markets.

   To  continue  to  grow  its wound care business, the Company realized
   that  it had to expand from the estimated $38 million hydrogel market
   in  which  it  competed  to  a  much  larger segment of the estimated
   billion  dollar  wound  care  market.   To achieve this objective, an
   aggressive  program  of  new  product  development  and licensing was
   undertaken in 1995 with the goal of creating a complete line of wound
   care products to address all stages of wound management.  As a result
   of  this  program,  the Company launched three new wound care product
   types in 1996 and nine new wound care product types in 1997.
<PAGE>
   Caraloe's  sales  increased  from $3,694,000 to $5,444,000, or 47.4%.
   Caraloe  sales  to Mannatech increased from $3,273,000 to $3,547,000.
   Of  the  1997  sales,  $4,102,000  was  related  to  the sale of bulk
   Manapol[R]  powder.    The  supply  agreement  in  effect during 1996
   provided  Mannatech  with  an  exclusive  license  for the Manapol[R]
   trademark  worldwide and contained a provision for termination of the
   agreement  upon  90  days  advance  notice.   Caraloe was informed by
   Mannatech  in  January  1997  that  the  supply  agreement  would  be
   terminated  on  March  31,  1997.    As  the supply agreement between
   Mannatech and Caraloe was terminated, the exclusive license agreement
   for  the  Manapol[R]  trade  mark  also terminated on March 31, 1997.
   Caraloe  was  then  able  to  sell  Manapol[R]  powder or license the
   trademark  to  other  third  parties  as  well as use it in Caraloe s
   products.    In  August  1997, Caraloe entered into new licensing and
   supply agreements with Mannatech granting a non-exclusive license for
   the use of the Manapol[R] trademark for a three year period.

   Sales of the Company's veterinary products decreased from $283,000 to
   $125,000.   In March 1996, the Company entered into an agreement with
   Farnam Companies, Inc., a leading marketer of veterinary products, to
   promote  and  sell  the Company's veterinary line on a broader scale,
   including  the  introduction of the Company's products under Farnam's
   private  label.    In  1997, Farnam's sales of the Company's products
   were    negatively   impacted   by   the   backorder   of   Acemannan
   Immunostimulant.    Production should recommence on schedule in 1998.
   Farnam  has  increased its sales force to improve the market share of
   the private labeled products.

   Cost  of sales decreased from $10,327,000 to $9,530,000, or 7.7%.  As
   a  percentage  of  sales,  cost  of sales decreased from 42.2%, after
   adjusting  for  period  cost  write-offs (discussed below), to 40.5%.
   The decrease in cost of goods sold is largely attributable to volume-
   related  manufacturing efficiencies realized in Costa Rica due to the
   increased   Caraloe   Manapol[R]   sales.    The  benefits  of  these
   manufacturing  efficiencies were partially offset by the lower profit
   margins  earned  on  Manapol[R]  as  compared to wound care products.
   Cost of goods sold in 1996 included $1,396,000 of additional expenses
   which  consisted  of  a $630,000 inventory valuation decrease on June
   30,  1996,  as  described  below,  and period costs of $766,000.  The
   period  costs  were related to the annual shutdown of the facility in
   Costa Rica for routine maintenance and inventory reduction programs.
<PAGE>
   As a result of the implementation of programs to reduce operating and
   production  costs,  several changes were implemented at the Company s
   Costa Rica production facility in early 1996.  This facility produces
   all  of  the  Company's  freeze-dried Aloe vera raw materials.  Among
   these  changes  was  a  restructuring  of  the  work force as well as
   improvements  in  efficiencies  in  the  manufacturing  process.  The
   implementation  of  these  changes  significantly reduced the cost of
   Costa  Rica production in the second quarter of 1996.  As a result of
   these reductions in cost, the actual cost of production under FIFO as
   of  June  30,  1996,  was  approximately 18% lower than the Company s
   standard  cost,  which  was  equal  to the FIFO cost of production at
   December  31,  1995  and March 31, 1996.  The Company determined that
   the  standard cost should be reset to the then current actual cost of
   production.  This reduction in standard FIFO cost decreased inventory
   valuation  by  $630,000.    This amount represented the change in the
   accumulated  value of all items in inventory as of June 30, 1996 that
   were  produced  in  Costa  Rica  as well as those finished goods that
   contain  component  items  produced  in Costa Rica.  This decrease in
   inventory  value  was  expensed  in  1996  as  a  period cost and was
   included in cost of sales.

   Selling,  general  and  administrative ("SG&A") expenses increased to
   $10,814,000  from  $10,771,000,  or  0.4%.   Partially offsetting the
   increase  was  approximately $242,000 in one-time charges incurred in
   1996  which  were  not  incurred  in  1997.    These one-time charges
   included  approximately  $150,000  in additional costs related to the
   launch  of  three  new  product  types  and  a  one-time write-off of
   approximately  $92,000 of bank and legal charges related to the early
   retirement of all bank debt in 1996.  Also contributing to the modest
   size  of  the  increase  in  SG&A  expenses were the ongoing benefits
   received  from  cost  reduction programs put in place in 1996 and the
   restructuring  of  the  sales force, also put in place in 1996, which
   were continued in 1997.

   Research  and  development  ("R&D")  expenses decreased to $3,006,000
   from  $5,927,000,  or  49.3%.    This  decrease  was  the  result  of
   discontinuing  the  Phase  III  clinical  program  for the testing of
   Aliminase[TM]  oral  capsules for the treatment of acute flare-ups of
   ulcerative  colitis.  The first clinical study under this program was
   initiated  in  the  third  quarter  of  1995  and  was  substantially
   completed  in  the  third quarter of 1996.  In September of 1996, the
   Company   initiated   the   second   pivotal  Phase  III  testing  of
   Aliminase[TM]  oral  capsules.    In  late  October 1996, the Company
   received  the results of the initial phase III clinical trial for the
   testing  of  Aliminase[TM]  oral  capsules,  which  indicated that no
   statistically   significant  differences  were  found  to  support  a
   therapeutic  effect.   As a result, the Company terminated the second
   large  scale  clinical  trial  and  placed  further  testing  of  the
   Aliminase[TM]  oral  formulation  on hold.  Approximately $317,000 of
   expenses for this program was incurred in 1997.

   Net  interest income of $36,000 was realized in 1997, versus $304,000
   in  1996,  due  to  having  less excess cash to invest as well as the
   repurchase  of the remainder of the Series E Preferred Stock issue in
   May 1997.
<PAGE>
   Net income for 1997 was $226,000, versus a net loss of $5,523,000 for
   1996.    This change is a result of increased volume in Caraloe, Inc.
   sales,  increased  production  volumes in Costa Rica resulting in the
   realization  of manufacturing efficiencies and the full absorption of
   production,  and  decreased  research  and  development  expenditures
   related  to  the  cancellation  of  the  second  Phase III ulcerative
   colitis  study.   Assuming dilution, net income per share was $.02 in
   1997, compared to a loss per share of $.74 in 1996.


   Fiscal 1996 Compared to Fiscal 1995

   Net  sales  were  $21,286,000  in  1996, compared with $24,374,000 in
   1995.    This  decrease  of  $3,088,000,  or  12.7%,  resulted from a
   decrease  of $3,845,000 in sales of the Company's wound and skin care
   products  from  $21,147,000  to  $17,302,000, or 18.2%.  New products
   introduced in late January accounted for $1,182,000 in wound and skin
   care  sales  during  1996.  The decrease in wound and skin care sales
   was  partially  offset  by a $787,000, or 27.1%, increase in sales of
   Caraloe, Inc., the Company's consumer products subsidiary.

   Caraloe's  sales  increased  from $2,907,000 to $3,694,000, or 27.1%.
   Caraloe  sales  to Mannatech increased from $2,488,000 to $3,273,000.
   Of  the  1996  sales,  $3,213,000  was  related  to  the sale of bulk
   Manapol[R]  powder.    Sales  of  the  Company's  veterinary products
   decreased  from  $320,000  to  $290,000.   In March 1996, the Company
   entered  into  an  agreement  with  Farnam Companies, Inc., a leading
   marketer  of  veterinary  products, to promote and sell the Company s
   veterinary line on a broader scale.

   Cost of sales increased from $7,944,000 to $10,327,000, or 30.0%.  As
   a  percentage  of  sales, cost of sales increased from 32.2% to 42.0%
   after  adjusting  for a $630,000 inventory valuation decrease on June
   30,  1996 and period costs of $104,000 and $766,000 in 1995 and 1996,
   respectively.  The period costs are related to the annual shutdown of
   the  facility  in  Costa  Rica  for routine maintenance and inventory
   reduction  programs.    The increase in cost of goods sold is largely
   attributable  to the increased sales of bulk Manapol[R] powder, which
   had  a substantially lower profit margin in the first quarter of 1996
   as  compared  to  1995, as a result of decreased production levels in
   the  first  quarter  of  1996,  and as compared to the margins on the
   Company's  wound  and skin care products, and the overall 19.1% price
   decrease  which  occurred  in February of 1996.  Additionally, all of
   the   new   products  introduced  in  the  first  half  of  1996  are
   manufactured  for the Company by third-party manufacturers and have a
   lower profit margin than the products manufactured by the Company.
<PAGE>
   To  accelerate  new  product  development  and  reduce  overhead, the
   Company  was  restructured  in  1995.  The restructuring included the
   lay-off  of  seventeen  high  level  and  under-utilized positions in
   administration,  marketing,  and  research and development, for a net
   reduction  in  salaries  and  benefits  of approximately $120,000 per
   month.    Also, the Company relocated its manufacturing operations to
   its current facility on Walnut Hill in Irving, Texas, and immediately
   realized  a  reduction  in  overhead and production costs, as the new
   facility  is  more  efficient than the prior location.  As the Walnut
   Hill  facility  is  owned  by  the  Company,  rent and other facility
   expenses  related  to the former production facility of approximately
   $25,000  per  month were eliminated.  Each of these items is expected
   to reduce future expenses and improve cash flow results.  As a result
   of  the  restructuring,  approximately $1,400,000 of one-time charges
   were  taken during 1995.  Of these charges, approximately $147,000 of
   severance  compensation  was  paid in the first two quarters of 1996.
   Of  this  amount, $75,000 was a final payment to a single former high
   ranking  research  and development employee.  This negotiated payment
   relieved  the  Company  of  $128,000 in future severance compensation
   liability  to  this  employee.   As of June 30, 1996, all liabilities
   resulting  from  the  restructuring  were  paid  in full or otherwise
   relieved.

   SG&A  expenses  decreased  to $10,771,000 from $12,442,000, or 13.4%.
   This  decrease  was attributable in part to approximately $900,000 in
   one-time  charges  in  the first nine months of 1995.  These one-time
   charges  were  related  to  severance  agreements, legal expenses and
   settlements and debt refinancing costs.  This was partially offset as
   the  Company  incurred  approximately  $150,000  in  additional costs
   related  to  the  launch  of  three  new product types and a one-time
   write-off  of approximately $92,000 of bank and legal charges related
   to  the early retirement of all bank debt in 1996.  Also contributing
   to the reduced SG&A expenses were the benefits received from the cost
   reduction  programs  put  in  place  earlier  in  the year as well as
   savings generated from the restructuring of the sales force.

   R&D expenses increased to $5,927,000 from $5,370,000, or 10.4%.  This
   increase  was  the  result of beginning the initial large scale Phase
   III  clinical  trial  for  the testing of Aliminase[TM] oral capsules
   during  the  third  quarter  of  1995.   This study was substantially
   completed  in  the  third quarter of 1996.  In September of 1996, the
   Company   initiated   the   second   pivotal  Phase  III  testing  of
   Aliminase[TM]  oral  capsules.   The initial payment of approximately
   $212,000  was  expensed  in  the  third  quarter,  and  approximately
   $150,000 in cancellation fees were also recorded in the third quarter
   of 1996 after this clinical trial was canceled.  Additional R&D costs
   related to the ongoing cancer research contributed to the increase in
   R&D  during  1996  as  well.   These costs were partially offset by a
   reduction of internal salaries and other operating expenses.

   Net  interest  income  of  $304,000  was realized in 1996, versus net
   interest costs of $115,000 in 1995, due to having more excess cash to
   invest as well as the retirement of all bank debt in April 1996.
<PAGE>
   Net loss for 1996 was $5,523,000, versus a net loss of $1,628,000 for
   1995.    This  change  is  a  result  of a changing product mix, more
   products   manufactured  by  third  parties,  decreased  sales  which
   resulted  from  a  change  in  the  Medicare reimbursement rates, and
   increased  R&D  expenditures  related  to  the  Phase  III ulcerative
   colitis  study  and the ongoing Phase I cancer study.  Loss per share
   was  $.74 in 1996, compared to a loss per share of $.22 in 1995.  The
   loss  per share available to common shareholders in 1996 includes the
   recognition  of  a $986,000, or $.11 per share, beneficial conversion
   feature  of  the  Company's   Series  E  convertible preferred stock,
   accounted  for as a preferred dividend in the calculation of loss per
   share for the year ended December 31, 1996.

   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" or words of
   similar import.  Such forward-looking statements include, but are not
   limited  to,  statements  regarding  the Company's plan or ability to
   recover  the  cost  of  the  Costa  Rica plant, to absorb the plant s
   operating cost, to achieve growth in demand for or sales of products,
   to  reduce expenses and manufacturing costs and increase gross margin
   on  existing  sales,  to  initiate, continue or complete clinical and
   other  research  programs, to vigorously defend the legal proceedings
   described  in  this report, to obtain financing when it is needed, to
   increase  the  Company's   market  share  in the alternative and home
   health  care markets, to improve its revenues and fund its operations
   from  such revenues 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  expand  its business into a larger segment of the
   market  for  wound care products and increase its market share in the
   alternative care markets, to promote and sell its veterinary products
   on a broader scale, and various other matters.

<PAGE>
   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 demand for the Company's products may
   not  be sufficient to enable it to recover the cost of the Costa Rica
   plant  or to absorb all of that plant's operating costs, and 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, 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.

                              Year 2000 Issues

   During  1997,  the Company began an investigation of computer systems
   used   in  the  activities  of  the  business  to  process  data  and
   information  to  determine  the  exposure the Company has to software
   problems  arising from the year 2000 issue.  The Company surveyed its
   business,  scientific  and  network  systems  and discovered numerous
   software  programs which had not been updated or corrected to address
   the year 2000.  In all cases, software vendors were contacted and the
   scope  and  nature  of  the problem was discussed.  For most of these
   cases, program fixes or version upgrades were obtained, installed and
   tested  to  insure  that  the  matter was remedied.  In one case, the
   Company  has  experienced  some  difficulty  with  a program that has
   already  been  updated.    In this case, the software vendor has been
   contacted  and  is investigating the matter. As of December 31, 1997,
   there remained two minor programs to be updated.  The Company expects
   that  program  fixes  or  version  upgrades  will  be  available  and
   implemented by June 1998.


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

   The  Company  is not required to make the disclosures contemplated by
   Item 7A in this Annual Report.
<PAGE>

   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 14.


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

   Effective  March  19, 1997, the Company appointed the accounting firm
   of  Ernst & Young LLP as the Company's independent public accountants
   for  fiscal  1997  to  replace Arthur Andersen LLP, which resigned on
   that  same  date.    The  Company's   Board of Directors approved the
   selection of Ernst & Young LLP as independent public accountants upon
   the recommendation of the Board's Audit Committee.

   During  1995  and  1996  and  the period from January 1, 1997 through
   March  18, 1997, there were no disagreements with Arthur Andersen LLP
   on   any  matter  of  accounting  principle  or  practice,  financial
   statement   disclosure   or  auditing  scope  or  procedures  or  any
   reportable  events.    Arthur  Andersen LLP's report on the financial
   statements  for  the years 1995 and 1996 contained no adverse opinion
   or  disclaimer  of  opinion  and  was not qualified or modified as to
   uncertainty, audit scope or accounting principles.

   The  Company  provided  Arthur  Andersen  LLP  with  a  copy  of this
   disclosure  and  requested that Arthur Andersen LLP furnish it with a
   letter  addressed  to  the  Securities  and  Exchange Commission (the
   "Commission") stating whether it agreed with the above statements.  A
   copy  of  Arthur Andersen LLP's letter to the Commission, dated April
   7,  1997,  was  filed  as  Exhibit  16.1 to the Company's Form 10-K/A
   amendment  to its Form 10-K Annual Report for the year ended December
   31,  1996,  which amendment was filed with the Commission on April 7,
   1997.



                                  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 1998 annual meeting of
   shareholders,  which  will be filed pursuant to Regulation 14A within
   120 days after the Company's fiscal year ended December 31, 1997.
<PAGE>

   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 1998 annual meeting of shareholders, which
   will  be  filed  pursuant to Regulation 14A within 120 days after the
   Company's fiscal year ended December 31, 1997.


   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 1998 annual meeting of shareholders, which will be filed pursuant
   to  Regulation  14A  within  120 days after the Company's fiscal year
   ended December 31, 1997.


   ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

   The   information  required  by  ITEM  13  of  Form  10-K  is  hereby
   incorporated  by  reference  from the information appearing under the
   caption  "Certain  Transactions"  in  the  Company's definitive Proxy
   Statement  relating to its 1998 annual meeting of shareholders, which
   will  be  filed  pursuant to Regulation 14A within 120 days after the
   Company's fiscal year ended December 31, 1997.


                                   PART IV

   ITEM  14.      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 all
   financial statement schedules filed as a part of this Annual Report.

      (3) Exhibits.

         Reference is made to the Index to Exhibits on pages E-1 through
   E-10 for a list of all exhibits filed as a part of this Annual Report.

   (b) Reports on Form 8-K.

        The Company filed no reports on Form 8-K during the last quarter
   of its fiscal year ended December 31, 1997.


<PAGE>

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

Consolidated Financial Statements of the Company:

  Consolidated Balance Sheets --
    December 31, 1996 and 1997                             F -  2

  Consolidated Statements of Operations -- years ended
    December 31, 1995, 1996 and 1997                       F -  3

  Consolidated Statements of Shareholders' Investment --
    years ended December 31, 1995, 1996 and 1997           F -  4

  Consolidated Statements of Cash Flows -- years ended
    December 31, 1995, 1996 and 1997                       F -  5

  Notes to Consolidated Financial Statements               F -  6

  Financial Statement Schedule
    Valuation and Qualifying Accounts                      F - 21

  Report of Ernst & Young LLP, Independent
    Public Accountants                                     F - 22

  Report of Arthur Andersen LLP, Independent
    Public Accountants                                     F - 23
<PAGE>
<TABLE>
Consolidated Balance Sheets
(Dollar amounts in thousands, except share amounts)

                                             December 31        December 31
                                                1996               1997
<S>                                             <C>              <C>
ASSETS
Current assets:
 Cash and cash equivalents                      $11,406          $ 4,023
 Accounts receivable, net of
   allowance for doubtful accounts of
   $213 and $478
   1996 and 1997, respectively                    1,912            3,457
 Inventories                                      3,623            5,003
 Prepaid expenses                                   368              328
Total current assets                             17,309           12,811
Property, plant and equipment, net               11,678           10,815

Other assets                                      2,215            2,537
Total assets                                    $31,202          $26,163

LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
 Accounts payable                               $ 1,621          $ 1,143
 Accrued liabilities                              1,824            2,194
Total current liabilities                         3,445            3,337
 Commitments and contingencies

SHAREHOLDERS' INVESTMENT:
 Preferred stock, 1,000,000 shares
 authorized (all series)
  Series C, $100 par value,
    No shares issued at December 31, 1996
    and 1997                                        -                -
  Series E Convertible, $100 par value, 660
    shares issued at December 31, 1996               66              -

  Common stock, $.01 par value,
   30,000,000 shares authorized,
   8,869,819 and 9,306,462 shares issued
   and outstanding at December 31, 1996
   and 1997, respectively                            89               93
  Capital in excess of par value                 56,680           51,585
  Deficit                                       (29,078)         (28,852)
Total shareholders' investment                   27,757           22,826
Total liabilities and shareholders'investment   $31,202          $26,163


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

</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)


                                              Years Ended December 31
                                      ----------------------------------
                                         1995         1996         1997
<S>                                    <C>          <C>          <C>
Net sales                              $24,374      $21,286      $23,559
Cost and expenses:
  Cost of sales                          7,944       10,327        9,530
  Selling, general and
    administrative                      12,442       10,771       10,814
  Research and development               5,370        5,927        3,006
  Interest expense                         251           88            6
  Interest income                         (136)        (392)         (43)
Income (loss) before
  income taxes                          (1,497)      (5,435)         246
Provision for
  income taxes                             131           88           20
Net income (loss)                       (1,628)       5,523)         226

Dividends and income attributed
  to preferred shareholders               (140)      (1,023)         (70)
Net income (loss) available to
  common shareholders                 $ (1,768)     $ (6,546)    $   156

Net income (loss) available to
  common shareholders per share -
  basic and diluted                   $   (.22)     $  (.74)     $   .02


The accompanying notes are an integral part of these statements.
</TABLE>

<PAGE>
<TABLE>
Consolidated Statements of Shareholders' Investment
For the Years Ended December 31, 1995, 1996 and 1997
(Dollar amounts and share amounts in thousands)
<CAPTION>
                                                          Capital in                Total
                            Preferred         Common      Excess of             Shareholder's
                              Stock           Stock       Par Value    Deficit   Investment
                         Shares  Amount  Shares  Amount
<S>                         <C>  <C>      <C>    <C>       <C>         <C>         <C>
Balance,
 December 31, 1994           11  $1,041   7,344  $   74    $33,075     $(21,750)   $12,440

Sales of common stock
 net of issuance
 costs of $41                -      -       300       3      2,956          -        2,959
Issuance of common
 stock upon exercise
 of stock options
 and warrants                -      -       711       7      8,426          -        8,433
Issuance of common
 stock for management
 and directors
 compensation                -      -        24       -        209          -          209
Dividends on
 preferred stock              1     126     -         -        -           (140)       (14)
Net loss                     -      -       -         -        -         (1,628)    (1,628)
--------------------------------------------------------------------------------------------
Balance,
 December 31, 1995           12   1,167   8,379      84     44,666      (23,518)    22,399

Issuance of common
 stock upon exercise
 of stock options,
 warrants and
 employee stock
 purchase plan               -      -       316       3      4,604            -      4,607
Dividends on
 preferred stock             -       35     -         -        -            (37)        (2)
Conversion of
 preferred to common
 stock (Series C)           (12) (1,202)    175       2      1,200            -        -
Sales of convertible
 preferred stock
 (Series E), $100 Par,
 net of issuance costs
 of $324                      1      66     -         -      6,210            -      6,276
Net loss                     -      -       -         -        -         (5,523)    (5,523)
--------------------------------------------------------------------------------------------
Balance,
 December 31, 1996            1      66   8,870      89     56,680      (29,078)    27,757

Issuance of common
 stock upon exercise
 of stock options
 and employee stock
 purchase plan               -      -        21       -        153            -        153
Sale of common stock
 net of issuance costs
 of $21                      -      -       415       4      2,471            -      2,475
Re-purchase of convertible
 preferred stock
 (Series E), $100 Par        (1)    (66)      -       -     (7,719)           -     (7,785)
Net income                    -       -       -       -          -          226        226
--------------------------------------------------------------------------------------------
Balance,
 December 31, 1997            -   $  -    9,306    $ 93    $51,585    $ (28,852)   $22,826

The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
(Dollar amounts in thousands)
                                                    Years ended December 31,
                                                 ---------------------------------
                                                   1995       1996       1997
<S>                                              <C>        <C>        <C>
Cash flows from operating activities:
 Net income (loss)                               $  (1628)  $(5,523)   $   226
 Adjustments to reconcile income (loss)
  to net cash used by
  operating activities:
   Depreciation and amortization                    1,277     1,273      1,196
   Provision for inventory obsolescence               476       545        523
   Changes in assets and liabilities:
   Accounts receivable, net                           658       315     (1,545)
   Inventories                                       (664)    1,067     (1,903)
   Prepaid expenses                                  (319)      490         40
   Other assets                                      (514)   (1,534)      (360)
   Accounts payable and accrued liabilities          (545)      949        (76)
  Net cash used by operating
    activities                                     (1,259)   (2,418)    (1,899)
Cash flows from investing activities:
 Purchases of property, plant and equipment        (4,206)     (242)      (295)

  Net cash used by investing activities            (4,206)     (242)      (295)
Cash flows from financing activities:

 Issuances of common stock                         11,393     4,607      2,628
 Issuance (retirement) of preferred stock             -       6,276     (7,785)
 Proceeds from short and long-term borrowings       5,742       -          -
 Payments of short and long-term debt              (5,848)   (2,999)       -

 Principal payments of capital lease obligations      (64)      (40)       (32)
  Net cash provided (used) by financing activities 11,223     7,844     (5,189)

Net increase (decrease) in cash and
  cash equivalents                                  5,758     5,184     (7,383)
Cash and cash equivalents at beginning of year        464     6,222     11,406

Cash and cash equivalents at end of year          $ 6,222   $11,406    $ 4,023

Supplemental Disclosure of Cash
 Flow Information:
  Cash paid during the year for interest          $   281    $    87     $     10
  Cash paid during the year for income taxes           99         13          -
Supplemental Disclosure of Non-Cash
 Financing Activities:
  Equipment acquired through capital leases           -           39          -
  Issuances of common stock and warrants              209        -            -


     The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>

   NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

   NOTE ONE. BUSINESS

   Carrington  Laboratories,  Inc.  (The  "Company")  is  a research-based
   pharmaceutical  and  medical device company engaged in the development,
   manufacture  and  marketing  of  complex carbohydrate and other natural
   products derived from the Aloe vera plant.

   The  Company's Wound and Skin Care division offers a comprehensive line
   of  wound management products to hospitals, alternative care facilities
   and  the  home  health  care market.  Sales are primarily in the United
   States through a network of distributors.


   Caraloe,  Inc., a subsidiary, markets or licenses consumer products and
   bulk  ingredients.    Principal   sales   of  Caraloe,  Inc.  are  bulk
   ingredients  which  are sold to United States manufacturers who include
   the high quality aloe extracts in their finished products.

   The  Company's  Veterinary Medical division markets vaccines and wound
   and  skin  care  products  to the veterinary market through third party
   licensees principally in the United States.

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



   NOTE TWO.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



   PRINCIPLES  OF  CONSOLIDATION     The consolidated financial statements
   include  the accounts of Carrington Laboratories, Inc. (the "Company"),
   and  its subsidiaries, all of which are wholly owned.  All intercompany
   accounts  and  transactions  have  been  eliminated  in  consolidation.
   Certain  prior year amounts have been reclassified to conform with 1997
   presentation.

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

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

   DEPRECIATION  AND  AMORTIZATION        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
   depreciated over the terms of the respective leases.
<PAGE>

   LONG-LIVED  ASSETS      The Company regularly reviews long-lived assets
   for  impairment  whenever  events  or changes in circumstances indicate
   that  the  carrying  amounts  of  the  assets  may  not be recoverable.
   Recoverability  is  based  on  whether the carrying amount of the asset
   exceeds  the current and anticipated undiscounted cash flows related to
   the asset.

   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  cost  of  sales  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 when title to
   the  goods  transfers.    For the majority of the Company's sales, this
   occurs at the time of shipment.

   FEDERAL  INCOME TAXES      Deferred income taxes reflect the tax effect
   of  temporary  differences between the amount of assets and liabilities
   recognized  for  financial  reporting and tax purposes.  These deferred
   taxes  are measured by applying currently enacted tax laws.  The effect
   on  deferred income tax assets and liabilities of a change in tax rates
   is recognized in income in the period that includes the enactment date.

   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 1995, 1996, or 1997.

   STOCK  BASED  COMPENSATION        The Company has elected to follow APB
   Opinion  No.  25,  "Accounting  for  Stock  Issued to Employees" in the
   primary  financial  statements and to provide supplementary disclosures
   required  by  FASB  Statement  No.  123,  "Accounting  for  Stock-Based
   Compensation" (See Note Eight).
<PAGE>
   NET  INCOME  (LOSS)  PER  SHARE       In 1997, the Financial Accounting
   Standards  Board   issued   Statement  No,  128,  Earnings  Per  Share.
   Statement 128 replaced the calculation of primary and fully diluted net
   income  (loss)  per  share  with  basic and diluted earnings per share.
   Unlike primary net income (loss) per share, basic net income (loss) per
   share   excludes   any   dilutive  effects  of  options,  warrants  and
   convertible  securities.    Diluted net income (loss) per share is very
   similar to the previously reported fully diluted earnings per share and
   includes  the  dilutive  effects  of  options, warrants and convertible
   securities  using  the  treasury  stock  method.    No  restatement  of
   previously  reported net income (loss) available to common shareholders
   per share for 1995 or 1996 was required to conform to the Statement 128
   requirements.

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

   OPERATING SEGMENTS     In June 1997, the Financial Accounting Standards
   Board  issued  Statement  of  Financial  Accounting  Standards No. 131,
   Disclosures  about  Segments  of  an Enterprise and Related Information
   (Statement  131), which is effective for years beginning after December
   15,  1997.  Statement 131 establishes standards for the way that public
   business  enterprises  report  information  about operating segments in
   annual  financial statements and requires that those enterprises report
   selected  information  about  operating  segments  in interim financial
   reports.    It also establishes standards for related disclosures about
   products  and  services,  geographic  areas,  and  major  customers.
   Statement  131  is  effective for financial statements for fiscal years
   beginning after December 15, 1997, and therefore the Company will adopt
   the  new  requirements  retroactively  in  1998.    Management  has not
   completed its review of Statement 131, but does not anticipate that the
   adoption  of  this  statement  will  have  a  significant effect on the
   Company's segments.


   NOTE THREE.     INVENTORIES

   Inventories  are  recorded  at the lower of first-in, first-out cost or
   market.  The  following  summarizes  the  components  of  inventory  at
   December 31, 1996 and 1997, in thousands:


                                               1996         1997
   ---------------------------------------------------------------
   Raw materials and supplies                $  658       $1,438
   Work-in-process                            1,197        1,296
   Finished goods                             1,768        2,269
   ---------------------------------------------------------------
   Total                                     $3,623       $5,003
   ----------------------------------------------------------------

   The  inventory  balances  above  are  net  of  $322,000 and $516,000 of
   reserves for obsolete and slow moving inventory at December 31,1996 and
   1997, respectively.
<PAGE>
   NOTE FOUR.   PROPERTY, PLANT AND EQUIPMENT

   Property, plant and equipment consists of the following at December 31,
   1996, and 1997, in thousands:

Estimated
                                       1996         1997    Useful Lives
--------------------------------------------------------------------------
Land and improvements               $ 1,389      $ 1,389
Buildings  and  improvements          8,085        8,086   7 to 25 years
Furniture  and  fixtures                880          892   4 to 8  years
Machinery  and  equipment             7,589        7,836   3 to 10 years
Leasehold  improvements                 756          793   1 to 3  years
Equipment under capital leases          152          150   4 years
----------------------------------------------------------------------
Total                                18,851       19,146
Less accumulated depreciation
and amortization                      7,173        8,331
----------------------------------------------------------------------
Property, plant and equipment, net  $11,678      $10,815


   The Company's net investment in property, plant and equipment and other
   assets  in Costa Rica at December 31, 1996 and 1997 were $3,958,000 and
   $3,738,000, respectively.


   NOTE FIVE.     ACCRUED LIABILITIES

   The  following summarizes significant components of accrued liabilities
   at December 31, 1996 and 1997, in thousands:


                                                    1996         1997
   ----------------------------------------------------------------------
   Accrued payroll                                  $  232     $  232
   Accrued sales commissions                           187        238
   Accrued taxes                                       512        633
   Other                                               893      1,091
   ----------------------------------------------------------------------
   Total                                            $1,824     $2,194
   ----------------------------------------------------------------------

<PAGE>

   NOTE SIX.     LINE OF CREDIT

   In November 1997, the Company entered into an agreement with a bank for
   a  $3,000,000 line of credit, collateralized by accounts receivable and
   inventory.    This credit facility will be used for operating needs, as
   required,  and  to issue a letter of credit to replace a certificate of
   deposit  of  $1,250,000 at December 31, 1997 (included in other assets)
   collateralizing  a  supply  agreement with its supplier of freeze dried
   products (See Note Nine).  The interest rate on this credit facility is
   equal  to  the bank's prime rate.  As of December 31, 1997 there was no
   balance outstanding on the credit line.

   In  1996, average short-term borrowings on a line of credit with a bank
   were  $991,000  at  an  average  interest rate of 7.7% with the maximum
   borrowings  outstanding  during the year of $2,977,000.  No such short-
   term borrowings were outstanding in 1997.

   NOTE SEVEN.     PREFERRED STOCK

   SERIES  C  SHARES      The Series C Shares were convertible into common
   stock  of  the  Company at a price of $7.58 per share; were callable by
   the Company, after January 14, 1996; and provided for dividend payments
   to  be  made  only  through the issuance of additional Series C Shares.
   Dividends of $140,000 and $37,000 were recorded in 1995 and 1996 on the
   Series  C  Shares.    In  January 1996, all of the outstanding Series C
   shares  were converted to 174,935 shares of the Company's common stock,
   and  related  warrants to purchase 55,000 shares of common stock at $15
   per share were exercised.

   SERIES  E  SHARES       In October 1996, the Company sold 660 shares of
   Series  E  Convertible  Preferred  Stock  (the  "Series  E Shares") for
   $6,600,000  before  offering  fees and costs of $324,000.  The Series E
   Shares  were  convertible  into  shares  of  the Company's common stock
   beginning  on  December  20,  1996,  and prior to October 21, 1999 at a
   conversion  price  per  share equal to the lower of $25.20 (120% of the
   market  price  per  share  of the Company's common stock) or 87% of the
   market  price immediately preceding the conversion date.  Each Series E
   Share  was  convertible into the number of whole shares of common stock
   determined  by  dividing  $10,000 by the conversion price.  Because the
   preferred  stock  is convertible into common stock at a conversion rate
   that  is the lower of a rate fixed at issuance or a fixed discount from
   the common stock market price at the time of conversion, the discounted
   amount  is  considered  to  be  an  assured  incremental  yield  to the
   preferred  shareholders  which must be recognized as a deemed preferred
   dividend  over  the  period  from  issuance  to the first date when the
   preferred  stock first becomes convertible.  As such, a deemed dividend
   of  $986,000 or $0.11 per share was recognized in the net income (loss)
   per  share calculation for 1996 as a reduction in earnings available to
   common shareholders.
<PAGE>
   On  October  31,  1996,  the Company announced the results of the first
   Phase III trial of Aliminase[TM] oral capsules.  Due to the unfavorable
   results  of  the  first  Phase III trial, the Aliminase[TM] project was
   placed  on  hold.   Additionally, the Company's management canceled the
   second  Phase  III  clinical  trial  then  under  contract.  This event
   resulted  in  significant  changes in the Company's planned uses of and
   need  for these funds.  In addition, the decline in the market price of
   the  Company's   common  stock had increased the extent of the dilution
   that would have occurred if all of the Series E Shares then outstanding
   were  converted  into  common  stock.  For these and other reasons, the
   Company's Board of Directors concluded that it was in the best interest
   of  the  Company  and  its shareholders that the Company repurchase the
   Series  E  Shares.  In March 1997 the Company completed a repurchase of
   50%  of the above Series E Shares for $3,832,000, a premium of 13% over
   the  original  purchase price.  In May 1997 the Company repurchased the
   remaining shares of its Series E Shares for a total cash purchase price
   of  $3,852,000.    For  both  transactions,  amounts  paid to preferred
   shareholders  in  excess  of par totaled $70,000 more than the embedded
   deemed dividend recognized in 1996 of $986,000.  This additional deemed
   dividend  was  used  in  the net income (loss) per share calculation in
   1997 to reduce net income available to common shareholders.


   NOTE EIGHT.     COMMON STOCK


   PRIVATE  PLACEMENT  OF COMMON STOCK     In April 1995, the Company sold
   300,000  shares  of common stock at a price of $10.00 per share.  Total
   proceeds,  net  of  issuance costs, were $2,959,000.  In June 1997, the
   Company  sold  415,000  shares  of common stock at a price of $6.00 per
   share.  Total proceeds, net of issuance costs, were $2,454,000.

   SHARE  PURCHASE RIGHTS PLAN     The Company has a share purchase rights
   plan  which  provides,  among  other rights, for the purchase of common
   stock  by  certain  existing   common   stockholders  at  significantly
   discounted amounts in the event a person or group acquires or announces
   the  intent  to acquire 20% or more of the Company's common stock.  The
   rights  expire in 2001 and may be redeemed at any time at the option of
   the Board of Directors for $.01 per right.


   EMPLOYEE  STOCK  PURCHASE  PLAN       The Company has an Employee Stock
   Purchase  Plan  (the  "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 the month.  A maximum of 500,000 shares of common stock
   was  reserved  for purchase pursuant to the Stock Purchase Plan.  As of
   December  31,  1997,  93,044  shares had been purchased by employees at
   prices ranging from $3.67 to $29.54 per share.
<PAGE>
   STOCK  OPTIONS      The Company has an incentive stock option plan (the
   "Option  Plan")  under  which  incentive stock options and nonqualified
   stock  options  may  be  granted  to  certain employees as well as 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 are granted at a
   price  no  less  than  110%  of  the  market value.  Options granted to
   employees  are  excercisable  at  the  rate  of 25% per  year after the
   anniversary of the grant.  Options granted to directors are exercisable
   in  whole  or in part on the date of the grant.  Options granted expire
   four  to  ten  years from the dates of grant.  The Company has reserved
   1,500,000  shares  of  common stock for issuance under the Option Plan.
   As  of  December  31, 1997, options to purchase 990,550 shares had been
   granted  under  the option plan, of which options for 17,200 shares had
   been  exercised.    As  of  December 31, 1997, options covering 752,225
   shares  were outstanding with exercise prices between $5.31 and $47.75,
   with a weighted average exercise price of $16.13 and a weighted average
   contractual life of 9.0 years.  Of these options, 181,282 are currently
   exercisable with a weighted average exercise price of $27.42.

   The  Company's  1985  Stock  Option Plan expired in February 1995.  The
   Company  had  reserved  1,400,000  shares  of common stock for issuance
   under  this  plan.    At the time the plan expired, options to purchase
   1,150,440  had  been  granted, of which options for 863,540 shares have
   been  exercised.    As  of  December 31, 1997, options covering 206,915
   shares  were outstanding with exercise prices between $6.25 and $29.00,
   with a weighted average exercise price of $11.72 and a weighted average
   contractual life of 6.7 years.  Of these options, 132,960 are currently
   exercisable with a weighted average exercise price of $11.93.

<PAGE>
   The  following  summarizes  stock option activity for each of the three
   years ended December 31, 1995, 1996 and 1997, shares in thousands:

                                                                  Weighted
                                                                  Average
                                   Shares    Price Per Share      Exercise
                                                                  Price
----------------------------------------------------------------------------
Balance, November 30, 1994           897   $ 6.25  to  $29.00     $12.95
  Granted                            592   $11.12  to  $35.25     $20.63
  Lapsed or canceled                 (72)  $ 8.62  to  $20.12     $11.93
  Exercised                         (581)  $ 6.25  to  $29.00     $12.45

----------------------------------------------------------------------------
Balance, December 31, 1995           836   $ 6.25  to  $35.25     $18.82
  Granted                            141   $24.25  to  $47.75     $32.69
  Lapsed or canceled                (109)  $11.25  to  $28.75     $23.81
  Exercised                         (201)  $ 6.25  to  $29.00     $15.33
----------------------------------------------------------------------------

Balance, December 31, 1996           667   $ 6.25  to  $47.75     $21.99
  Granted                            470   $ 5.31  to  $ 7.50     $ 6.84
  Lapsed or canceled                (178)  $ 7.50  to  $47.75     $18.38
----------------------------------------------------------------------------

Balance, December 31, 1997           959   $ 5.31  to  $47.75     $15.19
----------------------------------------------------------------------------
Options exercisable at
  December 31, 1997                  314   $ 7.50  to  $47.75     $20.87
----------------------------------------------------------------------------

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

                            Options Outstanding          Options Exercisable
                   -----------------------------------  ---------------------
                               Weighted     Weighted                 Weighted
    Range of                   Average      Average                  Average
 Exercise Prices   Shares      Remaining    Exercise     Shares      Exercise
                               Contractual  Price                    Price
                               Life
 ----------------  --------    -----------   ---------  --------    --------
 $ 5.31 to $13.13      612      8.7 years     $ 8.10        131      $10.65
 $16.56 to $20.13       74      6.4           $17.92         47      $18.18
 $24.25 to $30.25      203      9.1           $27.17         92      $27.41
 $35.25                 35      8.6           $35.25         25      $35.25
 $47.75                 35      6.5           $47.75         19      $47.75
 ----------------  ---------   -----------   ---------  --------  ---------
 $ 5.31 to $47.75      959      8.5           $15.19        314      $20.87
   ==============   =========   ==========    ========  ========  =========

   As  of  January  30, 1998 the Company  offered  all option  holders the
   option to  exchange  their  outstanding  options  for  new  options  at
   $4.81 per share.  The new employee options are  subject  to  four  year
   vesting  with new director options immediately vested.  New options for
   673,897 shares were issued in connection with the offer.
<PAGE>
   The  Company  accounts  for employee stock based compensation under APB
   Opinion  No.  25, under which no compensation cost has been recognized.
   Had  compensation  cost  been  determined  based  on  the fair value of
   options at their grant dates consistent with the method of Statement of
   Financial  Accounting  Standards  No.  123  "Accounting for Stock-Based
   Compensation" ("SFAS 123"), the Company's net income (loss) and diluted
   net income (loss) available to common shareholders per share would have
   been reduced to the following pro forma amounts:

----------------------------------------------------------------------------
                                                 1995       1996        1997
----------------------------------------------------------------------------
Net income(loss)
 (in thousands):
   As reported                                $(1,628)   $(5,523)      $226
   Pro forma                                   (2,656)    (8,022)    (2,199)

Diluted net income(loss)
  available to common shareholders per share:
   As reported                                $ (0.22)   $ (0.74)      $.02
   Pro forma                                    (0.35)     (1.03)      (.25)
-----------------------------------------------------------------------------

   Because  the  SFAS  123  method  of  accounting has not been applied to
   options  granted  prior  to January 1, 1995, the pro forma compensation
   cost  may not be representative of the pro forma cost to be expected in
   future years.

   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 in 1995, 1996, and 1997,
   respectively:  risk-free  interest  rates  of  6.50%,  6.47% and 6.13%,
   expected  volatility  of  64.2%, 63.0% and 57.0%.  The Company used the
   following  weighted-average  assumptions  for  grants in 1995, 1996 and
   1997: expected dividend yields of 0% and expected lives of 5.0 years on
   options granted to employees and 4.0 years on grants to directors.  The
   weighted  average fair value of options granted were $11.86, $18.70 and
   $6.84 in 1995, 1996, and 1997 respectively.

<PAGE>
   STOCK  WARRANTS     From time to time, the Company has granted warrants
   to  purchase  common  stock  to  the Company's research consultants and
   certain  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 periods ending
   December 31, 1995, 1996 and 1997, shares in thousands:

                                                                Weighted
                                                                Average
                             Shares      Price Per Share        Exercise
                                                                Price
------------------------------------------------------------------------

Balance, November 30, 1994     299      $ 6.25  to  $26.00      $14.27
  Granted                       20      $16.00                  $16.00
  Lapsed or canceled           (88)     $11.25  to  $26.00      $17.88
  Exercised                   (102)     $ 6.25  to  $16.25      $11.88
------------------------------------------------------------------------
Balance, December 31, 1995     129      $ 9.75  to  $20.13      $13.99
  Lapsed or canceled            (3)     $12.13                  $12.13
  Exercised                    (75)     $12.75  to  $15.00      $13.35
------------------------------------------------------------------------
Balance, December 31, 1996
     and December 31, 1997      51      $ 9.75  to  $20.13      $15.03
------------------------------------------------------------------------
Warrants exercisable at
  December 31, 1997             51      $ 9.75  to  $20.13      $15.03
------------------------------------------------------------------------

The  following  table  summarizes  information  about stock warrants
outstanding at December 31, 1997, shares in thousands:

                         Warrants Outstanding          Warrants Exercisable
                 ------------------------------------  -------------------------
                              Weighted     Weighted                 Weighted
Range of                      Average      Average                  Average
Exercise Prices    Shares     Remaining    Exercise     Shares      Exercise
                              Contractual  Price                    Price
                              Life
----------------   --------   -----------  ---------    --------   ---------
$ 9.75 to $13.00       20       2.8 years     $11.38         18      $11.38
$16.00 to $20.13       31       2.8           $17.39         31      $17.39
----------------   --------   -----------  ---------    --------   ---------
$ 9.75 to $20.13       51       2.8           $15.03         49      $15.03
================   ========   ===========  =========    =========  =========


   COMMON  STOCK RESERVED     The Company has reserved a toal of 2,096,671
   common  shares  for  future  issuance  relating  to  the employee stock
   purchase plan, stock option plans, and stock warrants, disclosed above.

<PAGE>

   NOTE NINE.     COMMITMENTS AND CONTINGENCIES


   The  Company  conducts  a significant portion of its operations from an
   o f fice/  warehouse/distribution  facility  and  an  office/laboratory
   facility  under  operating leases that expire over the next five years.
   In   addition,  the  Company  leases  certain  office  equipment  under
   operating  leases  that expire over the next four years.  The Company s
   commitments  under  noncancellable operating leases, as of December 31,
   1997 are as follows, in thousands:


   Years Ending December 31,
   ----------------------------------------------
   1998                                    $  440
   1999                                       439
   2000                                       182
   2001                                       131
   2002                                         5
   ----------------------------------------------
   Total minimum lease payments            $1,197
   ----------------------------------------------

   Total  rental  expenses  under operating leases were $364,000, $451,000
   and  $465,000  for  the  years  ended December 31, 1995, 1996 and 1997,
   respectively.

   In February 1995 the Company entered into a commitment to purchase $2.5
   million  of freeze dried products from its principal supplier over a 66
   month  period  ending  in  August  2000.    The  commitment, which also
   provides  for monthly minimum purchases, is required to be supported to
   the  extent  of  60%  of the remaining commitment by a letter of credit
   from  a  bank  or  a  pledged  certificate  of  deposit (See Note Six).
   Through  December  31,  1997,  the  Company  has  purchased $515,000 of
   products  pursuant  to  this  commitment  and  in  February  1998  made
   prepayments  of $115,000 toward future deliveries under the commitment.
   Although  management  believes  that  new  products which they began to
   actively  market  in  late  1997,  as well as additional products to be
   developed,  will  result  in no losses pursuant to this commitment, the
   Company could incur significant losses if they are not able to meet the
   minimum purchase commitments.
<PAGE>

   NOTE TEN.     INCOME TAXES

   The tax effects of temporary differences that give rise to deferred tax
   assets and deferred tax liabilities at December 31, 1995, 1996 and 1997
   are as follows, in thousands:

                                           1995          1996         1997
----------------------------------------------------------------------------
Net operating loss carryforward         $  9,835      $ 12,875      $12,468
Research and development
   and other credits                         839           839          858
Property, plant and equipment                184           184          225
Patents                                      308           318          318
Inventory                                    200           249          315
Other, net                                   411           357          592
Less - Valuation allowance               (11,777)      (14,822)     (14,776)
                                        $    -        $    -        $    -

   The  Company  has  provided  a  valuation  allowance against the entire
   deferred  tax  asset  at  December  31,  1995, 1996 and 1997 due to the
   uncertainty as to the realization of the asset.

   The  provisions  for  federal income taxes for the years ended December
   31, 1995, 1996 and 1997 consisted of the following, in thousands:

                                            1995         1996         1997
----------------------------------------------------------------------------
Current provision                            $131         $ 88         $ 20
Deferred provision, net                        -            -            -
----------------------------------------------------------------------------
Total provision                              $131         $ 88         $ 20
----------------------------------------------------------------------------

   The  differences  (expressed as a percentage of pre-tax income or loss)
   between  the  statutory  and  effective federal income tax rates are as
   follows:

                                             1995        1996         1997
---------------------------------------------------------------------------
Statutory tax rate                          (34.0%)     (34.0%)       34.0%
State Income Taxes                            2.8          .5          -
Unrecognized deferred tax
   benefit/change in valuation allowance     34.6        34.9        (20.8)
Expenses related to foreign
  operations                                  4.1         -            -
Other                                         1.3          .2         (4.9)
---------------------------------------------------------------------------
Effective tax rate                            8.8%        1.6%         8.3%
---------------------------------------------------------------------------

   At  December 31, 1997, the Company had net operating loss carryforwards
   of  approximately  $36,670,000  for  federal income tax purposes, which
   expire   during  the  period  from  1999  to  2011,  and  research  and
   development  tax  credit carryforwards of approximately $839,000, which
   expire  during the period from 1999 to 2008, all of which are available
   to offset federal income taxes due in future periods.
<PAGE>
   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.  McKesson
   General  accounted for 7%, 9% and 12%; Owens & Minor accounted for 14%,
   11%  and  11%;  and  Bergen  Brunswig,  which acquired Durr Medical and
   Colonial  Healthcare in December 1996, accounted for 10%, 12% and 9% of
   the Company's net sales in 1995, 1996 and 1997, respectively.  Sales by
   Caraloe,  Inc., to Mannatech, Inc., , accounted for 10%, 15% and 15% of
   the Company's net sales in 1995, 1996 and 1997, respectively.  Sales by
   Caraloe, Inc. to Aloe Commodities International, Inc. ("ACI") accounted
   for  4%  of  the Company's net sales in 1997.  Accounts receivable from
   Mannatech  and  ACI  represented  20%  and  15% of accounts receivable,
   respectively, at December 31, 1997.  The Company also has an investment
   of  $600,000 (less than 10% ownership interest) in common stock of ACI.
   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) available to common shareholders
   by  the  weighted  average  number  of  common  shares  outstanding  of
   7,933,000, 8,798,000 and 8,953,000 in 1995, 1996, and 1997, respectively.

   In  calculating  the  diluted net loss available to common shareholders
   per  share  for 1995 and 1996, no effect was given to options, warrants
   or  convertible  securities  because  the  effect  of  including  these
   securities  would  have been antidilutive.  In 1997, diluted net income
   available  to  common  shareholders per share is also based only on the
   weighted  average  number  of  common shares outstanding.  There was no
   additional  dilution  related to options whose exercise price was below
   the  average  market price due to the application of the treasury stock
   method.    Remaining options and warrants to purchase 885,000 shares at
   an  average  exercise  price  of $16.84 per share were excluded because
   their  exercise  price  exceeded  the  average  market  price and were,
   therefore, antidilutive.

<PAGE>
   NOTE THIRTEEN.     BUSINESS SEGMENTS

   The  Company  operates in three business segments: Wound Care Products;
   Caraloe,   Inc.,   a  consumer   products  subsidiary,  including  bulk
   ingredients,  consumer  beverages,  nutritional and skin care products;
   and  Veterinary  Products,  including  veterinary wound care and cancer
   therapy products.

   Corporate  Income  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 is
   included in the Corporate Assets figure.


   Business Segments (in thousands)


                         Wound    Caraloe
1995                     Care     Inc.     Veterinary   Corporate    Total
----------------------------------------------------------------------------
Sales to unaffiliated
  customers             $21,147   $2,907     $320       $  -        $24,374
Income(loss) before
  income taxes            2,903      494     (222)        (4,672)    (1,497)
Identifiable assets      16,241      299      116         11,278     27,934
Capital expenditures      4,206      -         -             -        4,206
Depreciation and
  amortization            1,262      -         15            -        1,277
----------------------------------------------------------------------------

1996
----------------------------------------------------------------------------
Sales to unaffiliated
  customers             $17,302   $3,694     $290       $  -        $21,286
Income(loss) before
  income taxes             (641)     375       (9)        (5,160)    (5,435)
Identifiable assets      14,834      231       51         16,086     31,202
Capital expenditures        242      -         -             -          242
Depreciation and
  amortization            1,259      -         14            -        1,273
---------------------------------------------------------------------------
1997
---------------------------------------------------------------------------
Sales to unaffiliated
  customers             $17,990   $5,444     $125       $  -        $23,559
Income(loss) before
    income  taxes         1,522    1,381      (42)        (2,615)       246
Identifiable assets      16,068    1,426       17          8,652     26,163
Capital expenditures        295      -         -             -          295
Depreciation and
  amortization            1,191      -          5            -        1,196
---------------------------------------------------------------------------

<PAGE>
   NOTE FOURTEEN.     UNAUDITED SELECTED QUARTERLY FINANCIAL DATA


   The  unaudited  selected  quarterly  financial  data  below reflect the
   fiscal years ended December 31, 1996, and 1997 respectively.

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

1996                  1st Quarter   2nd Quarter   3rd Quarter   4th Quarter
------------------------------------------------------------------------------
 Net sales              $ 5,515       $ 5,438       $ 5,112       $ 5,221
 Gross Profit             2,584         2,073         2,967         3,335
 Net income (loss)       (2,156)       (2,545)        ( 839)           17
Diluted income (loss)
 available to common
 shareholders per share$  (.25)      $  (.29)      $  (.09)      $  (.11) *
 Weighted average
 common shares       8,666,177     8,804,567     8,854,533     8,867,575
-----------------------------------------------------------------------------

1997                  1st Quarter   2nd Quarter   3rd Quarter   4th Quarter
-----------------------------------------------------------------------------
 Net sales              $ 6,083       $ 5,121        $ 6,229      $ 6,126
 Gross Profit             3,576         3,234          3,653        3,566
 Net income (loss)           83          (531)           463          211
Diluted income (loss)
 available to common
 shareholders per share $   .00       $  (.05)       $   .05      $   .02
 Weighted average
 common shares        8,870,148     8,896,078      9,239,109    9,293,450
-----------------------------------------------------------------------------

    *  Net  loss  per  share for the quarter ended December 31, 1996, gives
   effect  to  the      accounting treatment announced by the staff of the
   Securities  and Exchange    Commission relevant to the Company's Series
   E  convertible  preferred  stock  having        "beneficial  conversion
   features."    The  net  loss per share includes a $986,000    preferred
   dividend  as a result of this treatment.  This treatment reflects the
   discount in the conversion price as a reduction of net income available
   to    common shareholders between the date of issuance of the preferred
   stock,  October      21, 1996, and the first available conversion date,
   December  20,  1996, to more    closely reflect the evolving accounting
   literature regarding accounting for    beneficial conversion features.
<PAGE>

Financial Statement Schedule
Valuation and Qualifying Accounts
(In thousands)


Description                          Additions
                  Balance at  Charged to  Charged to  Deductions  Balance at
                  Beginning   Costs and   Other                    End of
                  Of Period   Expenses    Accounts                 Period
-------------------------------------------------------------------------
1995

Bad Debt Reserve    $205        $107        $ -          $ 85       $227
Inventory Reserve    321         476          -           579        218
Rebates               55          90          -            63         82
-------------------------------------------------------------------------
1996

Bad Debt Reserve    $227        $ 82        $ -          $ 96       $213
Inventory Reserve    218         545          -           441        322
Rebates               82          90          -            36        136
-------------------------------------------------------------------------
1997

Bad Debt Reserve    $213        $280        $ -          $ 15       $478
Inventory Reserve    322         523          -           329        516
Rebates              136         331          -           125        342
-------------------------------------------------------------------------

<PAGE>
   -----------------------------------------------------------------------

   Report of Independent Public Accountants
   -----------------------------------------------------------------------

   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, 1997
   and  the  related  consolidated statements of operations, shareholders'
   investment  and  cash  flows  for  the year then ended.  Our audit also
   included  the  financial statement schedule listed in the Index at item
   14(a).   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 audit.

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

   In  our opinion, the 1997 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, 1997, and the consolidated results of their operations
   and  their  cash flows for year then ended in conformity with generally
   accepted  accounting  principles.    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 25, 1998


<PAGE>

   Report of Independent Public Accountants


   To the Stockholders and Board of Directors of
   Carrington Laboratories, Inc. and Subsidiaries:

   We  have  audited  the  accompanying  consolidated  balance  sheets  of
   Carrington  Laboratories, Inc.(a Texas corporation) and subsidiaries as
   of  December  31,  1996  and  the  related  consolidated  statements of
   operations,  shareholders'  investment and cash flows for the two years
   ended  December  31, 1995 and 1996.  These financial statements are the
   responsibility  of  the Company's management.  Our responsibility is to
   express an opinion on these financial statements based on our audits.

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

   In our opinion, the consolidated financial statements referred to above
   present  fairly,  in  all  material respects, the financial position of
   Carrington Laboratories, Inc. and subsidiaries as of December 31, 1996,
   and  the  results  of their operations and their cash flows for the two
   years  ended  December  31, 1995 and 1996, in conformity with generally
   accepted accounting principles.

   Our audits were made for the purpose of forming an opinion on the basic
   consolidated  financial  statements  taken as a whole.  The schedule on
   page  F-21  of this form 10-K is presented for the purpose of complying
   with  the Securities and Exchange Commission's rules and is not part of
   the  basic  consolidated  financial statements.  This schedule has been
   subjected to the auditing procedures applied in our audits of the basic
   consolidated financial statements and, in our opinion, fairly states in
   all  material  respects  the  financial  data  required to be set forth
   therein  in  relation  to  the  basic consolidated financial statements
   taken as a whole.



                                                      Arthur Andersen LLP
     Dallas, Texas,
     February 7, 1997 (except with respect
     to certain matters discussed in Note 7,
     as to which the date is April 25, 1997)

<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 30, 1998                By:  /s/ Carlton E. Turner
                                           -----------------------
                                       Carlton E. Turner, Ph.D., President

            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 30, 1998
   -------------------------    Officer and Director
   Carlton E. Turner, Ph.D.     (principal executive officer)

   /s/  Robert  W. Schnitzius   Chief Financial Officer        March 30, 1998
   -------------------------    (principal financial and
   Robert W. Schnitzius          accounting officer)

   /s/  R.  Dale Bowerman                Director              March 30, 1998
   -----------------------------
   R. Dale Bowerman

   /s/  George  DeMott                   Director              March 30, 1998
   -----------------------------
   George DeMott

   /s/  Robert  A. Fildes, Ph.D.         Director              March 30, 1998
   -----------------------------
   Robert A. Fildes, Ph.D.

   /s/  Thomas  J. Marquez               Director              March 30, 1998
   -----------------------------
   Thomas J. Marquez

   /s/  James  T. O'Brien                Director              March 30, 1998
   -----------------------------
   James T. O'Brien

   /s/  Selvi  Vescovi                   Director              March 30, 1998
   -----------------------------
   Selvi Vescovi
<PAGE>



                                INDEX TO EXHIBITS


 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

    3.1  Restated Articles of Incorporation of Carrington
         Laboratories, Inc., (incorporated herein by
         reference to Exhibit 3.1 to Carrington's 1988
         Annual Report on Form 10-K).
    3.2  Statement of Cancellation of Redeemable Shares of
         Carrington Laboratories, Inc., dated June 9, 1989
         (incorporated herein by reference to Exhibit 3.2 to
         Carrington's 1991 Annual Report on Form 10-K).

    3.3  Statement of Change of Registered Office and
         Registered Agent of Carrington Laboratories, Inc.,
         (incorporated herein by reference to Exhibit 3.1 to
         Carrington's Quarterly Report on Form 10-Q for the
         quarter ended May 31, 1991).

    3.4  Statement of Resolution Establishing Series D
         Preferred Stock of Carrington Laboratories, Inc.,
         (incorporated herein by reference to Exhibit 3.1 to
         Carrington's Quarterly Report on Form 10-Q for the
         quarter ended August 31, 1991).
    3.5  Statement of Resolution Establishing Series E
         Convertible Preferred Stock of Carrington
         Laboratories, Inc., (incorporated herein by
         reference to Exhibit 3.1 to Carrington's Form 8-K
         Current Report dated October 21, 1996).

    3.6* Statement of Cancellation of Treasury Shares, dated
         July 17, 1997.

    3.7* Statement of Resolution Eliminating Four Series of
         Preferred Stock, dated July 17, 1997.

    3.8* By-laws of Carrington Laboratories, Inc., as
         amended through March 3, 1998

                                    E - 1


<PAGE>

 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

    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  Agreement Regarding Termination of Employment and
         Full and Final Release dated June 2, 1997, between
         Carrington Laboratories, Inc., and Sheri L.
         Pantermuehl (incorporated herein by reference to
         Exhibit 4.1 to Carrington's Quarterly Report on
         Form 10-Q for the quarter ended June 30, 1997).

                                    E - 2
<PAGE>

 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

    4.3  Form of Letter Agreement dated May 9, 1997 between
         the Registrant and each holder of Series E
         Convertible Preferred Stock (incorporated herein by
         reference to Exhibit 10.1 to Carrington's Current
         Report on Form 8-K dated
         May 21, 1997).

    4.4  Form of Second Offer and Agreement of Sale and
         Purchase dated May 15, 1997 between the Registrant
         and each holder of Series E Convertible Preferred
         Stock (incorporated herein by reference to Exhibit
         10.2 to Carrington's Current Report on Form 8-K
         dated May 21, 1997).

    4.5  Form of Stock Purchase Agreement dated June 20,
         1997 between the Registrant and each purchaser of
         Common Stock (incorporated herein by reference to
         Exhibit 10.1 to Carrington's Current Report on Form
         8-K dated June 20, 1997).

    4.6  Retirement and Consulting Agreement dated August
         14, 1997, between Carrington Laboratories, Inc.,
         and David G. 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).

    4.7  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).

    4.23 Rights Agreement dated as of September 19, 1991,
         between Carrington Laboratories, Inc., and
         Ameritrust Company National Association
         (incorporated herein by reference to Exhibit 1 to
         Carrington's Report on Form 8-K dated September 19,
         1991).
   10.1  1985 Stock Option Plan of Carrington Laboratories,
         Inc., as amended through April 28, 1994
         (incorporated herein by reference to Exhibit 4.1 to
         Carrington's Form S-8 Registration Statement (No.
         33-64407) filed with the Securities and Exchange
         Commission on November 17, 1995).




                                    E - 3

<PAGE>

 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

   10.2  Form of Nonqualified Stock Option Agreement for
         employees, as amended, relating to Carrington's
         1985 Stock Option Plan (incorporated herein by
         reference to Exhibit 4.2 to Carrington's
         Registration Statement on Form S-8 (No. 33-50430)
         filed with the Securities and Exchange Commission
         on August 4, 1992).
   10.3  Form of Nonqualified Stock Option Agreement for
         non-employee directors, as amended, relating to
         Carrington's 1985 Stock Option Plan (incorporated
         herein by reference to Exhibit 4.3 to Carrington's
         Registration Statement on Form S-8 (No. 33-64407)
         filed with the Securities and Exchange Commission
         on November 17, 1995).

   10.4  License Agreement dated September 20, 1990, between
         Carrington Laboratories, Inc., and Solvay Animal
         Health, Inc. (incorporated herein by reference to
         Exhibit 10.1 to Carrington's Quarterly Report on
         Form 10-Q for the quarter ended August 31, 1990).

   10.5  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).
   10.6  Lease Agreement dated as of August 30, 1991,
         between Carrington Laboratories, Inc., and Western
         Atlas International, Inc. (incorporated herein by
         reference to Exhibit 10.59 to Carrington's 1991
         Annual Report on Form 10-K).

   10.7  Employee Stock Purchase Plan of Carrington
         Laboratories, Inc., as amended through June 15,
         1995 (incorporated herein by reference to Exhibit
         10.29 to Carrington's 1995 Annual Report on Form
         10-K).
   10.8  Employment Agreement dated July 6, 1993, between
         Carrington Laboratories, Inc., and Luiz F.
         Cerqueira (incorporated herein by reference to
         Exhibit 10.43 to Carrington's 1993 Annual Report on
         Form 10-K).

                                    E - 4
<PAGE>

 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

   10.9  Common Stock Purchase Warrant dated September 14,
         1993, issued by Carrington Laboratories, Inc., to
         E. Don Lovelace (incorporated herein by reference
         to Exhibit 10.44 to Carrington's 1993 Annual Report
         on Form 10-K).
   10.10 Common Stock Purchase Warrant dated September 14,
         1993, issued by Carrington Laboratories, Inc., to
         Jerry L. Lovelace (incorporated herein by reference
         to Exhibit 10.45 to Carrington's 1993 Annual Report
         on Form 10-K).

  10.11  Agreement Regarding Termination of Employment and
         Full and Final Release dated February 16, 1994,
         between Carrington Laboratories, Inc., and David A.
         Hotchkiss (incorporated herein by reference to
         Exhibit 10.49 to Carrington's 1993 Annual Report on
         Form 10-K).

   10.12 License Agreement dated March 18, 1994, between
         Carrington Laboratories, Inc., and Societe
         Europeenne de Biotechnologie (incorporated herein
         by reference to Exhibit 10.53 to Carrington's 1994
         Annual Report on Form 10-K).
   10.13 Agreement dated March 28, 1994, between Carrington
         Laboratories, Inc., and Keun Wha Pharmaceutical
         Co., Ltd., (incorporated herein by reference to
         Exhibit 10.54 to Carrington's 1994 Annual Report on
         Form 10-K).

   10.14 Lease Agreement dated June 15, 1994, between DFW
         Nine, a California limited partnership, and
         Carrington Laboratories, Inc., (incorporated herein
         by reference to Exhibit 10.55 to Carrington's 1994
         Annual Report on Form 10-K).
   10.15 Lease Amendment dated August 23, 1994, amending
         Lease Agreement listed as Exhibit 10.14
         (incorporated herein by reference to Exhibit 10.57
         to Carrington's 1994 Annual Report on Form 10-K).

   10.16 License Agreement dated September 29, 1994, between
         Carrington Laboratories, Inc., and Immucell
         Corporation (incorporated herein by reference to
         Exhibit 10.58 to Carrington's 1994 Annual Report on
         Form 10-K).

   10.17 Third Lease Amendment dated December 1, 1994,
         amending Lease Agreement listed as Exhibit 10.6
         (incorporated herein by reference to Exhibit 10.60
         to Carrington's 1994 Annual Report on Form 10-K).

                                    E - 5
<PAGE>
 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

   10.18 Production Contract dated February 13, 1995,
         between Carrington Laboratories, Inc., and Oregon
         Freeze Dry, Inc. (incorporated herein by reference
         to Exhibit 10.63 to Carrington's 1994 Annual Report
         on Form 10-K).
  10.19  Management Compensation Plan (incorporated herein
         by reference to Exhibit 10.64 to Carrington's 1994
         Annual Report on Form 10-K).

   10.20 Research Agreements dated June 24, 1994, September
         16, 1994, and February 2, 1995, between Southern
         Research Institute and Carrington Laboratories,
         Inc., (incorporated herein by reference to Exhibit
         10.65 to Carrington's 1994 Annual Report on Form
         10-K).

   10.21 Trademark License Agreement between Caraloe, Inc.
         (Licensor), and Emprise International, Inc.
         (Licensee), dated March 31, 1995 (incorporated
         herein by reference to Exhibit 10.2 to Carrington's
         Second Quarter 1995 Report on Form 10-Q).
   10.22 Supply Agreement between Caraloe, Inc. (Seller),
         and Emprise International, Inc. (Buyer), dated
         March 31,1995 (incorporated herein by reference to
         Exhibit 10.3 to Carrington's Second Quarter 1995
         Report on Form 10-Q).

   10.23 Sales Distribution Agreement between the Chinese
         Academy of Sciences and Carrington Laboratories,
         Inc., dated August 16, 1995 (incorporated herein by
         reference to Exhibit 10.1 to Carrington's Third
         Quarter 1995 Report on Form 10-Q).
   10.24 Sales Distribution Agreement between the Chinese
         Academy of Sciences and Carrington Laboratories,
         Inc., dated August 16, 1995 (incorporated herein by
         reference to Exhibit 10.2 to Carrington's Third
         Quarter 1995 Report on Form 10-Q).

   10.25 Sales Distribution Agreement between the Chinese
         Academy of Sciences and Carrington Laboratories,
         Inc., dated August 16, 1995 (incorporated herein by
         reference to Exhibit 10.3 to Carrington's Third
         Quarter 1995 Report on Form 10-Q).

   10.26 Supply and Distribution Agreement between Medical
         Polymers, Inc., and Carrington Laboratories, Inc.,
         dated September 15, 1995 (incorporated herein by
         reference to Exhibit 10.4 to Carrington's Third
         Quarter 1995 Report on Form 10-Q).

                                    E - 6
<PAGE>

 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

   10.27 Clinical Services Agreement between Pharmaceutical
         Products Development, Inc., and Carrington
         Laboratories, Inc., dated July 10, 1995
         (incorporated herein by reference to Exhibit 10.5
         to Carrington's Third Quarter 1995 Report on Form
         10-Q).
   10.28 Non-exclusive Sales and Distribution Agreement
         between Innovative Technologies Limited and
         Carrington Laboratories, Inc., dated August 22,
         1995 (incorporated herein by reference to Exhibit
         10.6 to Carrington's Third Quarter 1995 Report on
         Form 10-Q).

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

   10.30 Product Development and Exclusive Distribution
         Agreement between Innovative Technologies Limited
         and Carrington Laboratories, Inc., dated November
         10, 1995 (incorporated herein by reference to
         Exhibit 10.8 to Carrington's Third Quarter 1995
         Report on Form 10-Q).
  10.31  Resignation Agreement and Full and Final Release
         dated February 24, 1995, between Carrington
         Laboratories, Inc., and Bill H. McAnalley
         (incorporated herein by reference to Exhibit 10.68
         to Carrington's 1995 Annual Report on Form 10-K).

  10.32  Revised and Restated Resignation Agreement dated
         March 14, 1995, between Carrington Laboratories,
         Inc., and Karl H. Meister (incorporated herein by
         reference to Exhibit 10.69 to Carrington's 1995
         Annual Report on Form 10-K).
   10.33 Common Stock Purchase Warrant dated August 4, 1995,
         issued by Carrington Laboratories, Inc., to
         Clifford T. Kalista (incorporated herein by
         reference to Exhibit 10.70 to Carrington's 1995
         Annual Report on Form 10-K).

   10.34 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).

                                    E - 7
<PAGE>

 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

   10.35 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).
   10.36 Supply and Distribution Agreement between Farnam
         Companies, Inc., and Carrington Laboratories, Inc.,
         dated March 22, 1996 (incorporated herein by
         reference to Exhibit 10.76 to Carrington's 1995
         Annual Report on Form 10-K).

   10.37 Placement Agent Agreement between Carrington
         Laboratories, Inc., and First Granite Securities,
         Inc. (incorporated herein by reference to Exhibit
         10.1 to Carrington's Current Report on Form 8-K
         dated October 21, 1996).

   10.38 Indemnification Agreement between the Carrington
         Laboratories, Inc., and First Granite Securities,
         Inc. (incorporated herein by reference to Exhibit
         10.2 to Carrington's Current Report on Form 8-K
         dated October 21, 1996).
   10.39 Joint Escrow Instructions from Carrington
         Laboratories, Inc., and accepted by Krieger &
         Prager, Esqs., as escrow agent (incorporated herein
         by reference to Exhibit 10.3 to Carrington's
         Current Report on Form 8-K dated October 21, 1996).

   10.40 Stock Purchase Agreement between Carrington
         Laboratories, Inc., and each of the purchasers of
         shares of the Registrant's Series E Convertible
         Preferred Stock (incorporated herein by reference
         to Exhibit 10.4 to Carrington's Current Report on
         Form 8-K dated October 21, 1996).
   10.41 Amendment to the Stock Purchase Agreement between
         Carrington Laboratories, Inc., and each of the
         purchasers of shares of Carrington's Series E
         Convertible Preferred Stock, dated October 15, 1996
         (incorporated herein by reference to Exhibit 10.5
         to Carrington's Current Report on Form 8-K dated
         October 21, 1996).

   10.42 Registration Rights Agreement between Carrington
         Laboratories, Inc., and each of the purchasers of
         shares of Carrington's Series E Convertible
         Preferred Stock (incorporated herein by reference
         to Exhibit 10.6 to Carrington's Current Report on
         Form 8-K dated October 21, 1996).


                                    E - 8
<PAGE>

 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

   10.43 Distribution Agreement between Carrington
         Laboratories, Inc., and Ching Hwa Pharmaceutical
         Co., Ltd., dated March 1, 1996 (incorporated herein
         by reference to Exhibit 10.1 to Carrington's First
         Quarter 1996 Report on Form 10-Q).
   10.44 Fourth Amendment to Credit Agreement and Term Note
         between Carrington Laboratories, Inc., and
         NationsBank of Texas, N.A., dated May 1, 1996
         (incorporated herein by reference to Exhibit 10.2
         to Carrington's First Quarter 1996 Report on Form
         10-Q).

   10.45 Assignment of Certificate of Deposit to NationsBank
         of Texas, N.A., dated May 1, 1996 (incorporated
         herein by reference to Exhibit 10.3 to Carrington's
         First Quarter 1996 Report on Form 10-Q).

   10.46 Release of Liens agreement between Carrington
         Laboratories, Inc., and NationsBank of Texas, N.A.,
         dated May 1, 1996 (incorporated herein by reference
         to Exhibit 10.4 to Carrington's First Quarter 1996
         Report on Form 10-Q).
  10.47  Form of Nonqualified Stock Option Agreement for
         Employees (incorporated herein by reference to
         Exhibit 4.1 to Carrington's Second Quarter 1996
         Report on Form 10-Q).

  10.48  Carrington Laboratories, Inc., 1995 Stock Option
         Plan, As Amended and Restated Effective March 27,
         1996 (incorporated herein by reference to Exhibit
         4.2 to Carrington's Second Quarter 1996 Report on
         Form 10-Q).

  10.49  Form of Nonqualified Stock Option Agreement for
         Nonemployee Directors (incorporated herein by
         reference to Exhibit 4.3 to Carrington's Second
         Quarter 1996 Report on Form 10-Q).
  10.50  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).

   10.51 Sales Distribution Agreement between Faulding
         Pharmaceuticals Laboratories and Carrington
         Laboratories, Inc., dated September 30, 1996
         (incorporated herein by reference to Exhibit 10.1
         to Carrington's Third Quarter 1996 Report on Form
         10-Q).


                                    E - 9
<PAGE>
 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

   10.52 Sales Distribution Agreement between Trudell
         Medical Marketing Limited and Carrington
         Laboratories, Inc., dated May 15, 1996
         (incorporated herein by reference to Exhibit 10.2
         to Carrington's Third Quarter 1996 Report on Form
         10-Q).

   10.53 Clinical Research Agreement between ICON and
         Carrington Laboratories, Inc., dated July 15, 1996
         (incorporated herein by reference to Exhibit 10.3
         to Carrington's Third Quarter 1996 Report on Form
         10-Q).
   10.54 Sales Distribution Agreement between Suco
         International Corp. and Carrington Laboratories,
         Inc., dated December 1, 1996 (incorporated by
         reference to Exhibit 10.54 to Carrington's 1996
         Annual Report on Form 10-K).

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

   10.56 Nonexclusive Distribution Agreement between
         Polymedica Industries, Inc., and Carrington
         Laboratories, Inc., dated November 15, 1996
         (incorporated by reference to Exhibit 10.56 to
         Carrington's 1996 Annual Report on Form 10-K).

   10.57 Sales Distribution Agreement between Gamida-
         Medequip Ltd., and Carrington Laboratories, Inc.,
         dated December 24, 1996 (incorporated by reference
         to Exhibit 10.57 to Carrington's 1996 Annual Report
         on Form 10-K).

   10.58 Sales Distribution Agreement between Gamida For
         Life BV, and Carrington Laboratories, Inc., dated
         December 24, 1996 (incorporated by reference to
         Exhibit 10.58 to Carrington's 1996 Annual Report on
         Form 10-K).
   10.59 Sales Distribution Agreement between Darrow
         Laboratorios S/A and Carrington Laboratories, Inc.,
         dated December 4, 1996 (incorporated by reference
         to Exhibit 10.59 to Carrington's 1996 Annual Report
         on Form 10-K).



                                    E - 10
<PAGE>
 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

   10.60 Independent Sales Representative Agreement between
         Vision Medical and Carrington Laboratories, Inc.,
         dated October 1, 1996 (incorporated by reference to
         Exhibit 10.60 to Carrington's 1996 Annual Report on
         Form 10-K).
   10.61 Independent Sales Representative Agreement between
         Think Medical, Inc., and Carrington Laboratories,
         Inc., dated October 1, 1996 (incorporated by
         reference to Exhibit 10.61 to Carrington's 1996
         Annual Report on Form 10-K).

   10.62 Independent Sales Representative Agreement between
         Meares Medical Sales Associates and Carrington
         Laboratories, Inc., dated October 1, 1996
         (incorporated by reference to Exhibit 10.62 to
         Carrington's 1996 Annual Report on Form 10-K).

   10.63 Supply Agreement between Aloe Commodities
         International, Inc., and Caraloe, Inc., dated
         February 13, 1997 (incorporated by reference to
         Exhibit 10.63 to Carrington's 1996 Annual Report on
         Form 10-K).
   10.64 Trademark License Agreement between Light Resources
         Unlimited and Carrington Laboratories, Inc., dated
         March 1, 1997 (incorporated by reference to Exhibit
         10.64 to Carrington's 1996 Annual Report on Form
         10-K).

   10.65 Supply Agreement between Light Resources Unlimited
         and Caraloe, Inc., dated February 13, 1997
         (incorporated by reference to Exhibit 10.65 to
         Carrington's 1996 Annual Report on Form 10-K).
   10.66 Sales Distribution Agreement between Penta
         Farmaceutica, S.A., and Carrington Laboratories,
         Inc., dated December 27, 1996 (incorporated by
         reference to Exhibit 10.66 to Carrington's 1996
         Annual Report on Form 10-K).

   10.67 Stock Subscription Offer of Aloe Commodities, Inc.,
         and Caraloe, Inc., dated October 30, 1996
         (incorporated by reference to Exhibit 10.67 to
         Carrington's 1996 Annual Report on Form 10-K).

   10.68 Modification Number Two to the Production Contract
         dated February 13, 1995, between Carrington
         laboratories, Inc., and Oregon Freeze Dry, Inc.,
         listed as Exhibit 10.18, dated November 19, 1996
         (incorporated by reference to Exhibit 10.68 to
         Carrington's 1996 Annual Report on Form 10-K).

                                    E - 11
<PAGE>
 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

   10.69 Offer and Agreement of Sale and Purchase of
         Convertible Preferred Series E Stock between
         holders of Carrington Laboratories, Inc.,
         Convertible Preferred Series E Stock and Carrington
         Laboratories, Inc., dated February 26, 1997
         (incorporated by reference to Exhibit 10.69 to
         Carrington's 1996 Annual Report on Form 10-K).
   10.70 Sales Distribution Agreement between Laboratories
         PiSA S.A. DE C.V., and Carrington Laboratories,
         Inc., dated November 1, 1995 (incorporated by
         reference to Exhibit 10.70 to Carrington's 1996
         Annual Report on Form 10-K).

   10.71 Termination Acknowledgment between China Academy of
         Sciences and Carrington Laboratories, Inc., dated
         February 12, 1996, regarding the three agreements
         listed as Exhibits 10.23, 10.24 and 10.25
         (incorporated by reference to Exhibit 10.71 to
         Carrington's 1996 Annual Report on Form 10-K).

   10.72 Letter from Immucell Corporation to Carrington
         Laboratories, Inc., dated February 7, 1996,
         canceling the License Agreement listed as Exhibit
         10.16 (incorporated by reference to Exhibit 10.72
         to Carrington's 1996 Annual Report on Form 10-K).

   10.73 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).
                                    E - 12

<PAGE>
 Exhibit                                                      Sequentially
  Number                       Exhibit                        Numbered Page

   10.74 Supply 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).

   10.75 Trademark License Agreement dated August 14, 1997,
         between Carloe, 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).

   10.76*Supply Agreement between Met-Trim, LLC and Caraloe,
         Inc., dated December 1, 1997.

   10.77*Trademark License Agreement between Met-Trim, LLC
         and Caraloe, Inc., dated December 1, 1997.

   10.78*Amendment Number One to Sales Distribution
         Agreement between Carrington Laboratories, Inc.,
         and Faulding Pharmaceuticals/David Bull
         Laboratories, dated January 12, 1998.

   16.1  Letter dated March 21, 1997 from Arthur Andersen
         LLP to the Securities and Exchange Commission
         (incorporated herein by reference to Exhibit 16.1
         to Carrington's Form 10-K/A amendment to its Form
         10-K Annual Report for the year ended December 31,
         1996, which amendment was filed on April 7, 1997).
   21.1* Subsidiaries of Carrington.

   23.1* Consent of Arthur Andersen LLP

   23.2* Consent of Ernst & Young LLP

   27.1* Financial Data Schedule



   *      Filed herewith.
          Management contract or compensatory plan.



                                     E - 13