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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
(Mark One)

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.

For the fiscal year ended June 30, 1997

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

For the transition period from         to
                               -------    -------
        
                        Commission file number 000-16061
                                               ---------

                            Criticare Systems, Inc.
                        ----------------------------- 
             (Exact Name of Registrant as Specified in Its Charter)


         Delaware                                    39-1501563
-------------------------------         ---------------------------------
(State or Other Jurisdiction of         (I.R.S. Employer Identification No.)
Incorporation or Organization)


20925 Crossroads Circle, Waukesha, Wisconsin                     53186
--------------------------------------------                  ----------
  (Address of Principal Executive Offices)                    (Zip Code)

       Registrant's telephone number, including area code:  414-798-8282
                                                            -------------

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

                                                     Name of Each Exchange on
     Title of Each Class                                Which Registered
     -------------------                             ------------------------  
            NA                                                  NA
     -------------------                             ------------------------

                           [COVER PAGE 1 OF 2 PAGES.]


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

                      Voting Common Stock, $.04 Par Value
                                (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 registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K.  [ X ]

     The aggregate market value of the voting common stock held by
nonaffiliates of the registrant as of August 31, 1997 was $38,499,447.

     On August 31, 1997, there were outstanding 8,095,486 shares of the
registrant's $.04 par value common stock.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's Annual Report to Stockholders for the fiscal
year ended June 30, 1997 are incorporated by reference into Part II of this
report.

     Portions of the Proxy Statement for the Annual Meeting of the Stockholders
of the Registrant to be held November 7, 1997 are incorporated by reference
into Part III of this report.

                           [COVER PAGE 2 OF 2 PAGES.]


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                                     PART I

Item 1. BUSINESS.

     Criticare Systems, Inc. (the "Company" or "Criticare") designs,
manufactures  and markets vital signs and gas monitoring instruments and related
noninvasive sensors used to monitor patients in many healthcare settings.  Since
a patient's oxygen, anesthetic gas and carbon dioxide levels can change
dramatically within minutes, causing severe side effects or death, continuous
monitoring of these parameters is increasing.  The Company's monitoring
equipment improves patient safety by delivering accurate, comprehensive and
instantaneous patient information to the clinician.  The Company's products also
allow hospitals to contain costs primarily by substituting cost-effective
reusable pulse oximetry sensors for disposable sensors, controlling the use of
costly anesthetics and increasing personnel productivity.

     To meet the needs of end-users in a wide variety of patient settings, the
Company has developed a broad line of patient monitors which combine one or
more of its patented or other proprietary technologies, for monitoring oxygen
saturation, carbon dioxide and anesthetic agents, with standard monitoring
technologies that provide electrocardiogram ("ECG"), invasive and noninvasive
blood pressures, temperature, heart rate and respiration rate.  In addition,
the Company's VitalView telemetry system allows one nurse to monitor up to
eight patients simultaneously from a convenient central location.  This allows
hospitals to move out of the intensive care unit ("ICU") those patients that
require continuous monitoring, but do not need all of an ICU's extensive and
costly personnel and equipment resources.

     The Company was incorporated under the laws of the State of Delaware in
October 1984.

Products

     Criticare markets a broad range of vital signs and gas monitoring products
designed to address the needs of a variety of end-users in different patient
settings.  Criticare's monitors display information graphically and
numerically.  All Criticare monitors incorporate adjustable visual and audible
alarms to provide reliable patient-specific warnings of critical conditions,
and most of the Company's monitors record up to 60 hours of trend data.
Criticare monitors are available with printer capability to provide permanent
records of patient data.

     Model 503, 503S, 504, 504P, 504US, 504USP and 504O (PONI) Pulse Oximeters.
Criticare's complete line of pulse oximeters meet the needs of virtually all
clinical environments:  adult, pediatric and neonatal intensive care units,
operating rooms, emergency rooms, nursing homes, physicians' offices and

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ambulances.  The line is designed to provide accuracy and convenience at a
competitive cost to the end-user.

     Model 507S, 507SD, 507N, 507O and 507E Patient Monitors.  The 507 series
is comprised of small, compact, portable, full-featured vital signs monitors
configured to meet specific clinical needs.  The 507S and 507SD are well-suited
to dental and physician offices.  The 507N and 507O are ideal for patient floor
monitoring of noninvasive blood pressure and pulse oximetry.  The 507E combines
ECG, oxygen saturation and noninvasive blood pressure for a complete vital
signs monitor for physician office and hospital applications.  Combined with
the VitalView central station, the 507E is an effective low-cost monitoring
system for the emergency room or the recovery room.

     Scholar(TM).  The Scholar monitor series specifically addresses the needs
of small hospitals with broad clinical needs (the monitoring of ECG, blood
oxygen saturation, noninvasive blood pressure, temperature and invasive blood
pressure) but whose budgets are small.  Scholar offers all the primary features
a hospital needs with the capability of adding more features if desired.
Scholar monitors are available with printer and recorder capability and can
transmit data to Criticare's Maestro and VitalView Central Stations.

     Model 1100 Anesthesia Monitor.  The Model 1100 monitor provides patient
monitoring for a wide variety of cardio-pulmonary parameters in an integrated
system.  The Model 1100 is able to monitor two ECG waveforms, noninvasive blood
pressure, three types of invasive blood pressure, respiration rate, heart rate,
temperature, oxygen saturation, inspired/expired oxygen, carbon dioxide and the
range of anesthetic gases, including recently developed anesthetic agents such
as desflurane and sevoflurane.  The Model 1100 uses the Company's proprietary
disposable respiratory secretion filter system and is designed to accommodate
low-flow anesthesia situations.

     Model 602-3B, 602-6B, 602-11 and 602-13 Gas Monitors.  The 602 series
provides monitoring of carbon dioxide, pulse oximetry and anesthetic agents
using Criticare's proprietary infrared technology.  The 602 IQ series of
operating room monitors provides automatic identification and quantification of
all five approved anesthetic agents simultaneously.

     Model 506DX Combination Monitor.  The 506DX combination monitor was
developed in conjunction with Alaris Medical ("Alaris") and incorporates
Criticare's oximetry and noninvasive blood pressure technology with Alaris's
temperature technology.  Alaris has rights to market the 506DX combination
monitor to hospitals in the United States and Canada.  Criticare has rights to
market the product to the alternate care market and to international markets.

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     Model 820 Maestro(TM) I Telemetry Monitors.  The Maestro I Telemetry
system addresses the rapidly expanding telemetry market with a reliable,
inexpensive ECG telemetry system.  The Maestro I system provides a waterproof
ECG transmitter capable of five ECG lead configurations.  The ability to link
Criticare's 507E and Scholar monitors to this versatile central station is
expected to expand the market into numerous hospital departments.

     VitalView(TM).  The VitalView central station makes it possible for one
nurse or technician to monitor numerous patients simultaneously.  The VitalView
can receive, display and store data from a wide variety of Criticare monitors
including the Scholar, 507E and MPT.

     MPT(TM).  The MPT (Multiple Parameter Telemetry) monitor allows the
transmission of vital signs (ECG, blood oxygen saturation and noninvasive blood
pressure) on a real time basis to a VitalView central station while the patient
is ambulatory.  The Company believes the MPT is the first device of its kind.
In today's healthcare environment, hospitals benefit by moving patients from
expensive critical care departments as quickly as possible to less expensive
general nursing floors.  MPT, because of its complete monitoring capability and
its lower cost, allows the patient to be ambulatory while still being monitored
for all vital signs.  MPT was approved by the FDA on December 10, 1996.

     Pulse Oximetry Sensors.  Criticare has designed proprietary, noninvasive
sensors that can be used on any patient, from a premature infant to a
full-grown adult.  Criticare's line of reusable pulse oximetry sensors offers
users significant cost savings compared to disposables.  Criticare's reusable
sensors generally last longer than the one-year warranty period and are easily
and inexpensively cleaned between uses.  Criticare's reusable sensors include a
finger sensor for routine applications and a multisite sensor for increased
placement flexibility.  The multisite sensor is fully immersible, allowing for
sterilization between patients.  Last year the Company introduced the "Shell"
sensor, the first reusable sensor with a removable hard cover.  The cover can
be inexpensively replaced if it becomes damaged, saving hundreds of dollars
over buying a new sensor.  The Shell sensor is also the first reusable sensor
on the market that can be fully dismantled and immersed for improved cleaning
and sterilization between patients if required.  The Company also sells a range
of disposable sensors designed for single use in cases where the facility would
prefer to use a patient charge disposable product.

     Water Chek/Chek-Mate Filter System.  The Company's patented, disposable
Water Chek system separates a patient's respiratory secretions from a breath
sample before it enters the gas monitor(s) for analysis.  The Company's
proprietary, disposable Chek-Mate filter enhances the removal of moisture from
the sample, while preventing cross-contamination.  This system allows the
monitor

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to operate effectively regardless of humidity or patient condition.  The
self-sealing feature also protects the healthcare provider from potential
contamination.

Products Under Development

     Digital Oximetry DOX(TM).  The Company is in the later stages of
developing an improved oxygen saturation monitor incorporating a digital
electronic signal which allows more accurate saturation readings in conditions
influenced by light, motion or temperature artifact than the analog electronic
signal used in current oxygen saturation monitors.

     Vital Signs(TM).  The hand-held Vital Signs monitor measures heart rate,
oxygen saturation, noninvasive blood pressure and temperature using a hand-held
monitor weighing less than two pounds.  These features make the Vital Signs
monitor well-suited for use on nursing floors and in physicians' offices,
ambulances and home healthcare organizations.

     Home View.  The Company is in the active stage of developing a home care
application of the MPT (Multiple Parameter Telemetry) monitor and the VitalView
central station.  When completed, the Home View system will allow patients to
be monitored, on a real time basis, using telephone modems to transmit data to
the care giver at a remote (hospital or home care) facility thereby further
reducing the cost of monitoring certain patients in the high cost hospital
environment.

     Fetal Oxygen Monitor.  The Company is in the active stage of developing a
fetal oxygen monitor designed to monitor the blood oxygen saturation of a fetus
during labor and delivery.  The Company's potential introduction of this
product will depend to a large extent on the need for clinical testing,
engineering requirements and, in particular, the FDA approval process.
Although there were over 4 million births in the United States in 1990, it is
likely that a fetal oxygen monitor would, at least initially, be used only
during deliveries where some unusual circumstances or danger were perceived by
the physician.  No assurance can be given that such product will be
successfully developed and marketed by the Company or, if developed and
marketed, will be clinically or commercially accepted.

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Marketing and Sales


     Domestic Sales.  During fiscal 1997, the Company's domestic sales efforts
were divided between a Hospital Division and an Alternate Care Division. As of
July 1, 1997, the Company's domestic sales responsibilities are divided between
a Systems Division and a Monitoring Division. The Company's Systems Division
focuses its efforts on the MPT/VitalView Systems and related monitors such as
Scholar I and Scholar II that can interface with the VitalView Central Station.
The flexibility of the MPT System affords hospitals the opportunity to place
monitoring where it is used rather than being tied to fixed monitoring units.
The Systems Division currently consists of four sales specialists, four clinical
specialists and one manager.

     The Company's Monitoring Division focuses its efforts on stand-alone
monitoring needs of hospitals, surgery centers, nursing homes and physician
offices.  Monitoring Division products include pulse oximeters, CO2 monitors,
anesthetic agent monitors and vital signs monitors. The Monitoring Division
currently consists of five regional managers, approximately 60 independent
dealers with approximately 600 sales people and one sales manager.

International Sales.  One of the Company's principal marketing strategies has
been to target international markets, particularly Western Europe, Latin
America and the Pacific Rim countries.  During fiscal 1997, Criticare sold its
products, principally to hospitals, in over 77 countries through over 140
independent dealers.  During fiscal 1997, the Company's European sales efforts
were coordinated by the Company's wholly-owned subsidiary, Criticare
International GmbH Marketing Services, a corporation organized under the laws
of Germany ("Criticare International"). During 1997, Criticare International
was involved in separate disputes with three former employees with respect to
the termination of such employees. Each of the former employees sued Criticare
International in the German Labor Court and the Labor Court ultimately entered
a judgement against Criticare International in two of the instances and 
proceedings have been stayed in the third instance pending the resolution of 
bankruptcy proceedings with respect to Criticare International.  Criticare
International has appealed both of the judgements to the Labor Court of Appeals
for the State of Hessia.  However, one of the former employees also filed a 
motion with the Municipal Court in Bad Homburg, Germany to put Criticare 
International into bankruptcy. The bankruptcy administrator has stayed 
Criticare International's appeals of the Labor Court judgements pending the
outcome of the bankruptcy proceedings.  Criticare International initially       
contested the bankruptcy motion but dropped the opposition after the Company
withdrew its commitment to pay the amount of any judgements against Criticare
International with respect to the litigation with its former employees.   On
August 29, 1997 the Municipal Court officially opened bankruptcy proceedings
against Criticare International.  Most of the Company's international order
processing, invoicing, collection and customer service functions are handled
directly from the Company's headquarters in Waukesha, Wisconsin. However, the
Company formed CSI Trading, Inc., a wholly-owned subsidiary, in
November of 1996 to perform certain marketing and service functions in Europe.
The International Division currently consists of 10 regional managers and one
sales manager. Criticare believes demand for the Company's products in
international markets is primarily driven by cost containment concerns, and
increased interest in using quality patient monitoring products for improved
patient management.
        
     In fiscal 1997, 51% of Criticare's net sales, or $13.3 million, was
attributable to international sales, of which approximately 42% was from sales
in Western Europe, 29% was from sales to Pacific Rim countries and 29% was from
sales to Canada and South America.  In fiscal 1996, 46% of Criticare's net sales
was attributable to international sales.  In fiscal 1995, 49% of Criticare's net
sales was attributable to exports.  There are no material identifiable assets of
the

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Company located in foreign markets.  The Company sells its products in United
States dollars and is not subject to significant currency risks; however, an
increase in the value of the United States dollar relative to foreign
currencies could make the Company's products less price competitive in those
markets.

     Clinical Support.  At August 31, 1997, Criticare employed four clinical
support specialists to provide customer training and education, primarily to
domestic hospitals.  The clinical support staff also assists in the periodic
training and education of the direct sales force.  In addition, the direct
sales force maintains contact with end-users and provides additional training
and updates.  Clinical support in foreign markets is provided by Criticare
regional managers.

     Warranty and Service.  Criticare believes that customer service is a key
element of its marketing program.  Criticare's monitors are warranted against
defects for one year and its reusable sensors for six months.  If a problem
develops with a Criticare product while under warranty, the Company typically
provides a replacement unit until the product can be repaired at the Company's
facility.  At August 31, 1997, the Company had a customer service staff of 15
people at its Waukesha, Wisconsin facility.  The Company also maintains a
product repair facility in Bad Homburg, Germany for its European
customers.  The Company offers extended warranties and service contracts on all
of its monitors.

Manufacturing

     The Company continually strives to implement manufacturing efficiencies
while maintaining product quality and reliability.  The Company's oximeters and
sensors are assembled from off-the-shelf components and other parts produced to
the Company's specifications, such as printed circuit board assemblies, custom
transformers and sensor cable/connector subassemblies.  However, Criticare
produces certain important components in-house.  All electronic components are
subjected to a 24-hour high-temperature burn-in to eliminate early component
failure.  Some subassembly is performed by subcontractors, but final assembly
and quality control are performed at Criticare's facility.  Criticare maintains
test and inspection procedures to minimize errors and enhance the operating
reliability of its products.  Final test procedures on fully assembled units
include an operational test and a continuous 72-hour burn-in procedure.

     Certain of Criticare's products incorporate components currently purchased
from single sources.  While the Company believes these components are available
from alternate sources on reasonable terms, an interruption in the delivery of
these or other components could have an adverse effect on the Company.  In
order to reduce the risk of supply interruption, the Company maintains
inventories of certain components.

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     The ISO 9000 series of quality management and assurance standards was
developed by the International Organization for Standardization (ISO) and
published in 1987.  In 1993 the EC (European Community) was formed with the
signing of the Maastricht Treaty by 12 European countries.  One of the many
standards adopted by this group is the ISO 9000 international quality assurance
and quality management series under the designation EN2 9000.  Based on this
action by the EC and specific requirements from European customers, the Company
believes ISO 9000 registration will be required to compete in EC and other
international markets as an indication of compliance with international quality
management and assurance standards.  In July 1994 the Food and Drug
Administration (FDA) announced its intention of harmonizing the ISO 9000
standards with its Medical Device Good Manufacturing Practices (GMP).  The
Company has achieved certification under ISO's standards 9001 and 9002.  See
"Regulation."

Research, Development and Engineering

     Criticare has focused its research, development and engineering
expenditures on products designed to meet identified market demands.  The
Company seeks to apply its expertise in gas monitoring and related sensor
technology to develop new products and adapt existing products for new markets.
At August 31, 1997, the Company had an in-house research, development and
engineering staff of 24 people.  The Company's research, development and
engineering expenditures were $2.3 million in fiscal 1997, $2.6 million in
fiscal 1996 and $1.9 million in fiscal 1995.

Competition

     The markets for the Company's products are highly competitive.  Many of
Criticare's competitors, including its principal competitors described below,
have greater financial resources, more established brand identities and
reputations, longer histories in the medical equipment industry and larger and
more experienced sales forces than Criticare.  In these respects, such
competitors have a competitive advantage over the Company.  The Company
competes primarily on the basis of product features, the quality and value of
its products (i.e., their relative price compared to performance features
provided) and the effectiveness of its sales and marketing efforts.  The
Company believes that its principal competitive advantages are provided by its
focus on cost containment and its patented and other proprietary technology and
software for noninvasive, continuous monitoring of oxygen, specific anesthetic
gases, carbon dioxide and blood pressure, its cost-efficient manufacturing, the
efficiency and speed of its research and development efforts and its
established international presence.

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     The principal competing manufacturers of pulse oximeters are Nellcor
Puritan Bennett and Ohmeda, a division of The BOC Group, Inc.  The Company
estimates that Nellcor has captured a majority, and that Ohmeda and the Company
have each captured significant portions of the worldwide pulse oximeter market.
In addition, there are approximately 30 other companies which compete in the
market for pulse oximeters.  The Company also indirectly competes with
manufacturers of numerous other medical equipment products for limited customer
funds.

     The Company believes that the worldwide anesthetic agent and carbon
dioxide monitor markets are comparatively fragmented, with no dominant
competitor.  The Company's principal competitors in the domestic gas monitor
market include Datex Medical Instrumentation, Inc., a United States subsidiary
of Instrumentarium OY, a Finnish company, Ohmeda and Datascope Corp.  The
market for vital signs monitors includes competitors such as Hewlett-Packard
Company, Siemens A.G., Datex and SpaceLabs, Inc., a subsidiary of Westmark
International Incorporated.

     The Company believes that its principal competitors in Western Europe
include Datex and Ohmeda and that the Company has a significant share of this
market.  In the Pacific Rim countries, the Company believes that Ohmeda is the
leading competitor and that Datex and the Company also have significant market
shares.

Regulation

     As a manufacturer of medical diagnostic equipment, the Company is
regulated by the FDA and similar foreign governmental agencies.  In producing
its products, the Company must comply with a variety of regulations, including
the good manufacturing practices regulations of the FDA.  In addition, it is
subject to periodic inspections by this agency.  If the FDA believes that its
legal requirements have not been fulfilled, it has extensive enforcement
powers, including the ability to ban or recall products from the market and to
prohibit the operation of manufacturing facilities.  The Company believes its
products comply with applicable FDA regulations in all material respects.  In
addition, the Company received ISO 9002 certification on April 29, 1993 and ISO
9001 certification on July 8, 1994.

     Under the Federal Food, Drug and Cosmetic Act, as amended, all medical
devices are classified as Class I, Class II or Class III, depending upon the
level of regulatory control to which they will be subject.  Class III devices,
which are the most highly controlled devices, are subject to premarket approval
by the FDA prior to commercial distribution in the United States.

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     The Company's current products have not been subject to the FDA's
comprehensive premarket approval requirements, but are generally subject to
premarket notification requirements.  If a new device is substantially
equivalent to a device that did not require premarket approval, premarket
review is satisfied through a procedure known as a "510(k) submission," under
which the applicant provides product information supporting its claim of
substantial equivalence.  The FDA may also require that it be provided with
clinical trial results showing the device's safety and efficacy.

     The Company believes that, with the possible exception of the fetal oxygen
monitor, the products it is currently developing generally will be eligible for
the 510(k) submission procedure and, therefore, will not be subject to lengthy
premarket approval procedures.  However, these products are still being
developed and there can be no assurance that the FDA will determine that the
products may be marketed without premarket approval.

     Criticare seeks, where appropriate, to comply with the safety standards of
Underwriters' Laboratories and the Canadian Standards Association and the
standards of the European Community.  To date, the Company has not experienced
significant regulatory expense or delay in the foreign markets in which it
sells its products.  Industry and professional groups such as the American
Society of Anesthesiologists, to the extent they have the power to mandate
certain practices or procedures as part of their profession's standard of care,
are also a source of indirect regulation of the Company's business.

Patents and Trademarks

     The Company believes one of its principal competitive advantages is
provided by its patented and other proprietary technology including its sensor
technology, infrared specific anesthetic gas monitoring technology, UltraSync
signal processing software and disposable respiratory secretion filter system.
None of the Company's U.S. patents expire before 2004.  Criticare also has
two foreign patent applications pending. There is no assurance that any
patents held or secured by the Company will provide any protection or
commercial or competitive benefit to the Company.  There is also no assurance
that the Company's products will not infringe upon patents held by others.  The
Company is the owner of a United States trademark registrations for "POET,"
"Scholar," "VitalView" and "MPT."

     The Company also relies upon trade secret protection for certain of its
proprietary technology.  Although the Company requires its employees having
access to its proprietary information to sign confidentiality agreements, no
assurance can be given that such agreements can be effectively enforced or that

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others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to or disclose the
Company's trade secrets.

Employees

     At August 31, 1997 Criticare had 126 employees; including 27 in
manufacturing and operations, 12 in quality control, 36 in domestic marketing
and sales, 14 in international marketing and sales, 13 in administration and 24
in research, development and engineering.

     Many of the Company's technical employees are highly skilled.  The Company
believes that its continued success depends in part on its ability to continue
to attract qualified management, marketing and technical personnel.  None of
the Company's employees are subject to a collective bargaining agreement.  The
Company believes that its relations with its employees are good.

Backlog

     Criticare's backlog on June 30, 1997 and 1996 was approximately $1,184,000
and $841,000, respectively.  The backlog at these dates consisted primarily of
products for which the sales order specified a delayed delivery date.
Criticare generally delivers its products out of inventory when specified by
the customer.  The Company does not believe that its backlog at any date is
indicative of its future sales.

Item 2. PROPERTIES.

     In November 1992, the Company purchased a new 60,000 square foot facility
for approximately $4.5 million.  The Company's mortgage calls for monthly
installments of principal and interest of approximately $35,000 and a final
"balloon" payment of approximately $2.7 million in December 2003.  The Company
believes this facility will be adequate for the foreseeable future.

Item 3. LEGAL PROCEEDINGS.

     On December 15, 1995, Criticare sued a number of its former employees in
Waukesha County Circuit Court for improperly diverting corporate
resources to pursue their personal business interests through a Bahamian
corporation called Pro Med.  Criticare asserted both breach of fiduciary duty
and conspiracy claims against these former employees, breach of employment
agreement against Allan Brack (its former Vice President-International), and
sought a declaratory ruling that Mr. Brack be barred from exercising any
outstanding stock options by virtue of his improper acts.  In April of 1996,
Criticare amended its complaint to

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drop Pro Med and one other individual defendant, Richard Buckley, who Criticare
was unable to serve.  One of the remaining defendants, Jean-Claude Joubert,
moved to dismiss for lack of personal jurisdiction.  The court granted his
motion and entered judgment dismissing him from the case on June 11, 1996.
Criticare does not intend at this time to appeal that ruling.  The only
remaining defendant, Allan Brack, moved for summary judgment on Criticare's
breach of fiduciary duty and conspiracy claims.  The court entered an order 
refusing to dismiss these claims, but limiting the scope of damages Criticare 
can seek.  Criticare is currently examining settlement possibilities,
but remains committed to litigate this action vigorously if it is unable to
achieve an overall settlement of its disputed claims with all the former
employees who were originally named in the lawsuit.  At this time, it is not
possible to assess with any degree of accuracy Criticare's likelihood of
prevailing on its claims against Mr. Brack, or the potential recovery, if any.

Messrs. Buckley and Joubert and Maria Letica, a former cleaning lady for
Criticare International, all filed separate wrongful termination suits against
Criticare International with the Labor Court in Frankfurt am Main, Germany. 
Mr. Buckley filed his wrongful termination action against Criticare
International on May 4, 1995.  On October 22, 1996, the Labor Court awarded Mr.
Buckley back wages and accrued interest of approximately $190,000.  Mr. Buckley
attempted to enforce the judgment by attempting to seize assets though the use
of a German bailiff.  When the bailiff was unsuccessful, Mr. Buckley filed a
motion on February 26, 1997 with the Municipal Court in Bad Homburg, Germany to
put Criticare International into bankruptcy.  Criticare International appealed
the Labor Court's decision to the Labor Court of Appeals for the State of
Hessia on March 17, 1997.  Criticare International's appeal of the judgment in
favor of Mr. Buckley has been stayed pending the outcome of the bankruptcy
proceedings against Criticare International.  On September 11, 1995, Mr.
Joubert filed his wrongful termination suit against Criticare International.  
The Labor Court awarded  Mr. Joubert a judgment for back wages and
accrued interest of approximately $45,000.  Criticare International appealed
this judgment to the Labor Court of Appeals for the State of Hessia on July 11,
1997.  Criticare International's appeal has been stayed pending the outcome of
bankruptcy proceedings against Criticare International.  On July 7, 1997, Ms.
Letica, who was fired by the interim bankruptcy administrator, filed her
wrongful termination suit against Criticare International in the Labor Court. 
This case has also been stayed pending the outcome of the bankruptcy
proceedings against Criticare International.  Criticare International initially
contested the motion for bankruptcy and Criticare submitted a support letter
guaranteeing that it would pay any judgments rendered against Criticare
International which Criticare International was unable to pay.  On June 16,
1997, the Municipal Court appointed a temporary receiver prior to deciding
whether to officially open bankruptcy proceedings.  Shortly thereafter,
Criticare revoked its guaranty of payment and Criticare International dropped
its opposition to the bankruptcy motion.  The Municipal Court subsequently
appointed a bankruptcy administrator and officially opened bankruptcy
proceedings on August 29, 1997.  The administrator has since terminated the
remaining employees of Criticare International and seized its assets, which
primarily consist of three prototype anesthesia machines, the revoked guaranty
from Criticare, tools used for providing customer service and certain assets of
CSI Trading, Inc. that were in Criticare International's possession at the time
of the bankruptcy, including some inventory, spare parts and a receivable. 
Criticare and Mr. Brack are in the process of bidding for the assets of
Criticare International.  At the present time, it is not possible to assess
with any degree of accuracy Criticare's likelihood of prevailing in the bidding
for these assets.  It is likely that after the bankruptcy proceedings are
terminated, the wrongful termination case of Ms. Letica and the appeals of
Criticare International in the cases involving Messrs. Buckley and Joubert will
be closed.  Upon such an occurrence, the judgments of Messrs. Buckley and
Joubert will be re-entered against Criticare International.  It is possible
that Messrs. Buckley and Joubert would then attempt to collect the judgments
from Criticare.  Criticare intends to vigorously defend against any such
actions.  However, at this time, it is not possible to assess with any degree
of accuracy whether such actions will be brought against Criticare or, if so,
Criticare's likelihood of prevailing with regard to such claims.

<PAGE>   14
Prior to April 4, 1997, Criticare fired two of its sales representatives, John
Bombulie and Michael Cox.  On April 4, 1997, Criticare sued the former
employees, in separate cases, in Waukesha County Circuit Court.  Criticare is
seeking repayment from both employees of advances made to the employees against
unearned future commission payments.  On May 16, 1997,  Messrs.  Bombulie and
Cox filed counterclaims against Criticare, in each case alleging breach of
contract and failure to pay wages.  Messrs. Bombulie and Cox claim that
Criticare breached and/or modified their original employment agreements, and
that Criticare's actions relieved them of any obligation to repay their
unearned draw balances.  Both men also claim that Criticare's actions altered
their compensation structures, and that Criticare is now liable to them for
unpaid wages and stock options.  Trial in both cases is scheduled for February
of 1998.  The judge in the case involving Mr. Bombulie has referred the matter
to non-binding mediation.  Criticare is currently examining settlement
possibilities, but remains committed to litigate these actions vigorously if it
is unable to achieve a favorable settlement of the respective actions.  At this
time, it is not possible to assess with any degree of accuracy Criticare's
likelihood of prevailing on its claims against Messrs. Bombulie and Cox, nor the
likelihood of prevailing with regard to the claims of Messrs. Bombulie and Cox
against Criticare.

        Prior to August, 1997, Criticare and a distributor of its products,
Dynamic Options Corporation ("D.O.C."), had a dispute over whether Criticare
could terminate the exclusive marketing agreement between the parties. On
August 8, 1997, Criticare filed a Complaint against D.O.C. in the Waukesha
County Circuit Court. Criticare did not seek specific damages from D.O.C., but
rather a declaratory judgment that Criticare could terminate the exclusive
marketing agreement. On August 14, 1997, D.O.C. filed a Complaint in the Circuit
Court for Madison County, Alabama against Criticare and one of its employees,
Fred Arbona. The Complaint alleged that Criticare breached the terms of the
exclusive marketing agreement between the parties and that Criticare had
committed fraud and intentional interference with the business relationships
between D.O.C. and its customers. D.O.C. also alleged in its Complaint that
Criticare violated the Alabama Sales Representative Commission Contract Act by
failing to pay commissions due under the exclusive marketing agreement between
the parties. D.O.C. is seeking $5 million in compensatory damages plus punitive
damages in its Complaint. On September 12, 1997, Criticare filed a Notice of
Removal of that case to the Federal District Court in Alabama. However, the
District Court recently indicated that it will remand the case to
the Madison County Court. Criticare has filed a motion with the Alabama
District Court to stay or dismiss the action in Alabama because of the prior
existing case in Waukesha County. Likewise, D.O.C. has filed a motion with the
Waukesha County Circuit Court to stay or dismiss the action in Waukesha County
due to the pending litigation in Alabama. D.O.C. has also filed a counterclaim
in the Waukesha County case alleging virtually the same causes of action that
it did in its Complaint against Criticare in Alabama. Criticare believes that
D.O.C.'s claims lack merit. Criticare is currently examining the possibility of
settling both the Wisconsin and the Alabama actions, but remains committed to
litigate vigorously if it is unable to achieve an overall settlement
satisfactory to it of its disputed claims with D.O.C. At this time, it is not
possible to assess with any degree of accuracy Criticare's likelihood of
prevailing on its claims against D.O.C., nor the likelihood of prevailing with
regard to D.O.C.'s claims against Criticare.

        The Company does not currently believe that any of such claims which
it has received, either individually or in the aggregate, will have a material
adverse effect on the Company's results of operations or financial condition.

     From time to time the Company receives notices from competitors of
potential patent infringement.  Based on the advice of its patent counsel and
other considerations, the Company does not currently believe that any of such
claims which it has received, either individually or in the aggregate, will
have a material adverse effect on the Company's results of operations or
financial condition.  However, there can be no assurance that the Company will
not be sued for patent infringement or that if sued, the outcome of such suits
will not have an adverse effect on the Company.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended June 30, 1997.

                                    PART II

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

     Incorporated herein by reference to the Company's 1997 Annual Report to
Stockholders, page 23.
















<PAGE>   15




Item 6. SELECTED FINANCIAL DATA.

     Incorporated herein by reference to the Company's 1997 Annual Report to
Stockholders, page 2.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATION.

     Incorporated herein by reference to the Company's 1997 Annual Report to
Stockholders, pages 7 through 9.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     Consolidated Balance Sheets for the Company at June 30, 1997 and 1996 and
Consolidated Statements of Operations, Stockholders' Equity and Cash Flows for
the years ended June 30, 1997, 1996 and 1995, and notes thereto, are
incorporated herein by reference to the Company's 1997 Annual Report to
Stockholders, pages 10 through 22.

Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

     The Company has not changed accountants during the 24 months prior to June
30, 1997.  During that period, there were no disagreements with the accountants
regarding accounting and financial disclosure.

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Information regarding the executive officers and directors of the Company
is incorporated herein by reference to the discussions under "Nominee for
Election as Director," "Other Directors," "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" and "Executive Officers" in the Company's
Proxy Statement for the 1997 Annual Meeting of Stockholders (the "Criticare
Proxy Statement").

Item 11. EXECUTIVE COMPENSATION.

     Incorporated herein by reference to the discussion under "Executive
Compensation" in the Criticare Proxy Statement.


                                       14



<PAGE>   16




Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Incorporated herein by reference to the discussion under "Security
Ownership" in the Criticare Proxy Statement.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Incorporated herein by reference to the discussion under "Certain
Transactions" in the Criticare Proxy Statement.

                                    PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K.

(a) The following documents are filed as part of this report:

     1. Financial Statements.  The following consolidated financial statements
of the Company, included in the annual report of the Company to its
Stockholders for the fiscal year ended June 30, 1997, are incorporated by
reference in Item 8.

     Consolidated Balance Sheets - as of June 30, 1997 and 1996.

     Consolidated Statements of Operations - for the years ended June 30, 1997,
1996 and 1995.

     Consolidated Statements of Stockholders' Equity - for the years ended June
30, 1997, 1996 and 1995.

     Consolidated Statements of Cash Flows - for the years ended June 30, 1997,
1996 and 1995.

     Notes to consolidated financial statements.

     Independent Auditors' Report.

     2. Financial Statement Schedules:

     Independent Auditors' Report.

     Financial Statement Schedule for the years ending June 30, 1997, 1996 and
1995:


                                       15



<PAGE>   17






          Schedule
          Number    Description                                   Page
          --------  ---------------------------------------       -----

          II        Valuation and Qualifying Accounts             22
                    and Reserves


     All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable or the required
information is shown in the financial statements or notes thereto, and
therefore have been omitted.

     3. Exhibits:

     3.1 Restated Certificate of Incorporation of the Company (incorporated by
reference to the Registration Statement filed on Form S-1, Registration No.
33-13050).

     3.2 By-Laws of the Company (incorporated by reference to the Registration
Statement filed on Form S-1, Registration No. 33-13050).

     4.1 Specimen Common Stock certificate (incorporated by reference to the
Registration Statement filed on Form S-1, Registration No. 33-13050).

     4.2 Specimen Convertible Debenture (incorporated by reference to the
Registration Statement filed on Form S-3, Registration No. 333-25153).

     10.1 Employment Agreement of Gerhard J. Von der Ruhr (incorporated by
reference to the Registration Statement filed on Form S-1, Registration No.
33-13050).

     10.2 Employment Agreement of N.C. Joseph Lai (incorporated by reference to
the Registration Statement filed on Form S-1, Registration No. 33-13050).

     10.3 Blatz House Offices Limited Partnership Agreement (incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1987).

     10.4 Option Agreement dated March 12, 1991 between the Company and
American Healthcare Systems (incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended June 30, 1991).

                                       16



<PAGE>   18





     10.5 1992 Employee Stock Option Plan (incorporated by reference to the
Company's Registration Statement on Form S-8, Registration No. 33-60644).

     10.6 1992 Nonemployee Stock Option Plan (incorporated by reference to the
Company's Registration Statement on Form S-8, Registration No. 33-60214).

     10.7 1987 Employee Stock Option Plan (incorporated by reference to the
Company's Registration Statement on Form S-8, Registration No. 33-33497).

     10.8 1987 Nonemployee Stock Option Plan (incorporated by reference to the
Company's Registration Statement on Form S-8, Registration No. 33-40038).

     10.9 Form of Executive Officer and Director Indemnity Agreement
(incorporated by reference to the Company's Registration Statement on Form S-1,
Registration No. 33-13050).

     10.10 Employment Agreement of Richard J. Osowski (incorporated by
reference to the Company's Annual Report on Form 10-K for the year ended June
30, 1994).

     10.11 Revised Option Agreement between the Company and AmHS Purchasing
Partners, L.P. dated as of July 1, 1993 (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended June 30, 1994).

     10.12 Amendment to Employment Agreement of Gerhard J. Von der Ruhr.


     10.13  Amendment to Employment Agreement of N.C. Joseph Lai.

     10.14  Amendment to Employment Agreement of Richard J. Osowski.

     10.15  Amended Consultant Warrant Agreement (incorporated by reference to
            the Company's Post-effective Amendment number 1 to its Registration 
            Statement on Form S-3, Registration No.  333-00861).

     10.16  Amendment to Amended Consultant Agreement.

     10.17  Rights Agreement (incorporated by reference to the Company's
            Current Report on Form 8-K filed on April 18, 1997).

     10.18  Convertible Debenture Purchase Agreement (incorporated by reference
            to the Company's Registration Statement on Form S-3, Registration 
            No.  333-25153).

     13     Annual Report to Stockholders for the Year Ended June 30, 1997.

     21     Subsidiaries.

     23     Independent Auditors' Consent.

                                       17



<PAGE>   19





     24 Power of Attorney. 

     27 Financial Data Schedule.

(b) Reports on Form 8-K.

     The Company filed a report on Form 8-K on April 18, 1997, reporting that
the Company declared a dividend of one preferred share purchase right for each
outstanding share of the Company's $.04 per share par value common stock,
payable on April 24, 1997, to all stockholders of record on that date.

(c)  Exhibits.

     The response to this portion of Item 14 is submitted as a separate section
of this report.

(d)  Financial Statement Schedules.

     The response to this portion of Item 14 is submitted as a separate section
of this report.

                                       18



<PAGE>   20




                                   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.

                                CRITICARE SYSTEMS, INC.

                                By /s/ Gerhard J. Von der Ruhr
                                   ----------------------------- 
                                       Gerhard J. Von der Ruhr,
                                               President

                                Date: October 10, 1997


                                       19



<PAGE>   21




                               POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Gerhard J. Von der Ruhr and Richard J. Osowski, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this Report
on Form 10-K and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

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


<TABLE>
<CAPTION>
Signature                                        Title                          Date
--------------------------------  -----------------------------------   ----------------------
<S>                               <C>                                   <C>
/s/Gerhard J. Von der Ruhr        Chairman of the Board, President and  October 10, 1997
---------------------------       Director
Gerhard J. Von der Ruhr
* Attorney-in-Fact

*                                 Vice Chairman of the Board,           October 10, 1997
---------------------------       Vice President and Director
N.C. Joseph Lai

/s/ Richard J. Osowski            Senior Vice President-Finance         October 10, 1997
---------------------------       (Principal Financial and Accounting
Richard J. Osowski                Officer)
* Attorney-in-Fact

*                                 Director                              October 10, 1997
---------------------------
Karsten Houm

*                                 Director                              October 10, 1997
---------------------------
Milton Datsopoulos

</TABLE>



                                       20



<PAGE>   22







INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
 Criticare Systems, Inc.:

We have audited the consolidated financial statements of Criticare Systems,
Inc. and subsidiaries as of June 30, 1997 and 1996, and for each of the three
years in the period ended June 30, 1997, and have issued our report thereon
dated August 15, 1997; such financial statements and report are included in
your 1997 Annual Report to Stockholders and are incorporated herein by
reference.  Our audits also included the consolidated financial statement
schedule of Criticare Systems, Inc. listed in Item 14(a).  This consolidated
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.  In our
opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.



/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
August 15, 1997

                                       21



<PAGE>   23



                                 SCHEDULE II

                            CRITICARE SYSTEMS, INC.

                       VALUATION AND QUALIFYING ACCOUNTS
                FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995



<TABLE>
<CAPTION>
Column A                                     Column B            Column C     Column D    Column E
---------                                   -----------         -----------  ----------   --------- 
                                  
                                            Balance at          Charged to               Balance at 
                                            Beginning           Costs and                   End of    
Description                                 of Period            Expenses    Deductions     Period 
-----------                                 -----------         -----------  ----------   ---------
<S>                                          <C>                <C>         <C>         <C>
YEAR ENDED JUNE 30, 1995:                                                                                        
                                                                                                                 
Allowance for doubtful accounts              $275,000           $   36,878      $41,878    $270,000                        
                                                                                                                 
Reserve for sales returns and                $204,000           $1,172,464   $1,007,464    $369,000
  allowances                                                                                           
                                                                                                                 
YEAR ENDED JUNE 30, 1996                                                                                         
                                                                                                                 
Allowance for doubtful                       $270,000           $  130,123   $  105,123    $295,000
 accounts                                                                                                        
                                                                                                                 
Reserve for sales returns and                $369,000           $1,062,793   $  927,793    $504,000
  allowances                                                                                                  
                                                                                                                 
YEAR ENDED JUNE 30, 1997:                                                                                        
                                                                                                                 
Allowance for doubtful                       $295,000           $  366,505   $  194,505    $467,000   
 accounts                                                                                                        
                                                                                                                 
Reserve for sales returns and                $504,000           $1,283,931   $1,647,931    $140,000
 allowances
</TABLE>



                                       22



<PAGE>   24




                                 EXHIBIT INDEX



<TABLE>
<CAPTION>
                                                                       Sequential
   Exhibit                                                             Page
   Number                                                              Number
   ------                                                              ------
   <S>      <C>                                                     <C>

     3.1    Restated Certificate of Incorporation of
            the Company                                                (1)

     3.2    By-Laws of the Company                                     (1)

     4.1    Specimen Common Stock certificate                          (1)

     4.2    Specimen Convertible Debenture                             (1)

    10.1    Employment Agreement of Gerhard J.
            Von der Ruhr                                               (1)

    10.2    Employment Agreement of N.C. Joseph Lai                    (1)

    10.3    Blatz House Offices Limited Partnership
            Agreement                                                  (1)

    10.4    Option Agreement dated March 12, 1991
            between the Company and American
            Healthcare Systems                                         (1)

    10.5    1992 Employee Stock Option Plan                            (1)

    10.6    1992 Nonemployee Stock Option Plan                         (1)

    10.7    1987 Employee Stock Option Plan                            (1)

    10.8    1987 Nonemployee Stock Option Plan                         (1)

    10.9    Form of Executive Officer and Director
            Indemnity Agreement                                        (1)

    10.10   Employment Agreement of Richard J. Osowski                 (1)
</TABLE>


                                       23



<PAGE>   25

<TABLE>

    <S>     <C>                                                        <C>
    10.11   Revised Option Agreement between the
            Company and AmHS Purchasing Partners, L.P.
            dated as of July 1, 1993                                     (1)

    10.12   Amendment to Employment Agreement
            of Gerhard J. Von der Ruhr                                  _____               
                                                                                              
    10.13   Amendment to Employment Agreement                                               
            of N.C. Joseph Lai                                          _____               
                                                                                            
    10.14   Amendment to Employment Agreement                                               
            of Richard J. Osowski                                       _____               

    10.15   Amended Consultant Warrant Agreement                         (1)

    10.16   Amendment to Amended Consultant Warrant Agreement           _____    

    10.17   Rights Agreement                                             (1)

    10.18   Convertible Debenture Purchase Agreement                     (1)

    11      Statement regarding computation                             _____               
            of per share earnings                                                           
                                                                                            
    13      Annual Report to Stockholders                               _____               
            for the year ended June 30, 1997                                                
                                                                                            
    21      Subsidiaries                                                _____               
                                                                                            
    23      Independent Auditors' Consent                               _____               
                                                                                                
    24      Power of Attorney                                           _____

    27      Financial Data Schedule                                     _____
</TABLE>


---------------
(1) Incorporated by reference as indicated in Part IV.


                                       24