content: SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      Form 10-Q
  
                  Quarterly Report Pursuant to Section 13 or 15 (d)
                       of the Securities Exchange Act of 1934
  
                         For quarter ended October 31, 1996
                           Commission File Number 0-14026
  
                            DALTEX MEDICAL SCIENCES, INC.
               (Exact Name of Registrant As Specified In Its Charter)
  
          Delaware                                         13-3174562
  (State of Incorporation)                      (IRS Employer Identification No.)
  
                                   50 Kulick Road
                             Fairfield, New Jersey 07004
                      (Address of Principal Executive Offices)
  
                                   (201) 227-5066
                (Registrant's telephone number, including area code)
  
           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,  and (2) has been  subject to such filing
  requirements for the past 90 days.      Yes  X    No
  
           Indicate the number of shares  outstanding of each of the  registrant's
  classes of Common Stock, as of the latest practicable date.
  
           Class                              Outstanding at December 6, 1996
  
  Common Stock par value $.01                               8,632,699
           per share
  
  
  
  <PAGE>
  
  
                            DALTEX MEDICAL SCIENCES, INC.
  
  
                                        INDEX
  
                                                                         Page
  PART 1 - FINANCIAL INFORMATION
  
  Item l - Financial Statements
  
            (a)       Condensed  balance  sheets as of October  31,
                      1996 (Unaudited) and July 31, 1996                  3-4
  
            (b)       Condensed   statements  of   operations   and
                      deficit  accumulated  during the  development
                      stage for the three months ended  October 31,
                      1996   (Unaudited)   and   October  31,  1995
                      (Unaudited), and for the period July 28, 1983
                      (Date of  incorporation)  to October 31, 1996
                      (Unaudited)                                           5
  
            (c)       Condensed  statements  of cash  flows for the
                      three   months   ended   October   31,   1996
                      (Unaudited) and October 31, 1995 (Unaudited),
                      and for the  period  July 28,  1983  (Date of
                      Incorporation)    to   October    31,    1996
                      (Unaudited)                                           6
  
            (d)       Notes  to  condensed   financial   statements
                      (Unaudited)                                         7-9
  
  Item 2 -  Management's  Discussion and Analysis of Financial
            Condition and Results of Operations                         10-14
  
  PART II -  OTHER INFORMATION
  
  Item 5 -  Other Information                                              14
  
  Item 6 -  Exhibits and Reports on Form 8-K                               14
  
  
                                          2
  
  <PAGE>
  
  
  PART I - FINANCIAL INFORMATION
  
  Item 1 - Financial Statements
  
                            Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                              Condensed Balance Sheets
  
                                                 October 31,    July 31,
                                                    1996        1996 (A)
  
           Assets
  
  Current assets:
           Cash and cash equivalents              $ 19,273     $ 49,926
           Other receivables                        15,319       15,319
           Prepaid royalty                          60,000       60,000
                                                   -------      -------
              Total current assets                  94,592      125,245
  
  
  Net plant and equipment, at cost                      __           __
  Patents, net of accumulated amortization of
           $134,246 at October 31, 1996
           and $134,246 at July 31, 1996                --           __
  Other assets, net                                  3,375        3,375
  Deferred royalty costs (note 2)                  170,000      185,000
                                                   -------      -------
                                                  $267,967     $313,620
                                                  ========     ========
  
  See accompanying notes to condensed financial statements.
  
  (A) Amounts at July 31, 1996, are from audited financial statements.
  
                                          3
  
         
  
  <PAGE>
  
                            Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                              Condensed Balance Sheets
  <TABLE>
  <CAPTION>
  
                                                               October 31,
                                                                   1996             July 31,
                                                               (Unaudited)          1996 (A)
  <S>                                                           <C>              <C>        
           Liabilities and Stockholders' Deficiency
  Current Liabilities:
           Accounts payable and accrued expenses (note 3)       $   904,972      $   885,942
           Advanced royalty payments (note 2)                       120,000          120,000
                                                              -------------    -------------
             Total current liabilities                          $ 1,024,972      $ 1,005,942
                                                              -------------    -------------
  
  Advanced royalty payments (note 2)                                340,000          370,000
                                                              -------------    -------------
  
  Stockholders' deficiency:
  
           Common stock, par value $.01 per share 
              Authorized 20,000,000 shares; issued
              8,632,699 shares at October 31, 1996 and
              8,632,699 at July 31, 1996                             86,327           86,327
           Paid in capital                                        6,816,369        6,816,369
           Deficit accumulated during the
              development stage                                  (7,999,701)      (7,965,018)
                                                                 ----------       ----------
  
              Total stockholders' deficiency                     (1,097,005)      (1,062,322)
                                                              -------------    -------------
                                                                $   267,967      $   313,620
                                                              =============    =============
  </TABLE>
  
  See accompanying notes to condensed financial statements 
  
  (A) Amounts at July 31, 1996, are from audited financial statements.
  
                                          4
  
  <PAGE>
  
                            Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                         Statements of Operations & Deficit
                      Accumulated During the Development Stage
  <TABLE>
  <CAPTION>
                                                                                                     For The Period
                                                                                                     July 28, 1983
                                                                                                       (Date of
                                                                                                     Incorporation)
                                                                 October 31,      October 31,         To Oct. 31,
                                                                    1996              1995                1996
                                                                 (Unaudited)      (Unaudited)         (Unaudited)
  <S>                                                                 <C>               <C>            <C>      
  Revenues:
  Sales - Patents and related technology                                  --                --      $    300,000
  Sales - Gloves                                                          --                --           208,440
  Interest and other income                                              167                --         1,712,728
  License fees & royalties                                            59,855            49,224         2,429,951
                                                                ------------      ------------      ------------ 
  
       Total revenues                                                 60,022            49,224         4,651,119
                                                                ------------      ------------      ------------ 
  
  Expenses incurred in the development stage:
         Cost of sales                                                    --                --           313,243
         Research & development                                           --                --         3,335,251
         General & administrative                                     94,705           105,106         9,002,326
                                                                ------------      ------------      ------------ 
  
       Total expenses incurred in the
         development stage                                            94,705           105,106        12,650,820
                                                                ------------      ------------      ------------ 
  
  Net loss                                                           (34,683)          (55,882)       (7,999,701)
                                                                ------------      ------------      ------------ 
  
  Deficit accumulated during the development stage:
  
       Beginning of period                                      $ (7,965,018)     $ (7,832,774)               --
                                                                ------------      ------------      ------------ 
  
       End of period                                            $ (7,999,701)     $ (7,888,656)     $ (7,999,701)
                                                                ============      ============      ============ 
  
  Net loss per common share                                             (.01)             (.01)            (1.03)
                                                                ============      ============      ============
  
  Weighted average number of
       shares outstanding                                          8,633,000         8,633,000         7,760,000
                                                                ============      ============      ============
  </TABLE>
  
  See accompanying notes to condensed financial statements 
  
                                          5
  
  <PAGE>
  
                            Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                         Condensed Statements of Cash Flows
  <TABLE>
  <CAPTION>
                                                                                              For the Period
                                                                                               July 28, 1983
                                                                                                 (Date of
                                                                                               Incorporation)
                                                             October 31,      October 31,      to October 31,
                                                                1996              1995             1996
                                                            (Unaudited)       (Unaudited)       (Unaudited)
  <S>                                                       <C>              <C>              <C>         
  Cash flows from operations:
       Net loss                                             $   (34,683)     $   (55,882)     $(7,999,701)
       Non-cash expenses included in net loss:
         Depreciation and amortization                               --            5,697          310,234
         Non-cash compensation charges                               --               --          889,130
         Abandoned equipment                                         --               --           53,386
         Write-off of patents                                        --               --          105,221
         Write-off of inventory/advance payments                     --               --          115,048
         Other                                                       --               --            4,499
  Changes in current assets & liabilities:
       (Increase) in inventory & advance payments                    --               --         (115,048)
       (Increase) decrease in grant & other receivables              --           43,448          (15,319)
       (Increase) decrease in deferred royalty costs             15,000         (290,000)        (230,000)
       Increase in accounts payable & accrued expenses           19,030          213,825          907,294
       Increase (decrease) in advance
            development & royalty payments                      (30,000)         580,000          460,000
                                                          -------------   --------------   --------------
            Net cash flows of operations                        (30,653)         497,088       (5,515,256)
                                                          -------------   --------------   --------------
  
  Cash flows from investing activities:
       Purchase of U. S. government obligations                      --               --       (8,813,987)
       Redeemed U. S. government obligations and
            other short-term investments                             --               --        8,810,988
       Purchase of equipment & furniture                             --               --         (159,370)
       Purchase of patents                                           --               --         (171,750)
       (Increase) in due from officer & stockholder                  --               --         (110,601)
       (Purchase) of other assets                                    --               --          (30,095)
                                                         --------------   --------------   --------------
            Net cash flows of investing activities                   --               --         (474,815)
                                                         --------------   --------------   --------------
  
       Cash flows from financing activities:
            Proceeds from sale of common stock &
              warrants - net                                         --               --        6,009,344
                                                         --------------   --------------   --------------
       Net increase (decrease) in cash                          (30,653)         497,088           19,273
       Cash, including certificates of deposit:
            Beginning of period                                  49,926           10,862               --
                                                            -----------      -----------     ------------
            End of period                                   $    19,273      $   507,950      $    19,273
                                                          =============    =============    =============
  </TABLE>
  
  See accompanying notes to condensed financial statements.
  
                                          6
  
  <PAGE>
  
  
  NOTES TO CONDENSED FINANCIAL STATEMENTS-October 31, 1996 (Unaudited)
  
  (1)      Basis of Presentation
  
           The unaudited  condensed  financial  statements have been prepared from
           the books and records of Daltex Medical Sciences,  Inc. (the "Company")
           in accordance with generally accepted accounting principles for interim
           financial  information  pursuant  to  Rule  10-01  of  Regulation  S-X.
           Accordingly,  they do not include all of the  information and footnotes
           required by  generally  accepted  accounting  principles  for  complete
           financial  statements.  In the opinion of management,  all  adjustments
           (consisting of normal recurring  accruals)  considered  necessary for a
           fair  presentation   have  been  included.   Interim  results  are  not
           necessarily  indicative  of the results  that may be  expected  for the
           fiscal year.
  
  (2)      Advanced Royalty Payment
  
           In October 1995, the Company and Arrow  International,  Inc.  ("Arrow")
           agreed to modify the terms of the existing Arrow License (the "Modified
           Arrow  License")  concerning  only those  license  fees  payable to the
           Company by Arrow for antimicrobially treated multi-lumen central venous
           catheters (exclusive of silicone Hickman/Broviac type, implantable port
           or peripherally inserted central venous catheters).  During the quarter
           ended  October 31, 1995 and  pursuant to the  Modified  Arrow  License,
           Arrow paid to the Company a one time  royalty of  $600,000  (in lieu of
           the periodic  royalty paid to the Company pursuant to the Arrow License
           for such catheters) for the period August 31, 1995 through September 1,
           2000, of which 50% was paid to Columbia  University (the  "University")
           in  November  1995  pursuant to the terms of a 1987  license  agreement
           between the Company and the University. Revenue, as well as the expense
           for the amounts paid to the University, will be recognized each quarter
           through September 1, 2000 in equal amounts, and accordingly, $30,000 of
           revenue  and  $15,000 of related  expense  were  recognized  during the
           quarter ended October 31, 1996.  After  September 1, 2000, the periodic
           royalty  payments  provided  for in the  existing  Arrow  License  with
           respect  to the  antimicrobially  treated  multi-lumen  central  venous
           catheters will resume and will be adjusted to reflect  increases in the
           Consumer  Price Index  through  September 1, 2000.  All other terms and
           conditions  of  the  existing  license  agreement   (including  Arrow's
           obligation  to make  quarterly  royalty  payments  based  on  sales  of
           percutaneous  sheath  introducer  ("PSI")  units  sold,  and  quarterly
           development  phase  payments for those  products Arrow is developing or
           has developed  incorporating the Company's  antimicrobial  technology),
           except those terms modified by a certain Patent Settlement Agreement of
           January 1, 1995,  remain in full force and  effect.  In  addition,  the
           Modified Arrow License does not modify or alter the terms of the Patent
           Settlement  Agreement.  For  a  discussion  of  the  Patent  Settlement
           Agreement and the  resolution of the Patent  Interference  Proceedings,
           see "Item 3. Legal  Proceedings" of the Company's Annual Report on Form
           10-K for the fiscal year ended July 31, 1995.
  
  
                                          7
  
  
  
  <PAGE>
  
  
  (3)      License Agreement and Research Agreement
  
           The Company currently has various license and research  agreements with
           the  University  related to  certain  antimicrobial  technologies  (see
           "Management's  Discussion  and  Analysis  of  Financial  Condition  and
           Results of Operations"). In this capacity, in January 1996, the Company
           paid the University $6,400 for the antimicrobial coating and evaluation
           of samples of tracheal  suction  catheters for a leading medical device
           manufacturer  who  has  expressed  interest  in  a  possible  licensing
           arrangement with the Company.  On December 3, 1996 the Company paid the
           University  $2,691.88,  representing  the  University's  50%  share  of
           payments  received  by the  Company  from  Arrow  representing  royalty
           payments  (based on sales of PSI  units  sold by Arrow  during  Arrow's
           quarter ended August 31, 1996) and quarterly development phase payments
           on  those   products   which  Arrow  has  developed  or  is  developing
           incorporating the Company's antimicrobial technology.
  
           The Company currently owes the University $165,706 for the University's
           past due share of  sublicensing  and royalty  payments  received by the
           Company through December 1994, and $22,500 for the  University's  share
           of  the  advance   development  and  royalty  payments  received  by  a
           sublicensee described in note 4 below.
  
           Moreover,  the Company has been billed  $630,168 as of October 31, 1996
           by the University's patent counsel for patent work undertaken under the
           Company's license agreements with the University,  although the Company
           is currently  disputing a substantial  portion of these legal fees. All
           of these  amounts are included in accounts  payable at October 31, 1996
           on the accompanying condensed balance sheet. Included in this amount is
           approximately  $ 120,820,  representing  charges in connection with the
           Company's  protection  of  its  intellectual  property  rights  through
           domestic and foreign patent filings and related matters.  Also included
           in this  amount is  approximately  $108,560,  representing  charges  in
           connection with the two AIDS-related patents and the patent application
           for   antimicrobially   treated  condoms  which  the  Company  and  the
           University have agreed in principle to reassign to the University,  due
           to the fact that the Company has been  unsuccessful  in licensing these
           technologies  to third  parties.  Finally,  approximately  $401,000  is
           included in this amount,  representing  charges in connection  with the
           previously  disclosed  Patent  Interference  Proceedings and subsequent
           Patent  Settlement  Agreement.   The  Company  disputes  the  Company's
           responsibility  for this  $401,000,  and the Company and the University
           are  attempting  to  negotiate  a  settlement.  Because the Company has
           proposed  to  reassign  the two  AIDS-related  patents  and one  patent
           application for antimicrobially treated condoms to the University,  the
           Company has requested  that the  University  credit the Company for the
           $108,560 outstanding amount due the University's patent counsel related
           to these matters. The University has continued to work with the Company
           with respect to these matters,  and the Company's  financial  condition
           and its relation to the University.  Although the Company is continuing
           its attempts to resolve these matters with the University, there can be
           no  assurance  that  the  Company  will be  successful  in  reaching  a
           solution.
  
  
                                          8
  
  <PAGE>
  
  (4)      Subsequent Event
  
           In November  1996, the Company  received an advance  payment of $45,000
           from one of its  sublicensees,  of which $22,500 is due the  University
           pursuant to the terms of a 1987 license  agreement  between the Company
           and the University.  Such $45,000  payment to the Company  consisted of
           (i) $15,000 in advance royalty payments  against minimum  royalties due
           the Company  based on sales of one segment of  antimicrobially  treated
           surgical  patches  recently  introduced  to  the  marketplace  by  such
           sublicensee; and (ii) $30,000 in advance development phase payments for
           two   additional   product   segments   incorporating   the   Company's
           antimicrobial technology. Such advance essentially represented payments
           due to the Company in the Company's  third quarter in fiscal 1997.  The
           Company has no agreement with the sublicensee  regarding future advance
           payments.
  
  
                                          9
  
  <PAGE>
  
  
  Item 2
  
                       Management's Discussion and Analysis of
  
                    Financial Condition and Results of Operations
  
           The  Company  is  in  the  development  stage  with  the  objective  of
  developing  and  commercializing   certain   cost-reducing  medical  device  and
  pharmaceutical  technologies.  Since  March  1,  1994  and  continuing  to date,
  research and development  efforts have been extremely limited,  or in most cases
  put  on  hold.  In  an  effort  to   commercialize   its  more  fully  developed
  technologies,  the Company had focused  from 1990 to March 1994,  its  research,
  development and commercialization efforts principally on its infection-reducing,
  antimicrobial  technologies,  including the  manufacture  and marketing  through
  distributors  of the Company's  antimicrobial  gloves and the licensing of other
  applications of the antimicrobial  technology to larger companies.  In the first
  quarter of fiscal 1997,  as well as in fiscal 1996,  the Company had no sales of
  any of its  technologies  or its  antimicrobial  medical  gloves.  See  "Item 1.
  Business" of the Company's  Annual Report on Form 10-K for the fiscal year ended
  July 31, 1996 for a discussion of the dispute with the University concerning the
  license for the antimicrobial glove technology, and a discussion of the terms of
  the Patent  Settlement  Agreement dated as of January 1, 1995 among the Company,
  the University, Arrow and Becton Dickinson.
  
           Given the continually deteriorating financial condition of the Company,
  the Board of Directors of the Company has recently authorized Bruce Hausman, the
  President and Chief Executive  Officer of the Company,  to negotiate the sale of
  the Company's rights to various applications of the antimicrobial  technology to
  certain sublicensees of the Company. These applications constitute substantially
  all of the assets of the Company. In the event that the Company is successful in
  selling  substantially  all of its assets,  the Company will either  endeavor to
  sell  the  remaining  corporate  shell  to a third  party  or to  liquidate  any
  remaining assets. The Company has not entered into any agreement to date for the
  sale of any  antimicrobial  technology or any other assets,  and there can be no
  assurance  that  the  Company  will be  successful  in  entering  into  any such
  agreement.
  
           In the event that the Company is  unsuccessful in negotiating a sale of
  its rights to the  antimicrobial  technology,  the  Company may seek to transfer
  this  technology  back to the University in exchange for the  forgiveness by the
  University  of  all of the  outstanding  amounts  owed  by  the  Company  to the
  University.
  
           During the first  quarter of fiscal 1997 and for the fiscal years ended
  July 31, 1996 and 1995, the Company received  revenues from royalty payments and
  development  fees pursuant to two licenses with  sublicensees of applications of
  the Company's antimicrobial medical technology in addition to an advance payment
  from one of its sublicensees  and the one-time  royalty payment,  both discussed
  below.
  
  
                                         10
  
  
  <PAGE>
  
  
           In October 1995,  the Company  received a one-time  royalty  payment of
  $600,000 from Arrow,  of which 50% was paid in November  1995 to the  University
  pursuant to the 1987 License  Agreement  between the Company and the University.
  Additionally,  in November 1995, the Company received $75,000 from Arrow to help
  fund the payment of legal costs  incurred by the Company in connection  with the
  Patent  Interference  Proceedings  and  the  Patent  Settlement  Agreement.  See
  "-Results of Operations" and "-Liquidity and Capital Resources."
  
           The Company will continue to receive  development phase payments on the
  other products  incorporating the Company's  antimicrobial  technology which the
  Company's  sublicensees  are  developing or have  developed,  which have not yet
  received  FDA  clearance  or have not yet  reached  the  marketplace  as well as
  quarterly  royalty  payments  from  Arrow  based on sales  of PSI  systems,  and
  quarterly  royalty payments from the Company's other  sublicensee based on sales
  of one product  segment  which has received FDA  clearance and has very recently
  been  introduced to the  marketplace.  As a result of the  Company's  receipt in
  November  1996  of  an  advance,  annual  minimum  royalty  payment  of  $15,000
  (described  in note 4  above),  pursuant  to the terms of a  definitive  license
  agreement  between the Company and such  sublicensee  entered  into in May 1992,
  annual  development phase payments from such sublicensee for one product segment
  application  have been  replaced by royalty  payments.  The Company is unable to
  assess at this time  whether  and to what  extent  such  royalty  payments  will
  increase in the future.
  
  Results of Operations for the Three Months Ended October 31, 1996
  
           Revenues for the quarter ended October 31, 1996  totalled  $60,022,  an
  increase of 21.9% over the $49,224 in revenues during the  corresponding  period
  in the previous  fiscal year.  Revenues from licensing fees in the first quarter
  of fiscal  1997 were  $5,000,  a  decrease  from the  $7,500  in  revenues  from
  licensing fees in the first quarter of fiscal 1996 due to the replacement of one
  development phase payment with nominal royalty payments. Revenues from royalties
  were $54,855, an increase of 31.4% over the $41,722 in royalty payments received
  during the first quarter of fiscal 1996 as the result of a $24,471  payment made
  by Arrow to the  Company  pursuant  to the  Patent  Settlement  Agreement  which
  provides  for certain  royalties to be paid by Arrow to the Company and for such
  royalties to be paid by the Company to another  party to such Patent  Settlement
  Agreement,  and a slight  increase in royalty  payments  from Arrow (of $384, of
  which 50% was paid to the University on December 3, 1996) based on limited sales
  by  Arrow of PSI  systems.  Included  in  revenues  from  royalties  is  $30,000
  representing  royalties  earned for the quarter  ended  October 31, 1996 derived
  from the $600,000  advance royalty payment received by the Company from Arrow in
  October  1995.  (See notes 2 and 3 above.) The  unearned  portion of $460,000 is
  reflected  as  deferred  revenue  in the  liability  section  and the  remaining
  $230,000 of the $300,000 paid to the University in November 1995 is reflected as
  deferred royalty costs in the asset section of the balance sheets.  Although the
  Company had no sales of its antimicrobial  gloves in the current quarter,  there
  were no glove  sales in the  corresponding  period of fiscal  1996  either.  The
  Company  maintains its belief that such lack of glove sales  continues to be due
  to the difficulty it faces as a small company with extremely  limited  resources
  in introducing and marketing a new product internationally without
  
                                         11
  
  
  
  <PAGE>
  
  the benefit of a domestic  sales base or  regulatory  clearance by the U.S. Food
  and Drug Administration ("FDA").
  
           Expenses  incurred  during the three  months  ended  October  31,  1996
  totalled  $94,705,  a decrease of 9.9% from the $105,106 of expenses incurred in
  the three months ended October 31, 1995.  This decrease was due to the reduction
  of legal costs incurred by the Company in connection  with the protection of its
  intellectual property rights.
  
           The  Company  sustained  a net loss of  $34,683  in the  quarter  ended
  October 31,  1996, a decrease of 37.9% from the net loss of $55,882 in the first
  quarter of fiscal 1995, primarily due to the aforementioned factors.
  
  Liquidity and Capital Resources
  
           At October  31,  1996,  the Company  had a working  capital  deficit of
  approximately  $930,000,  which represented an increase of approximately $50,000
  in such deficit from July 31,  1996.  During the three months ended  October 31,
  1996,  the  Company  had a decrease  of  $30,653  in cash flows from  operations
  principally  due to the receipt of a one time, five year advance royalty payment
  of $600,000 from Arrow in 1995, as described  above.  It is expected that future
  cash flows will be substantially less than reported revenues due to the one time
  advance royalty payment from Arrow. This one-time payment from Arrow had enabled
  the  Company  to  satisfy  certain  obligations  to its  creditors  and to  make
  substantial  payments to the University as required under various  licenses with
  the University. Although the Company has not satisfied all of its obligations to
  the University or the University's patent counsel, the Company is continuing its
  efforts  to resolve  such  matters.  All  remaining  funds  have been,  and will
  continue to be, used for working  capital.  At October 31, 1996, the Company had
  cash and cash equivalents of approximately $19,273.
  
           In November 1996, the Company  received advance royalty and development
  phase payments from another of its sublicensees as described in note 4 above.
  
           The Company currently owes the University $188,206. (See notes 2, 3 and
  4 to the  financial  statements.)  It is expected that future cash flows will be
  substantially  less than reported  revenues due to the one time advance  royalty
  payment  from Arrow.  The Company is currently  negotiating  with certain of its
  sublicensees for the sale of the Company's rights to various applications of the
  antimicrobial technology. In the event that the Company is successful in selling
  its rights to this  technology,  the Company  would use the funds  received from
  such sale to satisfy its outstanding  financial  obligations,  including amounts
  owed to the  University and the  University's  patent  counsel.  There can be no
  assurance, however, that the Company will be successful in selling its rights to
  the antimicrobial technology to a third party.
  
           In the event that the Company is  unsuccessful in negotiating a sale of
  its rights to the  antimicrobial  technology,  the  Company may seek to transfer
  this technology back to the
  
                                         12
  
  <PAGE>
  
  University  in exchange  for the  forgiveness  by the  University  of all of the
  outstanding amounts owed by the Company to the University.
  
           The  Company  is still in the  developmental  stage,  and its  business
  operations  have only generated a nominal amount of revenues to date.  There can
  be no assurance that the Company will be successful in raising  additional funds
  or that  the  Company  will  continue  as a going  concern.  The  report  of the
  Company's  independent  auditors on the Company's  financial  statements for the
  fiscal  years  ended July 31,  1996,  1995,  and 1994  included  an  explanatory
  paragraph which stated that the Company's  recurring  losses and working capital
  and total  stockholders'  deficits raised  substantial doubt about the Company's
  ability to  continue as a going  concern  and  precluded  the  expression  of an
  opinion on the Company's financial statements as of and for the years ended July
  31,  1996,  1995,  and  1994.  The  financial  statements  did not  include  any
  adjustments that might result from the outcome of that  uncertainty.  Because of
  the continued  working  capital  deficit,  the Company is attempting to sell its
  rights to various  applications of the  antimicrobial  technology,  as discussed
  above.  In any event,  the Company is attempting to resolve the dispute with the
  University  over the license for the  antimicrobial  glove  technology and legal
  fees billed to the Company by the University's patent counsel.  Furthermore, the
  Company  will  continue  to  attempt to  curtail  expenditures.  There can be no
  assurance that the Company will be successful in any of the foregoing.
  
           In the event that the  Company is  unsuccessful  in its attempt to sell
  its rights to the antimicrobial technology or to transfer such technology to the
  University,  the  Company  does  not have any  other  plans to raise  additional
  capital and there can be no assurance  that it will be able to raise  additional
  capital in the future or  continue  as a going  concern.  The Company may not be
  able to  continue as a going  concern or avoid  liquidation,  even with  further
  cost-cutting measures.
  
  Regulatory Proceedings
  
           In May 1989, the Company filed a pre-market 510(k) notification seeking
  consent to market its antimicrobial latex examination gloves. Since this initial
  510(k)  submission,  the Company has, from 1991 to date, amended and resubmitted
  the 510(k) several times and otherwise contacted,  in writing and in person, the
  FDA Office of Device  Evaluation  ("ODE") in an effort to obtain a determination
  of "substantial  equivalence" to previously  marketed latex examination  gloves.
  The ODE has notified the Company, in response to each of these submissions, that
  the Company's  antimicrobial  latex  examination  gloves are not  "substantially
  equivalent"  since the gloves have a new  indication  for an  examination  glove
  which may affect the prophylactic  effect, thus constituting a new intended use.
  The ODE has  further  stated,  in denying  market  clearance,  that no  accepted
  scientific  methods  presently  exist for  assessment  of the  effectiveness  of
  antiviral  activity for topical  antimicrobials,  particularly  under  glove-use
  conditions.
  
           On  September  26,  1995,  Mr.  Ulatowski  of the ODE  informed Dr. Del
  Guercio that  pursuant to the  Company's  most recent  submission  of data,  the
  Company was invited to make
  
                                         13
  
  <PAGE>
  
  a  presentation  concerning  the Company's  gloves before the FDA's  independent
  General Hospital Panel.
  
           On March 11, 1996,  Dr.  Shanta M. Modak of the  Department of Surgery,
  Columbia University,  where the antimicrobial  technology was developed, and Dr.
  Louis R.M.  Del Guercio,  the  Company's  Chairman,  attended the meeting on the
  Company's  behalf.  Each made a  presentation  before  the  Advisory  Committee,
  General  Hospital  and  Personal  Use  Devices  Panel,  Center for  Devices  and
  Radiological  Health.  Mr. Lester  Sampath,  also of the  Department of Surgery,
  Columbia  University,  was there as an  observer.  The Panel acts in an advisory
  capacity and makes  recommendations  to the FDA regarding whether or not certain
  device submissions should receive FDA clearance to be marketed.  While the Panel
  did not make any  recommendation  to the FDA at the March 11, 1996 meeting,  the
  Panel  voted to  accept  a  previously  distributed  opinion  of an  independent
  consultant  indicating  that  the  Company's  examination  gloves  do not have a
  positive  impact on disease  control.  To date, the Company has not yet received
  written   notice  from  the  FDA  of  its  decision   regarding   the  Company's
  antimicrobial  gloves following the March 11, 1996 meeting,  nor has the Company
  received a written  response from the FDA  concerning  the Company's  previously
  disclosed  response to Dr. Sheldon's  memorandum to Mr.  Ulatowski  submitted on
  September  13,  1995.  However,  Dr.  Modak has been  contacted  by Mr.  Terrell
  Cunningham,  Nurse  Consultant  of the ODE,  who has informed Dr. Modak that Mr.
  Ulatowski  of the ODE has sent a written  request  to Dr.  Sheldon  asking for a
  response  to  the  Company's   September  1995  submission.   According  to  Mr.
  Cunningham,  Dr. Modak or the Company was to have received a response by the end
  of October  1996.  To date,  neither the Company nor Dr. Modak has received such
  response.
  
           At present, the Company does not have sufficient financial resources to
  fund additional clinical testing, if such testing is required.  However,  should
  the Company's financial condition improve, the Company would spend some of these
  funds on  additional  testing  that may be  required.  There can be no assurance
  that,  even with  additional  testing,  if such  testing is  required,  that the
  Company will obtain FDA clearance to market its antimicrobial latex gloves.
  
           The  Company  has  received  clearance  from  the  Canadian  Bureau  of
  Radiation and Medical Devices of the Environmental  Health  Directorate,  Health
  Protection Branch, to market its Antimicrobial  Latex Examination Gloves and its
  sterile hypoallergenic antimicrobial surgeons' gloves in Canada under the Daltex
  A/M(TM) trademark.
  
           Based upon advice of its regulatory  counsel and its independent former
  medical products  distributor in Germany,  the Company believes it may offer its
  antimicrobial  latex examination  gloves and sterile surgical gloves for sale in
  Germany,  through distributors,  without seeking special regulatory clearance in
  the  event  that the  Company  obtains  the  financial  resources  necessary  to
  manufacture and market such gloves.
  
  
  
                                         14
  
  <PAGE>
  
  PART II-          OTHER INFORMATION
  
  Item 5 -          Other Information
  
                    None.
  
  Item 6 -          Exhibits and Reports on Form 8-K
  
           (a)      Exhibits
  
                    None
  
           (b)      Reports on Form 8-K
  
                    No  reports on Form 8-K were filed  during the  quarter  ended
                    October 31, 1996.
  
  
                                         15
  <PAGE>
  
                                     SIGNATURES
  
  Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
  the registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized.
  
  
  
  
                                           DALTEX MEDICAL SCIENCES, INC.
  
  Date: December 19, 1996                 By: /s/ Bruce Hausman, Esq.
                                              ------------------------------------
                                                  BRUCE HAUSMAN, ESQ.
                                                  President and Chief 
                                                  Executive Officer
  
  
  Date: December 19, 1996                 By: /s/ Herbert J. Mitschele, Jr.
                                              ------------------------------------
                                                  HERBERT J. MITSCHELE, JR.
                                                  Secretary, Treasurer and 
                                                  Chief Financial Officer
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 43187}]
metadata_filer: {"company-data": {"conformed-name": "DALTEX MEDICAL SCIENCES INC", "cik": "0000742686", "assigned-sic": "2834", "irs-number": "133174562", "state-of-incorporation": "DE", "fiscal-year-end": "0731"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-14026", "film-number": "96683199"}, "business-address": {"street1": "50 KULICK RD", "city": "FAIRFIELD", "state": "NJ", "zip": "07004", "phone": "2012275066"}}
text: SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      Form 10-Q
  
                  Quarterly Report Pursuant to Section 13 or 15 (d)
                       of the Securities Exchange Act of 1934
  
                         For quarter ended October 31, 1996
                           Commission File Number 0-14026
  
                            DALTEX MEDICAL SCIENCES, INC.
               (Exact Name of Registrant As Specified In Its Charter)
  
          Delaware                                         13-3174562
  (State of Incorporation)                      (IRS Employer Identification No.)
  
                                   50 Kulick Road
                             Fairfield, New Jersey 07004
                      (Address of Principal Executive Offices)
  
                                   (201) 227-5066
                (Registrant's telephone number, including area code)
  
           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,  and (2) has been  subject to such filing
  requirements for the past 90 days.      Yes  X    No
  
           Indicate the number of shares  outstanding of each of the  registrant's
  classes of Common Stock, as of the latest practicable date.
  
           Class                              Outstanding at December 6, 1996
  
  Common Stock par value $.01                               8,632,699
           per share
  DALTEX MEDICAL SCIENCES, INC.
  
                                        INDEX
  
                                                                         Page
  PART 1 - FINANCIAL INFORMATION
  
  Item l - Financial Statements
  
            (a)       Condensed  balance  sheets as of October  31,
                      1996 (Unaudited) and July 31, 1996                  3-4
  
            (b)       Condensed   statements  of   operations   and
                      deficit  accumulated  during the  development
                      stage for the three months ended  October 31,
                      1996   (Unaudited)   and   October  31,  1995
                      (Unaudited), and for the period July 28, 1983
                      (Date of  incorporation)  to October 31, 1996
                      (Unaudited)                                           5
  
            (c)       Condensed  statements  of cash  flows for the
                      three   months   ended   October   31,   1996
                      (Unaudited) and October 31, 1995 (Unaudited),
                      and for the  period  July 28,  1983  (Date of
                      Incorporation)    to   October    31,    1996
                      (Unaudited)                                           6
  
            (d)       Notes  to  condensed   financial   statements
                      (Unaudited)                                         7-9
  
  Item 2 -  Management's  Discussion and Analysis of Financial
            Condition and Results of Operations                         10-14
  
  PART II -  OTHER INFORMATION
  
  Item 5 -  Other Information                                              14
  
  Item 6 -  Exhibits and Reports on Form 8-K                               14
  
                                          2
  PART I - FINANCIAL INFORMATION
  
  Item 1 - Financial Statements
  
                            Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                              Condensed Balance Sheets
  
                                                 October 31,    July 31,
                                                    1996        1996 (A)
  
           Assets
  
  Current assets:
           Cash and cash equivalents              $ 19,273     $ 49,926
           Other receivables                        15,319       15,319
           Prepaid royalty                          60,000       60,000
                                                   -------      -------
              Total current assets                  94,592      125,245
  
  Net plant and equipment, at cost                      __           __
  Patents, net of accumulated amortization of
           $134,246 at October 31, 1996
           and $134,246 at July 31, 1996                --           __
  Other assets, net                                  3,375        3,375
  Deferred royalty costs (note 2)                  170,000      185,000
                                                   -------      -------
                                                  $267,967     $313,620
                                                  ========     ========
  
  See accompanying notes to condensed financial statements.
  
  (A) Amounts at July 31, 1996, are from audited financial statements.
  
                                          3
  Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                              Condensed Balance Sheets
  October 31,
                                                                   1996             July 31,
                                                               (Unaudited)          1996 (A)
  Liabilities and Stockholders' Deficiency
  Current Liabilities:
           Accounts payable and accrued expenses (note 3)       $   904,972      $   885,942
           Advanced royalty payments (note 2)                       120,000          120,000
                                                              -------------    -------------
             Total current liabilities                          $ 1,024,972      $ 1,005,942
                                                              -------------    -------------
  
  Advanced royalty payments (note 2)                                340,000          370,000
                                                              -------------    -------------
  
  Stockholders' deficiency:
  
           Common stock, par value $.01 per share 
              Authorized 20,000,000 shares; issued
              8,632,699 shares at October 31, 1996 and
              8,632,699 at July 31, 1996                             86,327           86,327
           Paid in capital                                        6,816,369        6,816,369
           Deficit accumulated during the
              development stage                                  (7,999,701)      (7,965,018)
                                                                 ----------       ----------
  
              Total stockholders' deficiency                     (1,097,005)      (1,062,322)
                                                              -------------    -------------
                                                                $   267,967      $   313,620
                                                              =============    =============
  See accompanying notes to condensed financial statements 
  
  (A) Amounts at July 31, 1996, are from audited financial statements.
  
                                          4
  Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                         Statements of Operations & Deficit
                      Accumulated During the Development Stage
  For The Period
                                                                                                     July 28, 1983
                                                                                                       (Date of
                                                                                                     Incorporation)
                                                                 October 31,      October 31,         To Oct. 31,
                                                                    1996              1995                1996
                                                                 (Unaudited)      (Unaudited)         (Unaudited)
  Revenues:
  Sales - Patents and related technology                                  --                --      $    300,000
  Sales - Gloves                                                          --                --           208,440
  Interest and other income                                              167                --         1,712,728
  License fees & royalties                                            59,855            49,224         2,429,951
                                                                ------------      ------------      ------------ 
  
       Total revenues                                                 60,022            49,224         4,651,119
                                                                ------------      ------------      ------------ 
  
  Expenses incurred in the development stage:
         Cost of sales                                                    --                --           313,243
         Research & development                                           --                --         3,335,251
         General & administrative                                     94,705           105,106         9,002,326
                                                                ------------      ------------      ------------ 
  
       Total expenses incurred in the
         development stage                                            94,705           105,106        12,650,820
                                                                ------------      ------------      ------------ 
  
  Net loss                                                           (34,683)          (55,882)       (7,999,701)
                                                                ------------      ------------      ------------ 
  
  Deficit accumulated during the development stage:
  
       Beginning of period                                      $ (7,965,018)     $ (7,832,774)               --
                                                                ------------      ------------      ------------ 
  
       End of period                                            $ (7,999,701)     $ (7,888,656)     $ (7,999,701)
                                                                ============      ============      ============ 
  
  Net loss per common share                                             (.01)             (.01)            (1.03)
                                                                ============      ============      ============
  
  Weighted average number of
       shares outstanding                                          8,633,000         8,633,000         7,760,000
                                                                ============      ============      ============
  See accompanying notes to condensed financial statements 
  
                                          5
  Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                         Condensed Statements of Cash Flows
  For the Period
                                                                                               July 28, 1983
                                                                                                 (Date of
                                                                                               Incorporation)
                                                             October 31,      October 31,      to October 31,
                                                                1996              1995             1996
                                                            (Unaudited)       (Unaudited)       (Unaudited)
  Cash flows from operations:
       Net loss                                             $   (34,683)     $   (55,882)     $(7,999,701)
       Non-cash expenses included in net loss:
         Depreciation and amortization                               --            5,697          310,234
         Non-cash compensation charges                               --               --          889,130
         Abandoned equipment                                         --               --           53,386
         Write-off of patents                                        --               --          105,221
         Write-off of inventory/advance payments                     --               --          115,048
         Other                                                       --               --            4,499
  Changes in current assets & liabilities:
       (Increase) in inventory & advance payments                    --               --         (115,048)
       (Increase) decrease in grant & other receivables              --           43,448          (15,319)
       (Increase) decrease in deferred royalty costs             15,000         (290,000)        (230,000)
       Increase in accounts payable & accrued expenses           19,030          213,825          907,294
       Increase (decrease) in advance
            development & royalty payments                      (30,000)         580,000          460,000
                                                          -------------   --------------   --------------
            Net cash flows of operations                        (30,653)         497,088       (5,515,256)
                                                          -------------   --------------   --------------
  
  Cash flows from investing activities:
       Purchase of U. S. government obligations                      --               --       (8,813,987)
       Redeemed U. S. government obligations and
            other short-term investments                             --               --        8,810,988
       Purchase of equipment & furniture                             --               --         (159,370)
       Purchase of patents                                           --               --         (171,750)
       (Increase) in due from officer & stockholder                  --               --         (110,601)
       (Purchase) of other assets                                    --               --          (30,095)
                                                         --------------   --------------   --------------
            Net cash flows of investing activities                   --               --         (474,815)
                                                         --------------   --------------   --------------
  
       Cash flows from financing activities:
            Proceeds from sale of common stock &
              warrants - net                                         --               --        6,009,344
                                                         --------------   --------------   --------------
       Net increase (decrease) in cash                          (30,653)         497,088           19,273
       Cash, including certificates of deposit:
            Beginning of period                                  49,926           10,862               --
                                                            -----------      -----------     ------------
            End of period                                   $    19,273      $   507,950      $    19,273
                                                          =============    =============    =============
  See accompanying notes to condensed financial statements.
  
                                          6
  NOTES TO CONDENSED FINANCIAL STATEMENTS-October 31, 1996 (Unaudited)
  
  (1)      Basis of Presentation
  
           The unaudited  condensed  financial  statements have been prepared from
           the books and records of Daltex Medical Sciences,  Inc. (the "Company")
           in accordance with generally accepted accounting principles for interim
           financial  information  pursuant  to  Rule  10-01  of  Regulation  S-X.
           Accordingly,  they do not include all of the  information and footnotes
           required by  generally  accepted  accounting  principles  for  complete
           financial  statements.  In the opinion of management,  all  adjustments
           (consisting of normal recurring  accruals)  considered  necessary for a
           fair  presentation   have  been  included.   Interim  results  are  not
           necessarily  indicative  of the results  that may be  expected  for the
           fiscal year.
  
  (2)      Advanced Royalty Payment
  
           In October 1995, the Company and Arrow  International,  Inc.  ("Arrow")
           agreed to modify the terms of the existing Arrow License (the "Modified
           Arrow  License")  concerning  only those  license  fees  payable to the
           Company by Arrow for antimicrobially treated multi-lumen central venous
           catheters (exclusive of silicone Hickman/Broviac type, implantable port
           or peripherally inserted central venous catheters).  During the quarter
           ended  October 31, 1995 and  pursuant to the  Modified  Arrow  License,
           Arrow paid to the Company a one time  royalty of  $600,000  (in lieu of
           the periodic  royalty paid to the Company pursuant to the Arrow License
           for such catheters) for the period August 31, 1995 through September 1,
           2000, of which 50% was paid to Columbia  University (the  "University")
           in  November  1995  pursuant to the terms of a 1987  license  agreement
           between the Company and the University. Revenue, as well as the expense
           for the amounts paid to the University, will be recognized each quarter
           through September 1, 2000 in equal amounts, and accordingly, $30,000 of
           revenue  and  $15,000 of related  expense  were  recognized  during the
           quarter ended October 31, 1996.  After  September 1, 2000, the periodic
           royalty  payments  provided  for in the  existing  Arrow  License  with
           respect  to the  antimicrobially  treated  multi-lumen  central  venous
           catheters will resume and will be adjusted to reflect  increases in the
           Consumer  Price Index  through  September 1, 2000.  All other terms and
           conditions  of  the  existing  license  agreement   (including  Arrow's
           obligation  to make  quarterly  royalty  payments  based  on  sales  of
           percutaneous  sheath  introducer  ("PSI")  units  sold,  and  quarterly
           development  phase  payments for those  products Arrow is developing or
           has developed  incorporating the Company's  antimicrobial  technology),
           except those terms modified by a certain Patent Settlement Agreement of
           January 1, 1995,  remain in full force and  effect.  In  addition,  the
           Modified Arrow License does not modify or alter the terms of the Patent
           Settlement  Agreement.  For  a  discussion  of  the  Patent  Settlement
           Agreement and the  resolution of the Patent  Interference  Proceedings,
           see "Item 3. Legal  Proceedings" of the Company's Annual Report on Form
           10-K for the fiscal year ended July 31, 1995.
  
                                          7
  (3)      License Agreement and Research Agreement
  
           The Company currently has various license and research  agreements with
           the  University  related to  certain  antimicrobial  technologies  (see
           "Management's  Discussion  and  Analysis  of  Financial  Condition  and
           Results of Operations"). In this capacity, in January 1996, the Company
           paid the University $6,400 for the antimicrobial coating and evaluation
           of samples of tracheal  suction  catheters for a leading medical device
           manufacturer  who  has  expressed  interest  in  a  possible  licensing
           arrangement with the Company.  On December 3, 1996 the Company paid the
           University  $2,691.88,  representing  the  University's  50%  share  of
           payments  received  by the  Company  from  Arrow  representing  royalty
           payments  (based on sales of PSI  units  sold by Arrow  during  Arrow's
           quarter ended August 31, 1996) and quarterly development phase payments
           on  those   products   which  Arrow  has  developed  or  is  developing
           incorporating the Company's antimicrobial technology.
  
           The Company currently owes the University $165,706 for the University's
           past due share of  sublicensing  and royalty  payments  received by the
           Company through December 1994, and $22,500 for the  University's  share
           of  the  advance   development  and  royalty  payments  received  by  a
           sublicensee described in note 4 below.
  
           Moreover,  the Company has been billed  $630,168 as of October 31, 1996
           by the University's patent counsel for patent work undertaken under the
           Company's license agreements with the University,  although the Company
           is currently  disputing a substantial  portion of these legal fees. All
           of these  amounts are included in accounts  payable at October 31, 1996
           on the accompanying condensed balance sheet. Included in this amount is
           approximately  $ 120,820,  representing  charges in connection with the
           Company's  protection  of  its  intellectual  property  rights  through
           domestic and foreign patent filings and related matters.  Also included
           in this  amount is  approximately  $108,560,  representing  charges  in
           connection with the two AIDS-related patents and the patent application
           for   antimicrobially   treated  condoms  which  the  Company  and  the
           University have agreed in principle to reassign to the University,  due
           to the fact that the Company has been  unsuccessful  in licensing these
           technologies  to third  parties.  Finally,  approximately  $401,000  is
           included in this amount,  representing  charges in connection  with the
           previously  disclosed  Patent  Interference  Proceedings and subsequent
           Patent  Settlement  Agreement.   The  Company  disputes  the  Company's
           responsibility  for this  $401,000,  and the Company and the University
           are  attempting  to  negotiate  a  settlement.  Because the Company has
           proposed  to  reassign  the two  AIDS-related  patents  and one  patent
           application for antimicrobially treated condoms to the University,  the
           Company has requested  that the  University  credit the Company for the
           $108,560 outstanding amount due the University's patent counsel related
           to these matters. The University has continued to work with the Company
           with respect to these matters,  and the Company's  financial  condition
           and its relation to the University.  Although the Company is continuing
           its attempts to resolve these matters with the University, there can be
           no  assurance  that  the  Company  will be  successful  in  reaching  a
           solution.
  
                                          8
  (4)      Subsequent Event
  
           In November  1996, the Company  received an advance  payment of $45,000
           from one of its  sublicensees,  of which $22,500 is due the  University
           pursuant to the terms of a 1987 license  agreement  between the Company
           and the University.  Such $45,000  payment to the Company  consisted of
           (i) $15,000 in advance royalty payments  against minimum  royalties due
           the Company  based on sales of one segment of  antimicrobially  treated
           surgical  patches  recently  introduced  to  the  marketplace  by  such
           sublicensee; and (ii) $30,000 in advance development phase payments for
           two   additional   product   segments   incorporating   the   Company's
           antimicrobial technology. Such advance essentially represented payments
           due to the Company in the Company's  third quarter in fiscal 1997.  The
           Company has no agreement with the sublicensee  regarding future advance
           payments.
  
                                          9
  Item 2
  
                       Management's Discussion and Analysis of
  
                    Financial Condition and Results of Operations
  
           The  Company  is  in  the  development  stage  with  the  objective  of
  developing  and  commercializing   certain   cost-reducing  medical  device  and
  pharmaceutical  technologies.  Since  March  1,  1994  and  continuing  to date,
  research and development  efforts have been extremely limited,  or in most cases
  put  on  hold.  In  an  effort  to   commercialize   its  more  fully  developed
  technologies,  the Company had focused  from 1990 to March 1994,  its  research,
  development and commercialization efforts principally on its infection-reducing,
  antimicrobial  technologies,  including the  manufacture  and marketing  through
  distributors  of the Company's  antimicrobial  gloves and the licensing of other
  applications of the antimicrobial  technology to larger companies.  In the first
  quarter of fiscal 1997,  as well as in fiscal 1996,  the Company had no sales of
  any of its  technologies  or its  antimicrobial  medical  gloves.  See  "Item 1.
  Business" of the Company's  Annual Report on Form 10-K for the fiscal year ended
  July 31, 1996 for a discussion of the dispute with the University concerning the
  license for the antimicrobial glove technology, and a discussion of the terms of
  the Patent  Settlement  Agreement dated as of January 1, 1995 among the Company,
  the University, Arrow and Becton Dickinson.
  
           Given the continually deteriorating financial condition of the Company,
  the Board of Directors of the Company has recently authorized Bruce Hausman, the
  President and Chief Executive  Officer of the Company,  to negotiate the sale of
  the Company's rights to various applications of the antimicrobial  technology to
  certain sublicensees of the Company. These applications constitute substantially
  all of the assets of the Company. In the event that the Company is successful in
  selling  substantially  all of its assets,  the Company will either  endeavor to
  sell  the  remaining  corporate  shell  to a third  party  or to  liquidate  any
  remaining assets. The Company has not entered into any agreement to date for the
  sale of any  antimicrobial  technology or any other assets,  and there can be no
  assurance  that  the  Company  will be  successful  in  entering  into  any such
  agreement.
  
           In the event that the Company is  unsuccessful in negotiating a sale of
  its rights to the  antimicrobial  technology,  the  Company may seek to transfer
  this  technology  back to the University in exchange for the  forgiveness by the
  University  of  all of the  outstanding  amounts  owed  by  the  Company  to the
  University.
  
           During the first  quarter of fiscal 1997 and for the fiscal years ended
  July 31, 1996 and 1995, the Company received  revenues from royalty payments and
  development  fees pursuant to two licenses with  sublicensees of applications of
  the Company's antimicrobial medical technology in addition to an advance payment
  from one of its sublicensees  and the one-time  royalty payment,  both discussed
  below.
  
                                         10
  In October 1995,  the Company  received a one-time  royalty  payment of
  $600,000 from Arrow,  of which 50% was paid in November  1995 to the  University
  pursuant to the 1987 License  Agreement  between the Company and the University.
  Additionally,  in November 1995, the Company received $75,000 from Arrow to help
  fund the payment of legal costs  incurred by the Company in connection  with the
  Patent  Interference  Proceedings  and  the  Patent  Settlement  Agreement.  See
  "-Results of Operations" and "-Liquidity and Capital Resources."
  
           The Company will continue to receive  development phase payments on the
  other products  incorporating the Company's  antimicrobial  technology which the
  Company's  sublicensees  are  developing or have  developed,  which have not yet
  received  FDA  clearance  or have not yet  reached  the  marketplace  as well as
  quarterly  royalty  payments  from  Arrow  based on sales  of PSI  systems,  and
  quarterly  royalty payments from the Company's other  sublicensee based on sales
  of one product  segment  which has received FDA  clearance and has very recently
  been  introduced to the  marketplace.  As a result of the  Company's  receipt in
  November  1996  of  an  advance,  annual  minimum  royalty  payment  of  $15,000
  (described  in note 4  above),  pursuant  to the terms of a  definitive  license
  agreement  between the Company and such  sublicensee  entered  into in May 1992,
  annual  development phase payments from such sublicensee for one product segment
  application  have been  replaced by royalty  payments.  The Company is unable to
  assess at this time  whether  and to what  extent  such  royalty  payments  will
  increase in the future.
  
  Results of Operations for the Three Months Ended October 31, 1996
  
           Revenues for the quarter ended October 31, 1996  totalled  $60,022,  an
  increase of 21.9% over the $49,224 in revenues during the  corresponding  period
  in the previous  fiscal year.  Revenues from licensing fees in the first quarter
  of fiscal  1997 were  $5,000,  a  decrease  from the  $7,500  in  revenues  from
  licensing fees in the first quarter of fiscal 1996 due to the replacement of one
  development phase payment with nominal royalty payments. Revenues from royalties
  were $54,855, an increase of 31.4% over the $41,722 in royalty payments received
  during the first quarter of fiscal 1996 as the result of a $24,471  payment made
  by Arrow to the  Company  pursuant  to the  Patent  Settlement  Agreement  which
  provides  for certain  royalties to be paid by Arrow to the Company and for such
  royalties to be paid by the Company to another  party to such Patent  Settlement
  Agreement,  and a slight  increase in royalty  payments  from Arrow (of $384, of
  which 50% was paid to the University on December 3, 1996) based on limited sales
  by  Arrow of PSI  systems.  Included  in  revenues  from  royalties  is  $30,000
  representing  royalties  earned for the quarter  ended  October 31, 1996 derived
  from the $600,000  advance royalty payment received by the Company from Arrow in
  October  1995.  (See notes 2 and 3 above.) The  unearned  portion of $460,000 is
  reflected  as  deferred  revenue  in the  liability  section  and the  remaining
  $230,000 of the $300,000 paid to the University in November 1995 is reflected as
  deferred royalty costs in the asset section of the balance sheets.  Although the
  Company had no sales of its antimicrobial  gloves in the current quarter,  there
  were no glove  sales in the  corresponding  period of fiscal  1996  either.  The
  Company  maintains its belief that such lack of glove sales  continues to be due
  to the difficulty it faces as a small company with extremely  limited  resources
  in introducing and marketing a new product internationally without
  
                                         11
  the benefit of a domestic  sales base or  regulatory  clearance by the U.S. Food
  and Drug Administration ("FDA").
  
           Expenses  incurred  during the three  months  ended  October  31,  1996
  totalled  $94,705,  a decrease of 9.9% from the $105,106 of expenses incurred in
  the three months ended October 31, 1995.  This decrease was due to the reduction
  of legal costs incurred by the Company in connection  with the protection of its
  intellectual property rights.
  
           The  Company  sustained  a net loss of  $34,683  in the  quarter  ended
  October 31,  1996, a decrease of 37.9% from the net loss of $55,882 in the first
  quarter of fiscal 1995, primarily due to the aforementioned factors.
  
  Liquidity and Capital Resources
  
           At October  31,  1996,  the Company  had a working  capital  deficit of
  approximately  $930,000,  which represented an increase of approximately $50,000
  in such deficit from July 31,  1996.  During the three months ended  October 31,
  1996,  the  Company  had a decrease  of  $30,653  in cash flows from  operations
  principally  due to the receipt of a one time, five year advance royalty payment
  of $600,000 from Arrow in 1995, as described  above.  It is expected that future
  cash flows will be substantially less than reported revenues due to the one time
  advance royalty payment from Arrow. This one-time payment from Arrow had enabled
  the  Company  to  satisfy  certain  obligations  to its  creditors  and to  make
  substantial  payments to the University as required under various  licenses with
  the University. Although the Company has not satisfied all of its obligations to
  the University or the University's patent counsel, the Company is continuing its
  efforts  to resolve  such  matters.  All  remaining  funds  have been,  and will
  continue to be, used for working  capital.  At October 31, 1996, the Company had
  cash and cash equivalents of approximately $19,273.
  
           In November 1996, the Company  received advance royalty and development
  phase payments from another of its sublicensees as described in note 4 above.
  
           The Company currently owes the University $188,206. (See notes 2, 3 and
  4 to the  financial  statements.)  It is expected that future cash flows will be
  substantially  less than reported  revenues due to the one time advance  royalty
  payment  from Arrow.  The Company is currently  negotiating  with certain of its
  sublicensees for the sale of the Company's rights to various applications of the
  antimicrobial technology. In the event that the Company is successful in selling
  its rights to this  technology,  the Company  would use the funds  received from
  such sale to satisfy its outstanding  financial  obligations,  including amounts
  owed to the  University and the  University's  patent  counsel.  There can be no
  assurance, however, that the Company will be successful in selling its rights to
  the antimicrobial technology to a third party.
  
           In the event that the Company is  unsuccessful in negotiating a sale of
  its rights to the  antimicrobial  technology,  the  Company may seek to transfer
  this technology back to the
  
                                         12
  University  in exchange  for the  forgiveness  by the  University  of all of the
  outstanding amounts owed by the Company to the University.
  
           The  Company  is still in the  developmental  stage,  and its  business
  operations  have only generated a nominal amount of revenues to date.  There can
  be no assurance that the Company will be successful in raising  additional funds
  or that  the  Company  will  continue  as a going  concern.  The  report  of the
  Company's  independent  auditors on the Company's  financial  statements for the
  fiscal  years  ended July 31,  1996,  1995,  and 1994  included  an  explanatory
  paragraph which stated that the Company's  recurring  losses and working capital
  and total  stockholders'  deficits raised  substantial doubt about the Company's
  ability to  continue as a going  concern  and  precluded  the  expression  of an
  opinion on the Company's financial statements as of and for the years ended July
  31,  1996,  1995,  and  1994.  The  financial  statements  did not  include  any
  adjustments that might result from the outcome of that  uncertainty.  Because of
  the continued  working  capital  deficit,  the Company is attempting to sell its
  rights to various  applications of the  antimicrobial  technology,  as discussed
  above.  In any event,  the Company is attempting to resolve the dispute with the
  University  over the license for the  antimicrobial  glove  technology and legal
  fees billed to the Company by the University's patent counsel.  Furthermore, the
  Company  will  continue  to  attempt to  curtail  expenditures.  There can be no
  assurance that the Company will be successful in any of the foregoing.
  
           In the event that the  Company is  unsuccessful  in its attempt to sell
  its rights to the antimicrobial technology or to transfer such technology to the
  University,  the  Company  does  not have any  other  plans to raise  additional
  capital and there can be no assurance  that it will be able to raise  additional
  capital in the future or  continue  as a going  concern.  The Company may not be
  able to  continue as a going  concern or avoid  liquidation,  even with  further
  cost-cutting measures.
  
  Regulatory Proceedings
  
           In May 1989, the Company filed a pre-market 510(k) notification seeking
  consent to market its antimicrobial latex examination gloves. Since this initial
  510(k)  submission,  the Company has, from 1991 to date, amended and resubmitted
  the 510(k) several times and otherwise contacted,  in writing and in person, the
  FDA Office of Device  Evaluation  ("ODE") in an effort to obtain a determination
  of "substantial  equivalence" to previously  marketed latex examination  gloves.
  The ODE has notified the Company, in response to each of these submissions, that
  the Company's  antimicrobial  latex  examination  gloves are not  "substantially
  equivalent"  since the gloves have a new  indication  for an  examination  glove
  which may affect the prophylactic  effect, thus constituting a new intended use.
  The ODE has  further  stated,  in denying  market  clearance,  that no  accepted
  scientific  methods  presently  exist for  assessment  of the  effectiveness  of
  antiviral  activity for topical  antimicrobials,  particularly  under  glove-use
  conditions.
  
           On  September  26,  1995,  Mr.  Ulatowski  of the ODE  informed Dr. Del
  Guercio that  pursuant to the  Company's  most recent  submission  of data,  the
  Company was invited to make
  
                                         13
  a  presentation  concerning  the Company's  gloves before the FDA's  independent
  General Hospital Panel.
  
           On March 11, 1996,  Dr.  Shanta M. Modak of the  Department of Surgery,
  Columbia University,  where the antimicrobial  technology was developed, and Dr.
  Louis R.M.  Del Guercio,  the  Company's  Chairman,  attended the meeting on the
  Company's  behalf.  Each made a  presentation  before  the  Advisory  Committee,
  General  Hospital  and  Personal  Use  Devices  Panel,  Center for  Devices  and
  Radiological  Health.  Mr. Lester  Sampath,  also of the  Department of Surgery,
  Columbia  University,  was there as an  observer.  The Panel acts in an advisory
  capacity and makes  recommendations  to the FDA regarding whether or not certain
  device submissions should receive FDA clearance to be marketed.  While the Panel
  did not make any  recommendation  to the FDA at the March 11, 1996 meeting,  the
  Panel  voted to  accept  a  previously  distributed  opinion  of an  independent
  consultant  indicating  that  the  Company's  examination  gloves  do not have a
  positive  impact on disease  control.  To date, the Company has not yet received
  written   notice  from  the  FDA  of  its  decision   regarding   the  Company's
  antimicrobial  gloves following the March 11, 1996 meeting,  nor has the Company
  received a written  response from the FDA  concerning  the Company's  previously
  disclosed  response to Dr. Sheldon's  memorandum to Mr.  Ulatowski  submitted on
  September  13,  1995.  However,  Dr.  Modak has been  contacted  by Mr.  Terrell
  Cunningham,  Nurse  Consultant  of the ODE,  who has informed Dr. Modak that Mr.
  Ulatowski  of the ODE has sent a written  request  to Dr.  Sheldon  asking for a
  response  to  the  Company's   September  1995  submission.   According  to  Mr.
  Cunningham,  Dr. Modak or the Company was to have received a response by the end
  of October  1996.  To date,  neither the Company nor Dr. Modak has received such
  response.
  
           At present, the Company does not have sufficient financial resources to
  fund additional clinical testing, if such testing is required.  However,  should
  the Company's financial condition improve, the Company would spend some of these
  funds on  additional  testing  that may be  required.  There can be no assurance
  that,  even with  additional  testing,  if such  testing is  required,  that the
  Company will obtain FDA clearance to market its antimicrobial latex gloves.
  
           The  Company  has  received  clearance  from  the  Canadian  Bureau  of
  Radiation and Medical Devices of the Environmental  Health  Directorate,  Health
  Protection Branch, to market its Antimicrobial  Latex Examination Gloves and its
  sterile hypoallergenic antimicrobial surgeons' gloves in Canada under the Daltex
  A/M(TM) trademark.
  
           Based upon advice of its regulatory  counsel and its independent former
  medical products  distributor in Germany,  the Company believes it may offer its
  antimicrobial  latex examination  gloves and sterile surgical gloves for sale in
  Germany,  through distributors,  without seeking special regulatory clearance in
  the  event  that the  Company  obtains  the  financial  resources  necessary  to
  manufacture and market such gloves.
  
                                         14
  PART II-          OTHER INFORMATION
  
  Item 5 -          Other Information
  
                    None.
  
  Item 6 -          Exhibits and Reports on Form 8-K
  
           (a)      Exhibits
  
                    None
  
           (b)      Reports on Form 8-K
  
                    No  reports on Form 8-K were filed  during the  quarter  ended
                    October 31, 1996.
  
                                         15
  SIGNATURES
  
  Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
  the registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized.
  
                                           DALTEX MEDICAL SCIENCES, INC.
  
  Date: December 19, 1996                 By: /s/ Bruce Hausman, Esq.
                                              ------------------------------------
                                                  BRUCE HAUSMAN, ESQ.
                                                  President and Chief 
                                                  Executive Officer
  
  Date: December 19, 1996                 By: /s/ Herbert J. Mitschele, Jr.
                                              ------------------------------------
                                                  HERBERT J. MITSCHELE, JR.
                                                  Secretary, Treasurer and 
                                                  Chief Financial Officer