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 January 31, 1997
                           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 March 7, 1997
  
   Common Stock, par value $.01                          8,632,699
          per share
  
  
  <PAGE>
                            DALTEX MEDICAL SCIENCES, INC.
                                        INDEX
                                                                             Page
  
  PART  1 - FINANCIAL INFORMATION
  
  Item 1 - Financial Statements
  
            (a)       Condensed  balance  sheets as of January  31,
                      1997 (Unaudited) and July 31, 1996                     1-2
  
            (b)       Condensed   statements  of   operations   and
                      deficit  accumulated  during the  development
                      stage for the three months ended  January 31,
                      1997   (Unaudited)   and   January  31,  1996
                      (Unaudited),  six months  ended  January  31,
                      1997   (Unaudited)   and   January  31,  1996
                      (Unaudited), and for the period July 28, 1983
                      (Date of  Incorporation)  to January 31, 1997
                      (Unaudited)                                              3
  
            (c)       Condensed  statements  of cash  flows for the
                      six months ended January 31, 1997 (Unaudited)
                      and January 31, 1996 (Unaudited), and for the
                      period July 28, 1983 (Date of  Incorporation)
                      to January 31, 1997 (Unaudited)                          4
  
            (d)       Notes  to  condensed   financial   statements
                      (Unaudited)                                            5-6
  
  Item 2 - Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                        7-11
  
  PART II -OTHER INFORMATION
  
  Item 5 - Other Information                                                  11
  
  Item 6 - Exhibits and Reports on Form 8-K                                   11
  <PAGE>
  
  PART 1 - FINANCIAL INFORMATION
  
  Item 1 - Financial Statements
  
                    Daltex Medical Sciences, Inc.
                   (A Development Stage Enterprise)
                       Condensed Balance Sheets
  
  
                                                January 31,
                                                    1997        July 31,
                                                (Unaudited)     1996(A)
  
  Assets
  
  Current assets:
          Cash and cash equivalents                $21,863      $49,926
          Other receivables                         15,319       15,319
          Prepaid royalty                           60,000       60,000
                                                  --------     --------
              Total current assets                  97,182      125,245
  
  Net plant and equipment, at cost
  Patents, net of accumulated amortization of
     $134,426 at January 31, 1997
     and $134,426 at July 31, 1996                      --           --
  Other assets, net                                  3,375        3,375
  Deferred royalty costs (note 2)                  155,000      185,000
  
                                                  $255,557     $313,620
                                                  ========     ========
  
  See accompanying notes to condensed financial statements.
  
  (A) Amounts at July 31, 1996 are from audited financial statements.
  
  
                                          1
  
  <PAGE>
  
                            Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                              Condensed Balance Sheets
  <TABLE>
  <CAPTION>
                                                                 January 31,
                                                                     1997            July 31,
                                                                 (Unaudited)         1996(A)
  <S>                                                             <C>              <C>     
  Liabilities and Stockholders' Deficiency
  
  Current liabilities:
          Accounts payable & accrued expenses (note 3)             $908,004         $885,942
          Advance royalty payments (note 2)                          165,00          120,000
                                                                -----------      -----------
          Total current liabilities                               1,073,004        1,005,942
                                                                -----------      -----------
  
  Advance royalty payments (note 2)                                 310,000          370,000
                                                                -----------      -----------
  
  Stockholders' deficiency:
          Common Stock, par value $.01 per share 
          Authorized 20,000,000 shares; issued
          8,632,699 shares at January 31, 1997 and
          8,632,600 at July 31, 1996                                 86,327           86,327
          Paid in capital                                         6,816,369        6,816,369
          Deficit accumulated during the
              development stage                                  (8,030,143)      (7,965,018)
                                                                -----------      -----------
  
          Total stockholders' deficiency                         (1,127,447)      (1,062,322)
                                                                -----------      -----------
  
                                                                   $255,557         $313,620
                                                                ===========      ===========
  
  </TABLE>
  
  See accompanying notes to condensed financial statements 
  
  (A) Amounts at July 31, 1996 are from audited financial statements.
  
  
                                          2
  <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
                                     Three Months      Three Months       Six Months         Six Months         (Date of
                                        Ended              Ended            Ended              Ended         Incorporation)
                                     January 31,        January 31,       January 31,        January 31,      To January 31,
                                        1997               1996              1997               1996               1997
                                     (Unaudited)       (Unaudited)       (Unaudited)        (Unaudited)        (Unaudited)
  <S>                                      <C>               <C>              <C>               <C>             <C>      
  Revenues:
  Sales - Patents & related
   technology                        $         --      $         --      $         --      $         --          $300,000
  Sales - Gloves                               --                --                --                --           208,440
  Interest and other income                    90            75,000               257            75,000         1,712,818
  License fees and royalties               66,282            60,380           126,137           109,604         2,496,233
                                     ------------      ------------      ------------      ------------      ------------
  
  Total revenues                           66,372           135,380           126,394           184,604         4,717,491
                                     ------------      ------------      ------------      ------------      ------------
  
  Expenses incurred in the
   development stage:
  Cost of sales                                --                --                --                --           313,243
  Research & development                       --             6,400                --             6,400         3,335,251
  General & administrative                 96,814           121,469           191,519           226,575         9,099,140
                                     ------------      ------------      ------------      ------------      ------------
  
  Total expenses incurred in the
  development stage                        96,814           127,869           191,519           239,975        12,747,634
                                     ------------      ------------      ------------      ------------      ------------
  
  Net income (loss)                       (30,442)            7,511           (65,125)          (48,371)       (8,030,143)
                                     ------------      ------------      ------------      ------------      ------------
  
  Deficit accumulated during the
   development stage:
  
  Beginning of period                  (7,999,701)       (7,888,656)       (7,965,018)       (7,832,774                --
                                     ------------      ------------      ------------      ------------      ------------
  
  End of period                       $(8,030,143)      $(7,881,145)      $(8,030,143)      $(7,881,145)      $(8,030,143)
                                     ============      ============      ============      ============      ============
  
  Net loss per common share                    --                --             (0.01)            (0.01)            (1.03)
                                     ============      ============      ============      ============      ============
  
  Weighted average number of
  shares outstanding                    8,633,000         8,633,000         8,633,000         8,633,000         7,780,000
                                     ============      ============      ============      ============      ============
  </TABLE>
  
  
  See accompanying notes to condensed financial statements.
  
                                          3
  
  <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)
                                                                                January 31,        January 31,   to January 31,
                                                                                   1997               1996           1997
                                                                                (Unaudited)       (Unaudited)     (Unaudited)
  <S>                                                                           <C>              <C>             <C>      
  Cash flows from operations
     Net loss:                                                                    $(65,125)        $(48,371)     $(8,030,143)
     Non-cash expenses included in net loss:
          Depreciation and amortization                                                 --           11,394          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                                   --           35,948          (15,319)
     (Increase) decrease in deferred royalty costs                                  30,000         (275,000)        (215,000)
     Increase (decrease) in accounts payable & accrued expenses                     21,882         (190,901)         809,853
     Increase (decrease) in advance development & royalty payments                 (15,000)         550,000          475,000
                                                                               -----------      -----------      -----------
     Net cash flows of operations                                                  (28,243)          83,070       (5,512,845)
                                                                               -----------      -----------      -----------
  
  Cash flows from investing activities:
     Purchase of U.S. government obligations                                            --               --       (8,813,987)
     Redeemed U.S. government obligations and other short-term investments              --               --        8,810,987
     Purchase of equipment & furniture                                                  --               --         (159,370)
     Purchase of patent & trademark                                                     --               --         (171,750)
     (Increase) decrease in due from officer & stockholder                              --               --         (110,601)
     (Purchase) sale of other assets                                                    --               --          (30,095)
                                                                               -----------      -----------      -----------
          Net cash flows of investment activities                                       --               --         (474,816)
                                                                               -----------      -----------      -----------
  
  Cash flow from financing activities:
     Proceeds from sale of common stock & warrants, net                                 --               --        6,009,344
  
  Net increase (decrease) in cash                                                  (28,243)              --           21,683
  Cash, including certificates of deposit:
     Beginning of period                                                            49,926           10,862               --
                                                                               -----------      -----------      -----------
     End of period                                                                 $21,683          $93,932          $21,683
                                                                               ===========      ===========      ===========
  
  See accompanying notes to condensed financial statements 
  
                                          4
  
  <PAGE>
           NOTES TO CONDENSED FINANCIAL STATEMENTS-January 31, 1997 (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)      Advance Royalty and Development Phase Payments
  
           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 the 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 January 31, 1997.  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  Arrow  License  (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 the 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.
  
           During the quarter ended January 31, 1997, the Company received nominal
           royalty  payments  from Arrow based on limited  sales of PSI units sold
           during this period,  and quarterly  development  phase payments for two
           other products which Arrow is developing or has developed incorporating
           the Company's antimicrobial technology.
  
           Additionally, in November 1996, the Company received an advanced annual
           payment  (which was not  scheduled to be paid until April 1, 1997) from
           W.L. Gore & Associates, Inc. ("Gore"),
  
                                          5
  
  <PAGE>
  
           another  of the  Company's  sublicensees,  in the  amount  of  $45,000.
           Included  in this amount was $15,000  representing  an advance  against
           annual  minimum  royalties to be paid to the Company  based on sales of
           antimicrobially   treated  hernia  patches  which  have  recently  been
           introduced  to  the  marketplace  by  Gore,  and  $30,000  representing
           advanced  annual  development  phase  payments  for two  other  product
           segments  also  licensed to Gore  pursuant to the terms of the May 1992
           License Agreement between the Company and Gore.
  
  (3)      License Agreement and Research Agreement
  
           The Company  currently  has various  license  agreements  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
           1997,  the Company  paid the  University  $2,841.25,  representing  the
           University's 50% share,  pursuant to the 1987 License Agreement between
           the Company and the University, of sublicense and royalty fees received
           by the Company  from Arrow during the quarter  ended  January 31, 1997.
           Further,   in  February  1997,  the  Company  paid  the  University  an
           additional  $22,500,  representing  the  University's  50% share of the
           advanced  annual  development  and  royalty  payments  received  by the
           Company from Gore as described in note 2 above.
  
           As of January 31, 1997,  the Company owes the  University  $165,706 for
           the  University's  past due share of sublicensing  and royalty payments
           received by the Company  through 1994.  Moreover,  the Company has been
           billed  $638,303  as of January  31,  1997 by the  University's  patent
           counsel for patent work  undertaken  in  connection  with 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 January 31, 1997 on
           the accompanying  condensed balance sheets.  Included in this amount is
           approximately  $128,954,  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,
           because  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
           continue  attempts 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,  there can be no assurance that the
           Company  will  be  successful   in  reaching  a  resolution   with  the
           University.
  
  (4)      Subsequent Event - License Amendment Agreement
  
           In February 1997, the Company and Gore entered into a License Amendment
           Agreement, dated as of January 1, 1997, clarifying the specific product
           and market application segments set forth
  
                                          6
  
  <PAGE>
  
           in the existing license  agreement entered into by the Company and Gore
           in May 1992. The Company and Gore have also agreed to a royalty rate of
           5% for any  product  that does not  otherwise  fit within  the  royalty
           scheme set forth in Schedule 1 to the License Amendment Agreement.  All
           other  terms and  conditions  set forth in the  existing  1992  license
           agreement remain in full force and effect.
  
  (5)      Other Income
  
           In  February   1997,  the  Company   received   $50,000  from  Gore  in
           consideration for the Company's cooperation with respect to the License
           Amendment  Agreement  described  in note 4 above,  and to help fund the
           payment of legal and filing costs incurred by the Company in connection
           with such Agreement.
  
  
  
  Item 2
  
                       Management's Discussion and Analysis of
                    Financial Condition and Results of Operations
  
                    The following  discussion  contains forward looking statements
  within  the  meaning of the  Private  Securities  Litigation  Reform Act of 1995
  relating to the Company's  plans with respect to its  continually  deteriorating
  financial  condition.  Actual results could differ  materially from management's
  plans and there can be no assurance  that the Company will be  successful in its
  plan  (i)  to  sell  or  license  the  rights  to  certain  applications  of its
  antimicrobial  technology,  (ii) to sell all or substantially all of its assets,
  (iii) to negotiate  the  forgiveness  of certain debt owed to the  University or
  (iv) to continue as a going concern.
  
                    The  Company  is  in  the  development   stage  and  has  been
  principally engaged in research and development activities with the objective of
  developing  and  commercializing   certain   cost-reducing  medical  device  and
  pharmaceutical  technologies.  Since  March 1, 1994,  the Company has engaged in
  extremely   limited   research  and  development   efforts.   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 two quarters 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 dates 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  authorized  Bruce  Hausman,
  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
  
                                         7
  <PAGE>
  
  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  its  rights  to the
  antimicrobial technology or any other assets, and there can be no assurance that
  the Company will be successful in entering into 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 second  quarter of fiscal  1997 and for the fiscal
  years ended July 31, 1996 and 1995, the Company  received  revenues  principally
  from royalty  payments and development  fees pursuant to two licenses with Arrow
  and Gore,  sublicensees of applications of the Company's  antimicrobial  medical
  technology,  and the one-time royalty payment from Arrow,  both discussed below.
  Additionally,  the Company received  advanced  royalty and development  payments
  from one of its sublicensees during the quarter ended January 31, 1997.
  
                    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 clearance from the U.S. Food and Drug Administration
  ("FDA"),  or have not yet reached the marketplace,  as well as quarterly royalty
  payments  from  Arrow  based on sales of PSI units and  annual  minimum  royalty
  payments from Gore based on one product  segment which has recently  reached the
  marketplace.  As a result  of the  introduction  of the PSI to the  marketplace,
  quarterly development phase payments from Arrow have been reduced from $7,500 to
  $5,000,  which  will be  partially  offset by royalty  payments  related to such
  product.  The Company  will also  continue  to receive  annual  minimum  royalty
  payments  from Gore for the  first  three  years of sales  based on sales of one
  product  segment  which has received FDA  clearance  and has very  recently been
  introduced to the  marketplace.  The minimum annual royalty  payment is equal to
  the annual  development  payment the Company had been receiving for such product
  segment.  Such  minimum  annual  royalties  payable  to the  Company by Gore are
  subject to the terms and  conditions  set forth in the existing May 1992 License
  Agreement  between the Company and Gore. As a result of the Company's receipt in
  November 1996 of an advance annual minimum royalty payment of $15,000 (described
  in note 2 above),  annual  development  phase payments from Gore for the product
  segment which has recently been introduced to the marketplace 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 January 31, 1997
  
                    Revenues  for the  quarter  ended  January  31,  1997  totaled
  $66,372,   a  decrease  of  51%  from  the  $135,380  in  revenues   during  the
  corresponding  period in fiscal 1996.  This  decrease in revenues was due to the
  fixed royalties  earned during the quarter ended January 31, 1997 as a result of
  the
  
                                          8
  <PAGE>
  
  Modified  Arrow  License  between  Arrow  and  the  Company  (see  note 2 to the
  financial  statements),  the Company's  receipt in November 1995 of the one-time
  payment of $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,  and  to a  lesser  extent,  the  replacement  of
  quarterly development payments with nominal royalty payments from Arrow based on
  sales of PSI units. Revenues from licensing fees in the second quarter of fiscal
  1997 were $5,000, a decrease of 33.3% from the $7,500 in licensing fees recorded
  in the corresponding period in fiscal 1996 as a result of the replacement of one
  development phase payment with nominal royalty payments. Revenues from royalties
  were $61,282,  an increase of 104% over the $30,000 in royalty payments received
  during the second  quarter of fiscal 1996 as a result of a $30,600  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 $682,  of
  which 50% was paid to the University on January 9, 1997, related to sales of PSI
  units.  Included in revenues from  royalties is $30,000  representing  royalties
  earned for the  quarter  ended  January  31,  1997,  which is  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 $430,000 is reflected
  as deferred revenue in the liability  section and the remaining  $215,000 of the
  $300,000 paid to the  University  is reflected as deferred  royalty costs in the
  assets  section of the balance  sheets.  Also  included in deferred  revenues is
  $45,000  representing  advanced annual  development  phase and royalty  payments
  received from Gore  described in note 2 above,  which will be recorded as income
  in the third quarter of fiscal 1997.
  
                    Although the Company had no sales of its antimicrobial  gloves
  in the current  quarter or during the fiscal  year to date,  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 the benefit of a domestic sales
  base or regulatory clearance by the FDA.
  
                    Expenses  incurred  during the three months ended  January 31,
  1997 totaled $96,814, a decrease of 24.5% from the $127,869 of expenses incurred
  in the three months ended  January 31, 1996  primarily  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 $30,442 for the quarter
  ended  January 31,  1997,  as compared to a recorded net income of $7,511 in the
  corresponding  period in fiscal 1996.  This  difference  is due to the Company's
  receipt in November  1995 of the one-time  payment of $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.
  
           Results of Operations for the Six Months Ended January 31, 1997
  
                    Revenues  for the six months  ended  January 31, 1997  totaled
  $126,394,  a decrease of 31.5% from  revenues  of $184,604 in the  corresponding
  period  last year.  This  decrease in  revenues  was due to the fixed  royalties
  earned for the first six months of fiscal 1997 as a result of the Modified Arrow
  License between the Company and Arrow (see note 2 to the financial  statements),
  the Company's  receipt in November 1995 of the one-time  payment of $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,  and to a lesser extent,  the  replacement  of quarterly  development
  payments with
  
                                          9
  
  <PAGE>
  
  nominal  royalty  payments from Arrow based on sales of PSI units.  In addition,
  revenues included $30,600 as a result of the Patent  Settlement  Agreement which
  provides for certain  royalties to be paid by Arrow to the Company and, in turn,
  paid by the Company to another party to such agreement, as discussed above.
  
                    Expenses incurred during the six months ended January 31, 1997
  totaled $191,519,  a decrease of 20.2% from the $239,975 of expenses incurred in
  the six months ended  January 31, 1996.  This  decrease was due primarily to the
  reduction  in  legal  costs  incurred  by the  Company  in  connection  with the
  Company's  protection of its  intellectual  property  rights.  This decrease was
  partially  offset by payments  totaling  $30,600  made by the Company to another
  party to the Patent Settlement Agreement, as discussed above.
  
                    The Company sustained a net loss of $65,125 for the six months
  ended January 31, 1997, an increase of 34.6% over the net loss of $48,371 in the
  corresponding  period in 1996.  The  increase  in the net loss for the six month
  period is due primarily to the aforementioned factors.
  
           Liquidity and Capital Resources
  
                    At January 31, 1997, the Company had a working capital deficit
  of  approximately  $976,000,  which  represented  an increase  of  approximately
  $96,000 in such deficit from July 31, 1996.  During the six months ended January
  31,  1997,  the Company had a decrease of $28,243 in cash flows from  operations
  principally  due to the receipt in October 1995 of the one-time  advance royalty
  payment  of  $600,000  from  Arrow  which  enabled  the  Company  to reduce  its
  outstanding  accounts  payable,  and the one-time receipt from Arrow in November
  1995 of $75,000 to help fund the payment of legal costs  incurred by the Company
  in connection with the Patent Interference Proceedings and the Patent Settlement
  Agreement. It is expected that future cash flows will be substantially less than
  reported  revenues due to the one-time  advance royalty payment from Arrow. As a
  result of the  aforementioned  payments  to the  University,  payments  to legal
  counsel associated with corporate and intellectual  property matters,  and costs
  associated  with general  operations,  at January 31, 1997, the Company had cash
  and cash equivalents of $21,683.
  
                    In November 1996,  the Company  received  advance  royalty and
  development phase payments from Gore as described in note 2 above.
  
                    The Company currently owes the University  $165,706 (see notes
  2 and 3 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 University in exchange for the forgiveness
  by the University of all of the  outstanding  amounts owed by the Company to the
  University.
  
                                         10
  
  <PAGE>
  
                    The  Company  is  still  in the  development  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 continuing its attempts 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  its  attempts  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
  continue as a going concern or avoid liquidation, even with further cost-cutting
  measures.
  
           Regulatory Developments
  
                    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 had,  from 1991 to
  1993,  amended and resubmitted the 510(k) several times in an effort to obtain a
  determination  of  "substantial   equivalence"  to  previously   marketed  latex
  examination gloves. The FDA Office of Device Evaluation ("ODE") had 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 had further
  stated that no accepted scientific methods presently exist for assessment of the
  effectiveness  of antiviral  activity for topical  antimicrobials,  particularly
  under glove-use conditions.
  
                    On March 11, 1996,  Dr.  Shanta M. Modak of the  Department of
  Surgery,  Columbia  University,  where the  antimicrobial  glove  technology was
  developed,  and Dr. Louis R.M.  Del  Guercio,  the  Company's  Chairman,  made a
  presentation,  on the Company's  behalf,  concerning the Company's gloves before
  the FDA's  Independent  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.  Since the
  March 11, 1996 meeting,  the Company and Dr. Modak have remained in contact with
  the ODE, particularly with Mr. Terrell Cunningham, Nurse Consultant of the ODE.
  
                                         11
  
  <PAGE>
  
                    By letter dated February 27, 1997, the Company was informed by
  Mr.  Ulatowski  of the ODE that,  should the Company  wish to continue  with its
  efforts to bring its antimicrobial gloves to market, the ODE recommends that the
  Company submit a new 510(k),  with the focus of the  submission  directed at the
  recommendations  outlined in Mr. Ulatowski's letter relating to certain labeling
  claims and additional testing.
  
                    At present,  the Company  does not have  sufficient  financial
  resources  to fund  additional  clinical  testing  and to prepare the new 510(k)
  submission  necessary  to ready its  antimicrobial  gloves for the  marketplace.
  However,  should the Company's  financial  condition improve,  the Company would
  spend some of these  funds on  additional  testing  and  preparation  of the new
  510(k)  submission.  There can be no assurance that, even if the Company makes a
  new 510(k)  submission  in  accordance  with Mr.  Ulatowski's  February 27, 1997
  letter and conducts the additional testing suggested  therein,  that the Company
  will obtain FDA clearance to market its antimicrobial latex gloves.
  
  
  PART II - OTHER INFORMATION
  
  Item 5 - Other Information
  
  (a)       Negotiations  with Arrow to Increase Fields of Application in Existing
            License Agreement
  
           The  Company  is  currently  negotiating  with  Arrow  with  respect to
           increasing the Fields of Application for the sublicense  granted by the
           Company to Arrow.  Arrow may make an additional  payment to the Company
           in consideration therefor.  However, there can be no assurance that the
           Company and Arrow will reach agreement with respect to this matter.
  
  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 January 31,
  1997.
  
  
  
                                         12
  
  <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:  March 17, 1997           By: /s/ Bruce Hausman, Esq.
                                     BRUCE HAUSMAN, ESQ.
                                     President and Chief Executive Officer
  
  
  Date:  March 17, 1997           By: /s/ Herbert J. Mitschele, Jr.
                                     HERBERT J. MITSCHELE, JR.
                                     Treasurer, Secretary
                                     and Chief Financial Officer
  
                                         13
  
  
  </TABLE>
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 48509}]
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": "97557898"}, "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 January 31, 1997
                           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 March 7, 1997
  
   Common Stock, par value $.01                          8,632,699
          per share
  DALTEX MEDICAL SCIENCES, INC.
                                        INDEX
                                                                             Page
  
  PART  1 - FINANCIAL INFORMATION
  
  Item 1 - Financial Statements
  
            (a)       Condensed  balance  sheets as of January  31,
                      1997 (Unaudited) and July 31, 1996                     1-2
  
            (b)       Condensed   statements  of   operations   and
                      deficit  accumulated  during the  development
                      stage for the three months ended  January 31,
                      1997   (Unaudited)   and   January  31,  1996
                      (Unaudited),  six months  ended  January  31,
                      1997   (Unaudited)   and   January  31,  1996
                      (Unaudited), and for the period July 28, 1983
                      (Date of  Incorporation)  to January 31, 1997
                      (Unaudited)                                              3
  
            (c)       Condensed  statements  of cash  flows for the
                      six months ended January 31, 1997 (Unaudited)
                      and January 31, 1996 (Unaudited), and for the
                      period July 28, 1983 (Date of  Incorporation)
                      to January 31, 1997 (Unaudited)                          4
  
            (d)       Notes  to  condensed   financial   statements
                      (Unaudited)                                            5-6
  
  Item 2 - Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                        7-11
  
  PART II -OTHER INFORMATION
  
  Item 5 - Other Information                                                  11
  
  Item 6 - Exhibits and Reports on Form 8-K                                   11
  PART 1 - FINANCIAL INFORMATION
  
  Item 1 - Financial Statements
  
                    Daltex Medical Sciences, Inc.
                   (A Development Stage Enterprise)
                       Condensed Balance Sheets
  
                                                January 31,
                                                    1997        July 31,
                                                (Unaudited)     1996(A)
  
  Assets
  
  Current assets:
          Cash and cash equivalents                $21,863      $49,926
          Other receivables                         15,319       15,319
          Prepaid royalty                           60,000       60,000
                                                  --------     --------
              Total current assets                  97,182      125,245
  
  Net plant and equipment, at cost
  Patents, net of accumulated amortization of
     $134,426 at January 31, 1997
     and $134,426 at July 31, 1996                      --           --
  Other assets, net                                  3,375        3,375
  Deferred royalty costs (note 2)                  155,000      185,000
  
                                                  $255,557     $313,620
                                                  ========     ========
  
  See accompanying notes to condensed financial statements.
  
  (A) Amounts at July 31, 1996 are from audited financial statements.
  
                                          1
  Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                              Condensed Balance Sheets
  January 31,
                                                                     1997            July 31,
                                                                 (Unaudited)         1996(A)
  Liabilities and Stockholders' Deficiency
  
  Current liabilities:
          Accounts payable & accrued expenses (note 3)             $908,004         $885,942
          Advance royalty payments (note 2)                          165,00          120,000
                                                                -----------      -----------
          Total current liabilities                               1,073,004        1,005,942
                                                                -----------      -----------
  
  Advance royalty payments (note 2)                                 310,000          370,000
                                                                -----------      -----------
  
  Stockholders' deficiency:
          Common Stock, par value $.01 per share 
          Authorized 20,000,000 shares; issued
          8,632,699 shares at January 31, 1997 and
          8,632,600 at July 31, 1996                                 86,327           86,327
          Paid in capital                                         6,816,369        6,816,369
          Deficit accumulated during the
              development stage                                  (8,030,143)      (7,965,018)
                                                                -----------      -----------
  
          Total stockholders' deficiency                         (1,127,447)      (1,062,322)
                                                                -----------      -----------
  
                                                                   $255,557         $313,620
                                                                ===========      ===========
  See accompanying notes to condensed financial statements 
  
  (A) Amounts at July 31, 1996 are from audited financial statements.
  
                                          2
  Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                         Statements of Operations & Deficit
                      Accumulated During the Development Stage
  For The Period
                                                                                                              July 28, 1983
                                     Three Months      Three Months       Six Months         Six Months         (Date of
                                        Ended              Ended            Ended              Ended         Incorporation)
                                     January 31,        January 31,       January 31,        January 31,      To January 31,
                                        1997               1996              1997               1996               1997
                                     (Unaudited)       (Unaudited)       (Unaudited)        (Unaudited)        (Unaudited)
  Revenues:
  Sales - Patents & related
   technology                        $         --      $         --      $         --      $         --          $300,000
  Sales - Gloves                               --                --                --                --           208,440
  Interest and other income                    90            75,000               257            75,000         1,712,818
  License fees and royalties               66,282            60,380           126,137           109,604         2,496,233
                                     ------------      ------------      ------------      ------------      ------------
  
  Total revenues                           66,372           135,380           126,394           184,604         4,717,491
                                     ------------      ------------      ------------      ------------      ------------
  
  Expenses incurred in the
   development stage:
  Cost of sales                                --                --                --                --           313,243
  Research & development                       --             6,400                --             6,400         3,335,251
  General & administrative                 96,814           121,469           191,519           226,575         9,099,140
                                     ------------      ------------      ------------      ------------      ------------
  
  Total expenses incurred in the
  development stage                        96,814           127,869           191,519           239,975        12,747,634
                                     ------------      ------------      ------------      ------------      ------------
  
  Net income (loss)                       (30,442)            7,511           (65,125)          (48,371)       (8,030,143)
                                     ------------      ------------      ------------      ------------      ------------
  
  Deficit accumulated during the
   development stage:
  
  Beginning of period                  (7,999,701)       (7,888,656)       (7,965,018)       (7,832,774                --
                                     ------------      ------------      ------------      ------------      ------------
  
  End of period                       $(8,030,143)      $(7,881,145)      $(8,030,143)      $(7,881,145)      $(8,030,143)
                                     ============      ============      ============      ============      ============
  
  Net loss per common share                    --                --             (0.01)            (0.01)            (1.03)
                                     ============      ============      ============      ============      ============
  
  Weighted average number of
  shares outstanding                    8,633,000         8,633,000         8,633,000         8,633,000         7,780,000
                                     ============      ============      ============      ============      ============
  See accompanying notes to condensed financial statements.
  
                                          3
  Daltex Medical Sciences, Inc.
                          (A Development Stage Enterprise)
                         Condensed Statements of Cash Flows
  For the Period
                                                                                                                 July 28, 1983
                                                                                                                   (Date of
                                                                                                                (Incorporation)
                                                                                January 31,        January 31,   to January 31,
                                                                                   1997               1996           1997
                                                                                (Unaudited)       (Unaudited)     (Unaudited)
  Cash flows from operations
     Net loss:                                                                    $(65,125)        $(48,371)     $(8,030,143)
     Non-cash expenses included in net loss:
          Depreciation and amortization                                                 --           11,394          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                                   --           35,948          (15,319)
     (Increase) decrease in deferred royalty costs                                  30,000         (275,000)        (215,000)
     Increase (decrease) in accounts payable & accrued expenses                     21,882         (190,901)         809,853
     Increase (decrease) in advance development & royalty payments                 (15,000)         550,000          475,000
                                                                               -----------      -----------      -----------
     Net cash flows of operations                                                  (28,243)          83,070       (5,512,845)
                                                                               -----------      -----------      -----------
  
  Cash flows from investing activities:
     Purchase of U.S. government obligations                                            --               --       (8,813,987)
     Redeemed U.S. government obligations and other short-term investments              --               --        8,810,987
     Purchase of equipment & furniture                                                  --               --         (159,370)
     Purchase of patent & trademark                                                     --               --         (171,750)
     (Increase) decrease in due from officer & stockholder                              --               --         (110,601)
     (Purchase) sale of other assets                                                    --               --          (30,095)
                                                                               -----------      -----------      -----------
          Net cash flows of investment activities                                       --               --         (474,816)
                                                                               -----------      -----------      -----------
  
  Cash flow from financing activities:
     Proceeds from sale of common stock & warrants, net                                 --               --        6,009,344
  
  Net increase (decrease) in cash                                                  (28,243)              --           21,683
  Cash, including certificates of deposit:
     Beginning of period                                                            49,926           10,862               --
                                                                               -----------      -----------      -----------
     End of period                                                                 $21,683          $93,932          $21,683
                                                                               ===========      ===========      ===========
  
  See accompanying notes to condensed financial statements 
  
                                          4
  NOTES TO CONDENSED FINANCIAL STATEMENTS-January 31, 1997 (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)      Advance Royalty and Development Phase Payments
  
           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 the 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 January 31, 1997.  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  Arrow  License  (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 the 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.
  
           During the quarter ended January 31, 1997, the Company received nominal
           royalty  payments  from Arrow based on limited  sales of PSI units sold
           during this period,  and quarterly  development  phase payments for two
           other products which Arrow is developing or has developed incorporating
           the Company's antimicrobial technology.
  
           Additionally, in November 1996, the Company received an advanced annual
           payment  (which was not  scheduled to be paid until April 1, 1997) from
           W.L. Gore & Associates, Inc. ("Gore"),
  
                                          5
  another  of the  Company's  sublicensees,  in the  amount  of  $45,000.
           Included  in this amount was $15,000  representing  an advance  against
           annual  minimum  royalties to be paid to the Company  based on sales of
           antimicrobially   treated  hernia  patches  which  have  recently  been
           introduced  to  the  marketplace  by  Gore,  and  $30,000  representing
           advanced  annual  development  phase  payments  for two  other  product
           segments  also  licensed to Gore  pursuant to the terms of the May 1992
           License Agreement between the Company and Gore.
  
  (3)      License Agreement and Research Agreement
  
           The Company  currently  has various  license  agreements  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
           1997,  the Company  paid the  University  $2,841.25,  representing  the
           University's 50% share,  pursuant to the 1987 License Agreement between
           the Company and the University, of sublicense and royalty fees received
           by the Company  from Arrow during the quarter  ended  January 31, 1997.
           Further,   in  February  1997,  the  Company  paid  the  University  an
           additional  $22,500,  representing  the  University's  50% share of the
           advanced  annual  development  and  royalty  payments  received  by the
           Company from Gore as described in note 2 above.
  
           As of January 31, 1997,  the Company owes the  University  $165,706 for
           the  University's  past due share of sublicensing  and royalty payments
           received by the Company  through 1994.  Moreover,  the Company has been
           billed  $638,303  as of January  31,  1997 by the  University's  patent
           counsel for patent work  undertaken  in  connection  with 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 January 31, 1997 on
           the accompanying  condensed balance sheets.  Included in this amount is
           approximately  $128,954,  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,
           because  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
           continue  attempts 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,  there can be no assurance that the
           Company  will  be  successful   in  reaching  a  resolution   with  the
           University.
  
  (4)      Subsequent Event - License Amendment Agreement
  
           In February 1997, the Company and Gore entered into a License Amendment
           Agreement, dated as of January 1, 1997, clarifying the specific product
           and market application segments set forth
  
                                          6
  in the existing license  agreement entered into by the Company and Gore
           in May 1992. The Company and Gore have also agreed to a royalty rate of
           5% for any  product  that does not  otherwise  fit within  the  royalty
           scheme set forth in Schedule 1 to the License Amendment Agreement.  All
           other  terms and  conditions  set forth in the  existing  1992  license
           agreement remain in full force and effect.
  
  (5)      Other Income
  
           In  February   1997,  the  Company   received   $50,000  from  Gore  in
           consideration for the Company's cooperation with respect to the License
           Amendment  Agreement  described  in note 4 above,  and to help fund the
           payment of legal and filing costs incurred by the Company in connection
           with such Agreement.
  
  Item 2
  
                       Management's Discussion and Analysis of
                    Financial Condition and Results of Operations
  
                    The following  discussion  contains forward looking statements
  within  the  meaning of the  Private  Securities  Litigation  Reform Act of 1995
  relating to the Company's  plans with respect to its  continually  deteriorating
  financial  condition.  Actual results could differ  materially from management's
  plans and there can be no assurance  that the Company will be  successful in its
  plan  (i)  to  sell  or  license  the  rights  to  certain  applications  of its
  antimicrobial  technology,  (ii) to sell all or substantially all of its assets,
  (iii) to negotiate  the  forgiveness  of certain debt owed to the  University or
  (iv) to continue as a going concern.
  
                    The  Company  is  in  the  development   stage  and  has  been
  principally engaged in research and development activities with the objective of
  developing  and  commercializing   certain   cost-reducing  medical  device  and
  pharmaceutical  technologies.  Since  March 1, 1994,  the Company has engaged in
  extremely   limited   research  and  development   efforts.   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 two quarters 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 dates 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  authorized  Bruce  Hausman,
  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
  
                                         7
  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  its  rights  to the
  antimicrobial technology or any other assets, and there can be no assurance that
  the Company will be successful in entering into 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 second  quarter of fiscal  1997 and for the fiscal
  years ended July 31, 1996 and 1995, the Company  received  revenues  principally
  from royalty  payments and development  fees pursuant to two licenses with Arrow
  and Gore,  sublicensees of applications of the Company's  antimicrobial  medical
  technology,  and the one-time royalty payment from Arrow,  both discussed below.
  Additionally,  the Company received  advanced  royalty and development  payments
  from one of its sublicensees during the quarter ended January 31, 1997.
  
                    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 clearance from the U.S. Food and Drug Administration
  ("FDA"),  or have not yet reached the marketplace,  as well as quarterly royalty
  payments  from  Arrow  based on sales of PSI units and  annual  minimum  royalty
  payments from Gore based on one product  segment which has recently  reached the
  marketplace.  As a result  of the  introduction  of the PSI to the  marketplace,
  quarterly development phase payments from Arrow have been reduced from $7,500 to
  $5,000,  which  will be  partially  offset by royalty  payments  related to such
  product.  The Company  will also  continue  to receive  annual  minimum  royalty
  payments  from Gore for the  first  three  years of sales  based on sales of one
  product  segment  which has received FDA  clearance  and has very  recently been
  introduced to the  marketplace.  The minimum annual royalty  payment is equal to
  the annual  development  payment the Company had been receiving for such product
  segment.  Such  minimum  annual  royalties  payable  to the  Company by Gore are
  subject to the terms and  conditions  set forth in the existing May 1992 License
  Agreement  between the Company and Gore. As a result of the Company's receipt in
  November 1996 of an advance annual minimum royalty payment of $15,000 (described
  in note 2 above),  annual  development  phase payments from Gore for the product
  segment which has recently been introduced to the marketplace 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 January 31, 1997
  
                    Revenues  for the  quarter  ended  January  31,  1997  totaled
  $66,372,   a  decrease  of  51%  from  the  $135,380  in  revenues   during  the
  corresponding  period in fiscal 1996.  This  decrease in revenues was due to the
  fixed royalties  earned during the quarter ended January 31, 1997 as a result of
  the
  
                                          8
  Modified  Arrow  License  between  Arrow  and  the  Company  (see  note 2 to the
  financial  statements),  the Company's  receipt in November 1995 of the one-time
  payment of $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,  and  to a  lesser  extent,  the  replacement  of
  quarterly development payments with nominal royalty payments from Arrow based on
  sales of PSI units. Revenues from licensing fees in the second quarter of fiscal
  1997 were $5,000, a decrease of 33.3% from the $7,500 in licensing fees recorded
  in the corresponding period in fiscal 1996 as a result of the replacement of one
  development phase payment with nominal royalty payments. Revenues from royalties
  were $61,282,  an increase of 104% over the $30,000 in royalty payments received
  during the second  quarter of fiscal 1996 as a result of a $30,600  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 $682,  of
  which 50% was paid to the University on January 9, 1997, related to sales of PSI
  units.  Included in revenues from  royalties is $30,000  representing  royalties
  earned for the  quarter  ended  January  31,  1997,  which is  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 $430,000 is reflected
  as deferred revenue in the liability  section and the remaining  $215,000 of the
  $300,000 paid to the  University  is reflected as deferred  royalty costs in the
  assets  section of the balance  sheets.  Also  included in deferred  revenues is
  $45,000  representing  advanced annual  development  phase and royalty  payments
  received from Gore  described in note 2 above,  which will be recorded as income
  in the third quarter of fiscal 1997.
  
                    Although the Company had no sales of its antimicrobial  gloves
  in the current  quarter or during the fiscal  year to date,  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 the benefit of a domestic sales
  base or regulatory clearance by the FDA.
  
                    Expenses  incurred  during the three months ended  January 31,
  1997 totaled $96,814, a decrease of 24.5% from the $127,869 of expenses incurred
  in the three months ended  January 31, 1996  primarily  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 $30,442 for the quarter
  ended  January 31,  1997,  as compared to a recorded net income of $7,511 in the
  corresponding  period in fiscal 1996.  This  difference  is due to the Company's
  receipt in November  1995 of the one-time  payment of $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.
  
           Results of Operations for the Six Months Ended January 31, 1997
  
                    Revenues  for the six months  ended  January 31, 1997  totaled
  $126,394,  a decrease of 31.5% from  revenues  of $184,604 in the  corresponding
  period  last year.  This  decrease in  revenues  was due to the fixed  royalties
  earned for the first six months of fiscal 1997 as a result of the Modified Arrow
  License between the Company and Arrow (see note 2 to the financial  statements),
  the Company's  receipt in November 1995 of the one-time  payment of $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,  and to a lesser extent,  the  replacement  of quarterly  development
  payments with
  
                                          9
  nominal  royalty  payments from Arrow based on sales of PSI units.  In addition,
  revenues included $30,600 as a result of the Patent  Settlement  Agreement which
  provides for certain  royalties to be paid by Arrow to the Company and, in turn,
  paid by the Company to another party to such agreement, as discussed above.
  
                    Expenses incurred during the six months ended January 31, 1997
  totaled $191,519,  a decrease of 20.2% from the $239,975 of expenses incurred in
  the six months ended  January 31, 1996.  This  decrease was due primarily to the
  reduction  in  legal  costs  incurred  by the  Company  in  connection  with the
  Company's  protection of its  intellectual  property  rights.  This decrease was
  partially  offset by payments  totaling  $30,600  made by the Company to another
  party to the Patent Settlement Agreement, as discussed above.
  
                    The Company sustained a net loss of $65,125 for the six months
  ended January 31, 1997, an increase of 34.6% over the net loss of $48,371 in the
  corresponding  period in 1996.  The  increase  in the net loss for the six month
  period is due primarily to the aforementioned factors.
  
           Liquidity and Capital Resources
  
                    At January 31, 1997, the Company had a working capital deficit
  of  approximately  $976,000,  which  represented  an increase  of  approximately
  $96,000 in such deficit from July 31, 1996.  During the six months ended January
  31,  1997,  the Company had a decrease of $28,243 in cash flows from  operations
  principally  due to the receipt in October 1995 of the one-time  advance royalty
  payment  of  $600,000  from  Arrow  which  enabled  the  Company  to reduce  its
  outstanding  accounts  payable,  and the one-time receipt from Arrow in November
  1995 of $75,000 to help fund the payment of legal costs  incurred by the Company
  in connection with the Patent Interference Proceedings and the Patent Settlement
  Agreement. It is expected that future cash flows will be substantially less than
  reported  revenues due to the one-time  advance royalty payment from Arrow. As a
  result of the  aforementioned  payments  to the  University,  payments  to legal
  counsel associated with corporate and intellectual  property matters,  and costs
  associated  with general  operations,  at January 31, 1997, the Company had cash
  and cash equivalents of $21,683.
  
                    In November 1996,  the Company  received  advance  royalty and
  development phase payments from Gore as described in note 2 above.
  
                    The Company currently owes the University  $165,706 (see notes
  2 and 3 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 University in exchange for the forgiveness
  by the University of all of the  outstanding  amounts owed by the Company to the
  University.
  
                                         10
  The  Company  is  still  in the  development  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 continuing its attempts 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  its  attempts  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
  continue as a going concern or avoid liquidation, even with further cost-cutting
  measures.
  
           Regulatory Developments
  
                    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 had,  from 1991 to
  1993,  amended and resubmitted the 510(k) several times in an effort to obtain a
  determination  of  "substantial   equivalence"  to  previously   marketed  latex
  examination gloves. The FDA Office of Device Evaluation ("ODE") had 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 had further
  stated that no accepted scientific methods presently exist for assessment of the
  effectiveness  of antiviral  activity for topical  antimicrobials,  particularly
  under glove-use conditions.
  
                    On March 11, 1996,  Dr.  Shanta M. Modak of the  Department of
  Surgery,  Columbia  University,  where the  antimicrobial  glove  technology was
  developed,  and Dr. Louis R.M.  Del  Guercio,  the  Company's  Chairman,  made a
  presentation,  on the Company's  behalf,  concerning the Company's gloves before
  the FDA's  Independent  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.  Since the
  March 11, 1996 meeting,  the Company and Dr. Modak have remained in contact with
  the ODE, particularly with Mr. Terrell Cunningham, Nurse Consultant of the ODE.
  
                                         11
  By letter dated February 27, 1997, the Company was informed by
  Mr.  Ulatowski  of the ODE that,  should the Company  wish to continue  with its
  efforts to bring its antimicrobial gloves to market, the ODE recommends that the
  Company submit a new 510(k),  with the focus of the  submission  directed at the
  recommendations  outlined in Mr. Ulatowski's letter relating to certain labeling
  claims and additional testing.
  
                    At present,  the Company  does not have  sufficient  financial
  resources  to fund  additional  clinical  testing  and to prepare the new 510(k)
  submission  necessary  to ready its  antimicrobial  gloves for the  marketplace.
  However,  should the Company's  financial  condition improve,  the Company would
  spend some of these  funds on  additional  testing  and  preparation  of the new
  510(k)  submission.  There can be no assurance that, even if the Company makes a
  new 510(k)  submission  in  accordance  with Mr.  Ulatowski's  February 27, 1997
  letter and conducts the additional testing suggested  therein,  that the Company
  will obtain FDA clearance to market its antimicrobial latex gloves.
  
  PART II - OTHER INFORMATION
  
  Item 5 - Other Information
  
  (a)       Negotiations  with Arrow to Increase Fields of Application in Existing
            License Agreement
  
           The  Company  is  currently  negotiating  with  Arrow  with  respect to
           increasing the Fields of Application for the sublicense  granted by the
           Company to Arrow.  Arrow may make an additional  payment to the Company
           in consideration therefor.  However, there can be no assurance that the
           Company and Arrow will reach agreement with respect to this matter.
  
  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 January 31,
  1997.
  
                                         12
  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:  March 17, 1997           By: /s/ Bruce Hausman, Esq.
                                     BRUCE HAUSMAN, ESQ.
                                     President and Chief Executive Officer
  
  Date:  March 17, 1997           By: /s/ Herbert J. Mitschele, Jr.
                                     HERBERT J. MITSCHELE, JR.
                                     Treasurer, Secretary
                                     and Chief Financial Officer
  
                                         13