SECURITIES
AND EXCHANGE COMMISSION





Washington,
D.C. 20549


__________





Form
10-Q





__ X __
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
ACT OF 1934


For the
quarterly period ended March
31, 2005





OR





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





For the
transition period from ____________ to ____________





Commission
file number 1-31943





**CRITICARE
      SYSTEMS, INC.**(Exact
      name of registrant as specified in its
charter)





Delaware
    
    39-1501563(State
      or other jurisdiction of
      incorporation
      or organization)
    
    (IRS
      Employer Identification No.)





20925
      Crossroads Circle, Suite 100, Waukesha, Wisconsin
    
    53186(Address
      of principal executive offices)
    
    (Zip
      Code)





Registrant's
telephone number including area code (262)
798-8282





N/AFormer
      name, former address and former fiscal year, if changed since last
      report.





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





Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange
Act).  Yes  
No  X




Number of
shares outstanding of each class of the registrant's classes of common stock as
of March 31, 2005: Class A Common Stock 11,581,766 shares.








CRITICARE
SYSTEMS, INC.


CONSOLIDATED
BALANCE SHEETS


MARCH 31,
2005 AND JUNE 30, 2004





(UNAUDITED)





ASSETS
    
    March
      31,2005
    
    June
      30,2004CURRENT
      ASSETS:Cash
      and cash equivalents
    
    $
    3,731,417
    
    $
    3,738,825Accounts
      receivable, less allowance for doubtful accountsof
      $300,000 and $260,000, respectively
    
    
    6,345,700
    
    
    6,489,884Other
      receivables
    
    
    446,233
    
    
    359,806Inventories
    
    
    5,478,645
    
    
    6,418,135Prepaid
      expenses
    
    
    190,913
    
    
    364,375Total
      current assets
    
    
    16,192,908
    
    
    17,371,025Property,
      plant and equipment - net
    
    
    1,640,645
    
    
    2,094,330License
      rights and patents - net
    
    
    71,733
    
    
    76,985TOTAL
      ASSETS
    
    $
    17,905,286
    
    $
    19,542,340LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable
    
    $
    2,844,321
    
    $
    3,237,405Accrued
      liabilities:Compensation
      and commissions
    
    
    844,926
    
    
    863,113Product
      warranties
    
    
    486,000
    
    
    444,000Liability
      under guarantees
    
    
    —
    
    
    490,000Out
      of court settlement
    
    
    —
    
    
    200,000Obligations
      under capital lease
    
    
    61,442
    
    
    57,712Other
    
    
    146,731
    
    
    174,395Total
      current liabilities
    
    
    4,383,420
    
    
    5,466,625LONG-TERM
      LIABILITIES:Obligations
      under capital lease
    
    
    218,211
    
    
    264,770Other
      long-term obligations
    
    
    13,171
    
    
    21,646Total
      long-term liabilities
    
    
    231,382
    
    
    286,416TOTAL
      LIABILITIES
    
    
    4,614,802
    
    
    5,753,041STOCKHOLDERS'
      EQUITY:Preferred
      stock - $.04 par value, 500,000 shares authorized,
      no
      shares issued or outstanding
    
    
    —
    
    
    —Common
      stock - $.04 par value, 15,000,000 shares authorized, 11,696,649 and
      11,574,749 shares
      issued,
      respectively, and 11,581,766 and 11,450,021 shares outstanding,
      respectively467,865
    
    
    462,990Additional
      paid-in capital
    
    
    24,237,384
    
    
    23,965,900Common
      stock held in treasury (114,883 and 124,728 shares,
      respectively)
    
    
    (391,099
    )
    
    (409,439
    )Retained
      earnings (accumulated deficit)
    
    
    (11,020,184
    )
    
    (10,226,670
    )Cumulative
      translation adjustment
    
    
    (3,482
    )
    
    (3,482
    )Total
      stockholders' equity
    
    
    13,290,484
    
    
    13,789,299TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
    
    $
    17,905,286
    
    $
    19,542,340





See notes
to consolidated financial statements.





2





CRITICARE
SYSTEMS, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS


NINE
MONTHS ENDED MARCH 31, 2005 AND 2004




(UNAUDITED)





**2005**
    
    **2004**NET
      SALES
    
    $
    18,760,733
    
    $
    21,923,864COST
      OF GOODS SOLD
    
    
    11,357,934
    
    
    12,855,828GROSS
      PROFIT
    
    
    7,402,799
    
    
    9,068,036OPERATING
      EXPENSES:Sales
      and marketing
    
    
    4,231,575
    
    
    5,316,293Research,
      development and engineering
    
    
    1,899,752
    
    
    1,810,732Administrative
    
    
    2,140,193
    
    
    2,484,791Total
    
    
    8,271,520
    
    
    9,611,816LOSS
      FROM OPERATIONS
    
    
    (868,721
    )
    
    (543,780
    )OTHER
      INCOME (EXPENSE):Interest
      expense
    
    
    (23,091
    )
    
    —Interest
      income
    
    
    38,311
    
    
    29,496Other
      income
    
    
    59,987
    
    
    122,371Total
    
    
    75,207
    
    
    151,867LOSS
      BEFORE INCOME TAXES
    
    
    (793,514
    )
    
    (391,913
    )INCOME
      TAX PROVISION
    
    
    —
    
    
    —NET
      LOSS
    
    $
    (793,514
    )
    $
    (391,913
    )NET
      LOSS PER COMMON SHARE:Basic
    
    $
    (0.07
    )
    $
    (0.04
    )Diluted
    
    $
    (0.07
    )
    $
    (0.04
    )WEIGHTED
      AVERAGE NUMBER OF COMMONSHARES
      OUTSTANDING:Basic
    
    
    11,469,066
    
    
    11,173,768Diluted
    
    
    11,469,066
    
    
    11,173,768





See notes
to consolidated financial statements.





3





CRITICARE
SYSTEMS, INC.


CONSOLIDATED
INCOME STATEMENTS


THREE
MONTHS ENDED MARCH 31, 2005 AND 2004





(UNAUDITED)





**2005**
    
    **2004**NET
      SALES
    
    $
    6,054,370
    
    $
    6,571,171COST
      OF GOODS SOLD
    
    
    3,624,399
    
    
    3,762,149GROSS
      PROFIT
    
    
    2,429,971
    
    
    2,809,022OPERATING
      EXPENSES:Sales
      and marketing
    
    
    1,358,781
    
    
    1,944,077Research,
      development and engineering
    
    
    724,817
    
    
    586,419Administrative
    
    
    649,823
    
    
    759,740Total
    
    
    2,733,421
    
    
    3,290,236LOSS
      FROM OPERATIONS
    
    
    (303,450
    )
    
    (481,214
    )OTHER
      INCOME (EXPENSE):Interest
      expense
    
    
    (6,064
    )
    
    —Interest
      income
    
    
    18,238
    
    
    8,748Other
      income
    
    
    46,405
    
    
    59,859Total
    
    
    58,579
    
    
    68,607LOSS
      BEFORE INCOME TAXES
    
    
    (244,871
    )
    
    (412,607
    )INCOME
      TAX PROVISION
    
    
    —
    
    
    —NET
      LOSS
    
    $
    (244,871
    )
    $
    (412,607
    )NET
      LOSS PER COMMON SHARE:Basic
    
    $
    (0.02
    )
    $
    (0.04
    )Diluted
    
    $
    (0.02
    )
    $
    (0.04
    )WEIGHTED
      AVERAGE NUMBER OF COMMONSHARES
      OUTSTANDING:Basic
    
    
    11,501,085
    
    
    11,326,283Diluted
    
    
    11,501,085
    
    
    11,326,283





See notes
to consolidated financial statements.


4





CRITICARE
SYSTEMS, INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


NINE
MONTHS ENDED MARCH 31, 2005 AND 2004





(UNAUDITED)





**2005**
    
    **2004**OPERATING
      ACTIVITIES:Net
      loss
    
    $
    (793,514
    )
    $
    (391,913
    )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Depreciation
    
    
    448,691
    
    
    442,910Amortization
    
    
    5,252
    
    
    5,251Provision
      for doubtful accounts
    
    
    40,000
    
    
    80,602Provision
      for obsolete inventory
    
    
    340,000
    
    
    429,073Changes
      in assets and liabilities:Accounts
      receivable
    
    
    104,184
    
    
    (1,295,961
    )Other
      receivables
    
    
    (86,427
    )
    
    57,073Inventories
    
    
    683,561
    
    
    (400,094
    )Prepaid
      expenses
    
    
    173,462
    
    
    28,939Accounts
      payable
    
    
    (393,084
    )
    
    695,729Accrued
      liabilities
    
    
    (702,326
    )
    
    114,555Net
      cash used in operating activities
    
    
    (180,201
    )
    
    (233,836
    )INVESTING
      ACTIVITIES:Purchases
      of property, plant and equipment, net
    
    
    (79,078
    )
    
    (324,360
    )Net
      cash used in investing activities
    
    
    (79,078
    )
    
    (324,360
    )FINANCING
      ACTIVITIES:Retirement
      of obligations under capital lease
    
    
    (42,828
    )
    
    —Proceeds
      from issuance of common stock
    
    
    294,699
    
    
    827,059Net
      cash provided by financing activities
    
    
    251,871
    
    
    827,059NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (7,408
    )
    
    268,863CASH
      AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    3,738,825
    
    
    3,716,446CASH
      AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    3,731,417
    
    $
    3,985,309SUPPLEMENTAL
      CASH FLOW INFORMATION:Cash
      paid for:Income
      taxes paid-net
    
    $
    3,444
    
    $
    3,053Interest
    
    $
    23,091
    
    
    —





See notes
to consolidated financial statements.


5





CRITICARE
SYSTEMS, INC.


Condensed
Notes to Consolidated Financial Statements


(Unaudited)





**1.
Basis of Presentation**





The
accompanying unaudited financial statements have been prepared by Criticare
Systems, Inc. (the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC") and, in the opinion of the Company,
include all adjustments necessary for a fair statement of results for each
period shown. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such SEC rules and
regulations. The Company believes that the disclosures made are adequate to
prevent the financial information given from being misleading. It is suggested
that these financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's latest annual report and
previously filed Form 10-K. The three and nine month results represent past
performance, and are not necessarily indicative of results for an entire year.
Certain amounts from the fiscal 2004 financial statements have been reclassified
to conform to the 2005 presentation.





**2.
Inventory Valuation**





Inventory
is stated at the lower of cost or market, with cost determined on the first-in,
first-out method. Components of inventory consisted of the following at March
31, 2005 and June 30, 2004, respectively:








March
      31, 2005
    
    June
      30, 2004Component
      parts
    
    $
    1,992,358
    
    $
    1,988,414Work
      in process
    
    
    1,159,774
    
    
    781,156Finished
      units
    
    
    3,276,513
    
    
    4,258,565Total
      inventories
    
    
    6,428,645
    
    
    7,028,135Less:
      reserve for obsolescence
    
    
    950,000
    
    
    610,000Net
      inventory
    
    $
    5,478,645
    
    $
    6,418,135





**3.
Property, Plant and Equipment**





Property,
plant and equipment consist of the following:





March
      31, 2005
    
    June
      30, 2004Machinery
      and equipment
    
    $
    2,768,721
    
    $
    2,675,093Furniture
      and fixtures
    
    
    889,108
    
    
    937,906Leasehold
      improvements
    
    
    218,423
    
    
    218,423Production
      tooling
    
    
    2,064,866
    
    
    2,030,618Demonstration
      and loaner monitors
    
    
    808,209
    
    
    945,339Property,
      plant and equipment - cost
    
    
    6,749,327
    
    
    6,807,379Less:
      accumulated depreciation
    
    
    (5,108,682
    )
    
    (4,713,049
    )Property,
      plant and equipment - net
    
    $
    1,640,645
    
    $
    2,094,330





6





**4.
Stock Options**





The
Company has adopted the disclosure-only provisions of SFAS No. 123, “Accounting
for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based
Compensation—Transition and Disclosure”. If the Company had elected to recognize
compensation cost for the options granted for the three months and nine months
ended March 31, 2005 and 2004, consistent with the method prescribed by SFAS No.
123, net loss and net loss per share would have been changed to the pro forma
amounts indicated below:


Three
      Months Ended
    
    Nine
      Months Ended2005
    
    2004
    
    2005
    
    2004Net
      income (loss) - as reported
    
    $
    (244,871
    )
    $
    (412,607
    )
    $
    (793,514
    )
    $
    (391,913
    )Net
      income (loss) - pro forma
    
    $
    (356,989
    )
    $
    (431,118
    )
    $
    (1,129,867
    )
    $
    (447,446
    )Basic
      net income (loss) per share - as reported
    
    $
    (0.02
    )
    $
    (0.04
    )
    $
    (0.07
    )
    $
    (0.04
    )Diluted
      net income (loss) per share - as reported
    
    $
    (0.02
    )
    $
    (0.04
    )
    $
    (0.07
    )
    $
    (0.04
    )Basic
      net income (loss) per share - pro forma
    
    $
    (0.03
    )
    $
    (0.04
    )
    $
    (0.10
    )
    $
    (0.04
    )Diluted
      net income (loss) per share - pro forma
    
    $
    (0.03
    )
    $
    (0.04
    )
    $
    (0.10
    )
    $
    (0.04
    )




For the
three months ended March 31, 2005, the Company granted options totaling 20,000
shares at a weighted average exercise price of $3.70, which are valued at
$55,724. For the nine months ended March 31, 2005, the Company granted options
totaling 87,000 shares at a weighted average exercise price of $2.89, which are
valued at $186,047. The fair value of stock options used to compute pro forma
net loss and net loss per share is the estimated present value at the grant date
using the Black-Scholes option-pricing model.





**5.
Income Taxes**





No income
tax provision has been made in the consolidated statements of operations due to
federal and state net operating loss carry forwards that will be utilized to
offset taxable income earned. At March 31, 2005, the Company had federal net
operating loss carry forwards of approximately $16,980,000 (which expire from
2008 through 2024) and state net operating loss carry forwards of approximately
$11,476,000 (which expire from 2004 through 2019) available to offset future
taxable income. The Company has recorded a valuation allowance to offset the
related deferred income tax assets arising from these net loss carry forwards
due to the uncertainty of realizing the benefits of these assets in future
years.





**6.
Line of Credit Facility**





At March
31, 2005, the Company had a $1,000,000 demand line of credit with a commercial
bank, which matures on November 15, 2005, to meet its short-term borrowing
needs. Borrowings against the line are payable on demand with interest payable
monthly at the bank’s reference rate, plus 0.25% (6.00% as of March 31, 2005).
As of March 31, 2005 and 2004, there were no borrowings against the line.
Borrowings under the line of credit facility are collateralized by substantially
all assets of the Company. The credit facility has no loan covenant
restrictions.


7


CRITICARE
SYSTEMS, INC.


Management's
Discussion and Analysis of


Results
of Operations and Financial Condition


Nine
Months Ended March 31, 2005 and 2004





**Results
of Operations**





Net sales
of $18,760,733 for the nine months ended March 31, 2005 were down 14.4% from
$21,923,864 for the same period in fiscal 2004. A 30.5% decrease in the number
of units shipped was partially offset by a 13.5% increase in the average sales
price per unit and a 20.7% increase in accessory sales in the current year. The
reduced sales were the result of a $1,447,180 decrease in sales to Alaris
Medical Systems (“Alaris”), formerly our largest OEM partner, a $1,643,251
decrease in domestic sales and a $798,963 decrease in international sales during
the nine month period. Alaris was acquired by Cardinal Health in 2004.
Subsequently, Cardinal Health made the decision to exit from vital signs monitor
sales activities, since those products no longer fit within its core business
strategy. The international sales decrease was the result of a $1,130,250 order
shipped in December 2003, which increased international sales for the nine
months ended March 31, 2004, without a comparable sale in the nine months ended
March 31, 2005. The OEM sales decrease was partially offset by $790,122 in sales
to Medrad, our newest OEM partner for medical imaging applications. The decrease
in domestic sales was due in part to lost sales following the cancellation of
two oral surgery shows in Florida and one oral surgery show in Louisiana as a
result of the hurricanes during the first quarter.





The gross
profit percentage of 39.5% for the nine months ended March 31, 2005 decreased
from 41.4% for the same period in fiscal 2004. The reduced margins in the
current period were mainly a result of the decreased manufacturing overhead
absorption, due to the decrease in the number of units shipped against
relatively fixed overhead costs.





Operating
expenses for the nine months ended March 31, 2005 decreased $1,340,296 from the
same period in fiscal 2004. The decrease of $1,084,718 in sales and marketing
expenses was due mainly to an $388,660 decrease in the commissions earned by
dealers and employees, a decrease of $230,335 in advertising, trade shows and
sales promotion spending and a $244,394 decrease in operating supplies.
Research, development and engineering expenses increased by $89,020.
Administrative expenses decreased by $344,598 mainly due to the cost containment
efforts such as reducing consulting expenses by $107,300, reducing accounting
fees by $54,607, reducing investor expenses by $62,768 and reducing business
insurance premium expense by $54,921.





Total
other income for the nine months ended March 31, 2005 decreased $76,660 from the
same period in fiscal 2004. This reduction was mainly caused by interest expense
of $23,091 primarily for a new capital lease (which began in April 2004) and
$45,000 paid by the Company for the settlement with the U.S. government for
import/export regulation issues.





The
$1,665,237 reduction in gross profit and the decrease in other income of
$76,660, partially offset by the reduction in operating expenses of $1,340,296,
resulted in a net loss of $(793,514) for the nine months ended March 31, 2005 as
compared to a net loss of $(391,913) for the same period in fiscal
2004. ****


8


CRITICARE
SYSTEMS, INC.


Management's
Discussion and Analysis of


Results
of Operations and Financial Condition


Three
Months Ended March 31, 2005 and 2004





**Results
of Operations**





Net sales
of $6,054,370 for the three months ended March 31, 2005 were down 7.9% from
$6,571,171 for the same period in fiscal 2004. A 22.5% decrease in the number of
units shipped and a 0.98% decrease in the average sales price per unit, due to
the product mix, were partially offset by a 45.3% increase in accessory sales in
the current period. The reduced sales were the result of a $1,007,611 decrease
in domestic sales, a $258,846 decrease in international sales and a $204,925
decrease in sales to Alaris, formerly our largest OEM partner, in the current
period. The sales decrease was partially offset by $503,128 in sales to Medrad,
our newest OEM partner for medical imaging applications, and $275,936 in
government sales. Additionally, OEM sales to customers other than Medrad and
Alaris increased by $107,227 in the current period.





The gross
profit percentage of 40.1% for the three months ended March 31, 2005 decreased
from 42.7% for the same period in fiscal 2004. The reduced margins in the third
quarter were mainly due to the decreased manufacturing overhead absorption, due
to the decrease in the number of units shipped against relatively fixed overhead
costs.


****


Operating
expenses for the three months ended March 31, 2005 decreased $556,815 from the
same period in fiscal 2004. The decrease of $585,296 in sales and marketing
expenses was due mainly to a $148,334 decrease in the commissions earned by
dealers and employees, a $155,913 decrease in operating supplies, a $47,006
decrease in travel and a $34,037 decrease in advertising, trade shows and sales
promotion spending. Administrative expenses decreased by $109,917 mainly due to
cost containment efforts such as reducing consulting expenses by $18,304,
business insurance premium expense by $20,464, recruiting expenses by $21,373
and building operating expenses by $10,232. Research, development and
engineering expenses increased by $138,398.





Total
other income for the three months ended March 31, 2005 decreased $10,028 from
the same period in fiscal 2004. This reduction was mainly caused by interest
expense of $6,064 primarily for a new capital lease (which began in April
2004).





The
$556,815 reduction in operating expenses, partially offset by the reduction in
gross profit of $379,051 and the decrease in other income of $10,028, resulted
in a net loss of $(244,871) for the three months ended March 31, 2005 as
compared to a net loss of $(412,607) for the same period in fiscal
2004. ****


9


CRITICARE
SYSTEMS, INC.


Management's
Discussion and Analysis of


Results
of Operations and Financial Condition





**Liquidity
and Capital Resources**





As of
March 31, 2005, the Company had a cash balance of $3,731,417, which was $7,408
lower than its balance at June 30, 2004 of $3,738,825. The Company continues to
maintain a long-term bank debt free balance sheet since August 30, 2002 when it
sold its building and used the proceeds from the sale to retire the long-term
bank debt on the facility.





The
Company maintained its cash position for the nine months ended March 31, 2005 as
$180,201 and $79,078 of cash used in operations and investing, respectively, was
offset by the $294,699 of cash provided from the issuance of common stock, of
which $274,275 was provided from the exercise of expiring stock options to
purchase a total of 121,900 shares and the remainder represented sales pursuant
to the Employee Stock Purchase Plan.





The
Company believes all capital and liquidity requirements for the remainder of
fiscal 2005 will be satisfied by cash generated from operations and its current
cash balances. The Company's $1,000,000 line of credit expires in November 2005.
At March 31, 2005 there were no borrowings outstanding under this line of
credit.





**Forward
Looking Statements**





A number
of the matters and subject areas discussed herein that are not historical or
current facts deal with potential future circumstances and developments. These
include anticipated product introductions, expected future financial results,
liquidity needs, financing ability, management's or the Company's expectations
and beliefs and similar matters discussed in Management's Discussion and
Analysis or elsewhere herein. The discussions of such matters and subject areas
are qualified by the inherent risk and uncertainties surrounding future
expectations generally, and also may materially differ from the Company's actual
future experience.





The
Company's business, operations and financial performance are subject to certain
risks and uncertainties which could result in material differences in actual
results from management's or the Company's current expectations. These risks and
uncertainties include, but are not limited to, general economic conditions,
demand for the Company's products, costs of operations, the development of new
products, the reliance on single sources of supply for certain components in the
Company's products, government regulation, health care cost containment
programs, the effectiveness of the Company's programs to manage working capital
and reduce costs, competition in the Company's markets, compliance with product
safety regulations and product liability and product recall risks, risks
relating to international sales and compliance with U.S. export regulations,
unanticipated difficulties in outsourcing the manufacturing of the majority of
its products to foreign manufacturers and risks related to foreign
manufacturing, including economic and political instability, trade and foreign
tax laws, production delays and cost overruns and quality control.





10





**Quantitative
and Qualitative Disclosures about Market Risk**





The
Company has a demand line of credit facility with a commercial bank with
interest payable monthly at 0.25% above the bank's reference rate (6.00% as
of March 31, 2005). The Company had no borrowings outstanding under this bank
facility at March 31, 2005 and June 30, 2004. Due historically to the lack of
need to borrow from this credit facility and due to the Company’s current cash
position, the Company is not subject to financial risk on this obligation if
interest rates in the market change significantly.





The
Company’s net sales are primarily denominated in United States dollars, except
for a small amount of net sales from the Company’s operation in India
denominated in Indian rupees. As a result, part of the Company’s accounts
receivable are denominated in rupees and translated into U.S. dollars for
financial reporting purposes. A 10% change in the exchange rate of the U.S.
dollar with respect to the Indian rupee would not have a material adverse effect
on the Company’s financial condition or results of operations for the quarter
ended March 31, 2005. The Company does not use any hedges or other derivative
financial instruments to manage or reduce exchange rate risk.





**Controls
and Procedures**





As of the
end of the period covered by this report, the Company carried out an evaluation,
under the supervision and with the participation of the Company’s management,
including the Company’s Chief Executive Officer and the Company’s Vice President
- Finance, of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended). Based on this evaluation, the Company’s Chief Executive Officer and
Vice President - Finance concluded that the Company’s disclosure controls and
procedures were effective in timely alerting them to material information
relating to the Company required to be included in the Company’s periodic
filings with the Securities and Exchange Commission. It should be noted that in
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
The Company has designed its disclosure controls and procedures to reach a level
of reasonable assurance of achieving the desired control objectives and based
upon the evaluation described above, the Company’s Chief Executive Officer and
Vice President -Finance concluded that the Company’s disclosure controls and
procedures were effective at reaching that level of reasonable
assurance.





There was
no change in the Company’s internal control over financial reporting (as defined
in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
amended) during the Company’s most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.


11





PART II -
OTHER INFORMATION





Item 6. Exhibits.





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





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





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





4.2
    Rights
      Agreement (incorporated by reference to the Company’s Current Report on
      Form 8-K filed on April 18, 1997).





31.1
    Certification
      of Emil H. Soika, President and Chief Executive Officer (Principal
      Executive Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.





31.2
    Certification
      of Joel D. Knudson, Vice President - Finance and Secretary (Principal
      Financial Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.





32*
    Certification
      of Principal Executive Officer and Principal Financial Officer pursuant to
      18 U.S.C. Section 1350.





__________________


* This
Certification is not “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or incorporated by reference into any filing
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended.








12





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





CRITICARE
SYSTEMS, INC.


(Registrant)





Date: May
12,
2005 BY /s/
Joel D.
Knudson


Joel D.
Knudson


Vice President -
Finance


(Chief Accounting
Officer and


Duly Authorized
Officer)


13