22

                      US SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

             [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES AND EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1997


                         Commission file number 33-19583


                            ZEVEX INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

       Delaware                                              87-0462807
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                            Identification No.)

                              4314 ZEVEX Park Lane
                           Salt Lake City, Utah 84123

              (Address of principal executive offices and zip code)

         Issuer's telephone number, including area code: (801) 264-1001

      Securities Registered Pursuant to Section 12(b) of the Exchange Act:

                                                       Name of each
   Title of each class                          Exchange on which registered
Capital stock, par value $0.001 per share          American Stock Exchange

   Securities Registered Pursuant to Section 12(g) of the Exchange Act: None

     Check whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the  Exchange  Act 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:

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-K  contained  in this  form,  and  disclosure  will not be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K: X

         The  aggregate  market  value of the  Company's  voting  stock  held by
nonaffiliates  computed  with  reference  to the closing  price as quoted on the
American Stock Exchange on March 24, 1998 was approximately $22,504,884.

        The number of shares  outstanding  of the  Company's  Common Stock as of
March 24, 1998 was 3,294,476.

<PAGE>


                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant's  1997 Annual Report to Stockholders for the fiscal year
ended December 31, 1997, are  incorporated by reference in Parts I, II and IV of
this Form 10-K to the extent stated herein.  Portions of Registrant's definitive
Proxy  Statement for the Annual  Meeting of  Stockholders  to be held on June 4,
1998, are  incorporated by reference in Part III of this Form 10-K to the extent
stated herein.



<PAGE>



                                TABLE OF CONTENTS

Part I
   Item 1 - BUSINESS ......................................................    4
CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS .........................    4
   Item 2 - PROPERTIES ....................................................   18
   Item 3 - LEGAL PROCEEDINGS .............................................   18
   Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ...........   18

Part II
   Item 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND
               RELATED STOCKHOLDER MATTERS ................................   18
   Item 6 - SELECTED FINANCIAL DATA .......................................   19
   Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS ........................   19
   Item 7 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
                MARKET RISK ...............................................   19
   Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...................   19
   Item 9 - CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
                ON ACCOUNTING AND FINANCIAL DISCLOSURE ....................   19

Part III
   Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY ..............   19
   Item 11 - EXECUTIVE COMPENSATION .......................................   19
   Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT ..........................................   20
   Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...............   20

Part IV
   Item 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K ...............................................................   21
   Item 14(c) - INDEX TO EXHIBITS .........................................   22

SIGNATURES ................................................................   23


<PAGE>


PART I

ITEM 1.           BUSINESS

         Except for the section  below  entitled  "CAUTIONARY  FACTORS  THAT MAY
AFFECT FUTURE RESULTS," the information  required by this item is included under
"Business" in the Company's 1997 Annual Report to Stockholders.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS  (Cautionary  Statements Under
the Private Securities Litigation Reform Act of 1995)

         The  disclosure and analysis set forth herein and in the Company's 1997
Annual  Report  to  Shareholders  contain  certain  forward-looking  statements,
particularly  statements  relating to future actions,  performance or results of
current and anticipated  products,  sales efforts,  expenditures,  and financial
results. From time to time, the Company also provides forward-looking statements
in other  publicly-released  materials,  both written and oral.  Forward-looking
statements  provide  current  expectations or forecasts of future events such as
new  products,  product  approvals,  revenues and financial  performance.  These
statements  are  identified  as any statement  that does not relate  strictly to
historical or current facts.  They use words such as "plans,"  "expects," "will"
and other words and phrases of similar meaning. In all cases, a broad variety of
risks  and  uncertainties,  both  known  and  unknown,  as  well  as  inaccurate
assumptions can affect the realization of the expectations or forecasts in those
statements. Consequently, no forward-looking statement can be guaranteed.
Actual future results may vary materially.

         The Company  undertakes  no  obligation  to update any  forward-looking
statements,  but investors are advised to consult any further disclosures by the
Company on this subject in its  subsequent  filings  pursuant to the  Securities
Exchange  Act of 1934.  Furthermore,  as  permitted  by the  Private  Securities
Litigation Reform Act of 1995, the Company provides these cautionary  statements
identifying  factors  that could cause the  Company's  actual  results to differ
materially from expected and historical  results.  It is not possible to foresee
or identify all such factors.  Consequently,  this list should not be considered
an exhaustive  statement of all potential  risks,  uncertainties  and inaccurate
assumptions.

Dependence on Major Customers

         The Company's  revenues  historically  have been, and for a substantial
period of time in the future  likely will be,  largely  derived from the sale of
its design and  manufacturing  services  to a small  number of major  customers.
During  the  1993,  1994,  and 1995  fiscal  years,  the  Company  had two major
customers,  Allergan,  Inc., and Alaris Medical  Systems,  Inc.,  (formerly IVAC
Corporation),  who together  accounted for more than 50% of the Company's sales.
In 1996,  these two  customers  plus a third  customer,  Paradigm  Medical Inc.,
accounted for approximately  66% of sales.  These three customers each accounted
for more than ten percent of the Company's  total sales in 1996.  During the1997
fiscal year, 16% of sales were from  Allergan,  25% of sales were from Paradigm,
and 26% were from Alaris.  No assurances  can be given that such  customers will
continue to do business  with the Company or that the volume of their orders for
the Company's devices will increase or remain constant.  The loss of any of such
major  customers,  or a significant  reduction in the volume of their orders for
the  Company's  devices,  will have a material  adverse  impact on the Company's
operations.  In  addition,  if one or more of these  customers  were to seek and
obtain price discounts from the Company for the Company's devices, the resulting
lower gross margins on those devices would have a material adverse effect on the
Company's overall results of operations.  If any customer with which the Company
does a substantial amount of business were to encounter financial distress,  the
customer's lateness,  unwillingness,  or inability to pay its obligations to the
Company could result in a material  adverse  effect on the Company's  results of
operations and financial condition.

Risk Factors Relating to the Company's Customers

         At the  present  time,  and  for a  substantial  period  of time in the
future,  the  Company's  success  will  depend  largely  on the  success  of the
customers for its manufacturing services and on the medical devices designed and
manufactured by the Company for those customers. Any unfavorable developments or
adverse  effects on the sales of those  devices or such  customers'  businesses,
results of operations,  or financial position could have a corresponding adverse
effect on the Company.  In addition,  the Company sells certain types of medical
devices  to  multiple  customers  and  to the  extent  there  is an  unfavorable
development  affecting  the  sales of any such  type of  device  generally,  the
adverse effect of such development on the Company would be more substantial than
that  presented  by the decline in sales to a single  customer  for such type of
device.  The Company  believes that its design and  manufacturing  customers and
their  devices  (and  the  Company  indirectly)  are  generally  subject  to the
following risks:

         Competitive  Environment.  The  medical  products  industry  is  highly
competitive and subject to significant  technological  change.  Participation in
the  industry  requires  ongoing  investment  to keep  pace  with  technological
developments  and  quality and  regulatory  requirements.  The medical  products
industry   consists   of   numerous   companies,   ranging   from   start-up  to
well-established  companies.  Many of the  Company's  customers  have a  limited
number of  products,  and some market only a single  product.  As a result,  any
adverse  development  with  respect  to  these  customers'  products  may have a
material  adverse  effect  on the  business  and  financial  condition  of  such
customer, which may adversely affect that customer's ability to purchase and pay
for its products  manufactured  by the Company.  The  competitors  and potential
competitors  of the  Company's  customers may succeed in developing or marketing
technologies  and products  that will be preferred in the  marketplace  over the
devices  manufactured  by the Company for its customers or that would render its
customers'  technology  and products  obsolete or  noncompetitive.  In addition,
other competitors may develop  alternative  treatments or cures so that the need
for the products manufactured by the Company could be reduced or eliminated.

         Emerging  Technology  Companies.  A significant number of the Company's
customers are emerging  medical  technology  companies that have competitors and
potential competitors with substantially greater capital resources, research and
development  staffs,  and facilities,  and substantially  greater  experience in
developing new products,  obtaining regulatory approvals,  and manufacturing and
marketing medical products.  Approximately  five customers,  representing 15% of
the  Company's  revenues in fiscal year 1997,  were,  in  management's  opinion,
emerging medical technology companies.  These customers may not be successful in
launching  and  marketing  their  products,  or  may  not  respond  to  pricing,
marketing, or other competitive pressures or the rapid technological  innovation
demanded by the marketplace and, as a result,  may experience a significant drop
in product  revenues which would have a material adverse effect on the Company's
business, results of operations, and financial condition.

     Customer  Regulatory  Compliance.  The Food and  Drug  Administration  (the
"FDA")  regulates  many of the devices  manufactured  by the  Company  under the
Federal  Food,  Drug and  Cosmetic  Act,  as  amended , which  requires  certain
clearances  from the FDA before  new  medical  products  can be  marketed.  As a
prerequisite to any  introduction of a new device into the medical  marketplace,
the Company's customers must obtain necessary product clearances from the FDA or
other  regulatory  agencies  with  applicable  jurisdiction.  There  can  be  no
assurance that the Company's  customers will obtain such  clearances on a timely
basis, if at all.

         Certain medical  devices  manufactured by the Company may be subject to
the need to obtain FDA clearance of a premarket  approval  ("PMA")  application,
which requires substantial preclinical and clinical testing and may cause delays
and  prevent  introduction  of such  devices.  Currently,  at  least  two of the
Company's  customers  are  seeking  or  plan to  seek a PMA  for  devices  to be
manufactured  by the Company.  Other devices can be marketed  without a PMA, but
only  by  establishing   in  a  510(k)   premarket   notification   "substantial
equivalence" to a predicate device.  FDA clearance to market  regulations depend
heavily on administrative  interpretations,  which may change  retroactively and
may create  additional  barriers  that  prevent or delay the  introduction  of a
product.  The process of obtaining a PMA or a 510(k)  clearance  could delay the
introduction  of a product.  A PMA for a product  could be denied  altogether if
clinical  testing does not establish that the product is safe and  effective.  A
510(k) premarket  notification may also need to contain clinical data.  Clinical
testing must be performed in accordance with the FDA's regulations. A customer's
failure to comply with the FDA's  requirements can result in the delay or denial
of its PMA.  Delays in obtaining a PMA are frequent and could result in delaying
or canceling customer orders to the Company.  Many products never receive a PMA.
Similarly,  510(k)  clearance  may be  delayed,  and in some  instances,  510(k)
clearance is never obtained.

         Once a product  is in  commercial  distribution,  discovery  of product
problems  or  failure  to  comply  with  regulatory   standards  may  result  in
restrictions  on the product's  future use or withdrawal of the product from the
market despite prior governmental clearance. Additionally, once FDA clearance is
obtained,  a new  clearance  in the form of a PMA  supplement  may be  needed to
modify the  device,  its  intended  use, or its  manufacturing.  There can be no
assurance that product  recalls,  product  defects,  or  modification or loss of
necessary  regulatory  clearance  will not occur in the  future.  The delays and
potential  product  cancellations   inherent  in  the  development,   regulatory
clearance,  commercialization,  and ongoing  regulatory  compliance  of products
manufactured by the Company for its customers may have a material adverse effect
on the Company's  business,  reputation,  results of  operations,  and financial
condition.

         Sales of the Company's  medical  products outside the United States are
subject to regulatory requirements that vary widely from country to country. The
time required to obtain clearance for sale in foreign countries may be longer or
shorter than that required for FDA clearance,  and the  requirements may differ.
The FDA also  regulates  the sale of  exported  medical  devices,  although to a
lesser  extent than  devices  sold in the United  States.  For medical  products
exported to countries in Europe, the Company anticipates that its customers will
want their products to qualify for distribution under the "CE Mark." The CE Mark
is a designation  given to products which comply with certain European  Economic
Area  policy  directives  and  therefore  may be freely  traded in almost  every
European  country.  Commencing in 1998,  medical product  manufacturers  will be
required to obtain certifications  necessary to enable the CE Mark to be affixed
to medical products they manufacture for sale throughout the European Community.
In  addition,  the  Company's  customers  must comply with other laws  generally
applicable to foreign trade, including technology export restrictions,  tariffs,
and other  regulatory  barriers.  There can be no assurance  that the  Company's
customers will obtain all required clearances or approvals for exported products
on a timely basis,  if at all.  Failure or delay by the  Company's  customers in
obtaining  the   requisite   regulatory   approvals  for  exported   instruments
manufactured by the Company may have a material  adverse effect on the Company's
business, results of operations, and financial condition.

         Medical  devices  manufactured  by  the  Company  and  marketed  by its
customers  pursuant to FDA or foreign  clearances  or  approvals  are subject to
pervasive  and  continuing  regulation  by the FDA and certain state and foreign
regulatory agencies. Regulatory requirements may include significant limitations
on the  indicated  uses for which the product may be marketed.  FDA  enforcement
policy prohibits the marketing of approved medical products for unapproved uses.
The  Company's  customers  control the  marketing of their  products,  including
representing  to the market the approved uses of their  products.  If a customer
engages in prohibited marketing practices,  the FDA or another regulatory agency
with applicable  jurisdiction  could intervene,  possibly resulting in marketing
restrictions,  including  prohibitions  on further  product  sales,  or civil or
criminal penalties,  which could have a material adverse effect on the Company's
business, the results of operations, and financial condition.

         Changes in existing laws and  regulations or policies  could  adversely
affect  the  ability  of the  Company's  customers  to  comply  with  regulatory
requirements.  Failure  to comply  with  regulatory  requirements  could  have a
material adverse effect on the customer's business,  results of operations,  and
financial  condition,  which,  in turn,  could affect  adversely  the  Company's
business,  results  of  operations,  and  financial  condition.  There can be no
assurance that a customer of the Company,  or the Company,  will not be required
to incur significant costs to comply with laws and regulations in the future, or
that such  customer  or the  Company  will be able to comply  with such laws and
regulations,  or that compliance with such laws and regulations  will not have a
material adverse effect on the Company's  business,  results of operations,  and
financial condition.

         Uncertain Market Acceptance of Products. There can be no assurance that
the  products  created for the  Company's  customers  will gain any  significant
market  acceptance  and market  share  among  physicians  and other  health care
providers,  patients,  or  health  care  payors,  even  if  required  regulatory
approvals are obtained.  Market  acceptance  may depend on a variety of factors,
including  educating health care providers regarding the use of a new product or
procedure,  overcoming  objections  to  certain  effects  of the  product or its
related treatment  regimen,  and convincing health care payors that the benefits
of the product and its related  treatment  regimen  outweigh  its costs.  Market
acceptance  and  market  share  are  also  affected  by  the  timing  of  market
introduction of competitive products. Accordingly, the relative speed with which
the  Company's  customers can develop  products,  gain  regulatory  approval and
reimbursement acceptance, and supply commercial quantities of the product to the
market are  expected to be  important  factors in market  acceptance  and market
share. Some of the Company's  customers,  especially emerging medical technology
companies,  have limited or no experience in marketing  their  products and have
not  made  marketing  or  distribution  arrangements  for  their  products.  The
Company's customers may be unable to establish effective sales,  marketing,  and
distribution channels to successfully  commercialize their products. The failure
by the Company's  customers to gain market  acceptance of their  products  could
have a material adverse effect on the Company's business, results of operations,
and financial conditions.

         Product  Obsolescence.   Rapid  change  and  technological   innovation
characterize the marketplace for medical products.  As a result, the Company and
its  customers  are subject to the risk of product  obsolescence,  whether  from
prolonged  development  or  government  approval  cycles or the  development  of
improved  products or processes by  competitors.  In addition,  the  marketplace
could  conclude that the task for which a customer's  product was designed is no
longer an element of a generally accepted  diagnostic or treatment regimen.  Any
development  adversely  affecting the market for a product  manufactured  by the
Company would result in the Company's having to reduce production  volumes or to
discontinue  manufacturing  the  product,  which  could have a material  adverse
effect  on  the  Company's  business,   results  of  operations,  and  financial
condition.

         Customers'   Future  Capital   Requirements.   Many  of  the  Company's
customers,  especially  the  emerging  medical  technology  companies,  are  not
profitable and may have little or no revenues, but they have significant working
capital  requirements.  Such customers may be required to raise additional funds
through public or private  financings,  including  equity  financings.  Adequate
funds  for  their  operations  may  not be  available  when  needed,  if at all.
Insufficient  funds may  require a customer to delay  development  of a product,
clinical trials (if required),  or the commercial introduction of the product or
prevent such commercial introduction  altogether.  Depending on the significance
of a customer's product to the Company's revenues or profitability,  any adverse
effect on a customer  resulting  from  insufficient  funding  could  result in a
material adverse effect on the Company's  business,  results of operations,  and
financial condition.

         Uncertainty of Third-Party Reimbursement.  Sales of many of the devices
manufactured  by the  Company  will be  dependent  in part  on  availability  of
adequate  reimbursement  for those  instruments  from  third-party  health  care
payors,  such as government  and private  insurance  plans,  health  maintenance
organizations,  and preferred  provider  organizations.  Third-party  payors are
increasingly challenging the pricing of medical products and services. There can
be no  assurance  that  adequate  levels of  reimbursement  will be available to
enable the Company's  customers to achieve market  acceptance of their products.
Without adequate support from third-party payors, the market for the products of
the Company's customers may be limited.

         Nonmedical  Customers.  While the Company  presently  does not have any
significant  nonmedical  customers,  the  Company  may  in  the  future  perform
significant design and manufacturing work for such parties. Nonmedical customers
are subject to general business risks, such as competition, market acceptance of
their products,  capital  requirements,  and credit risks.  The Company's future
nonmedical customers may operate in highly competitive industries in which their
products compete on price,  quality, and product enhancements and are subject to
risks of technological obsolescence.  As a result, sales to nonmedical customers
may  be  volatile  and  subject  to  risks  of  cancellation.   Any  unfavorable
development  experienced  by such  future  nonmedical  customers,  whether  of a
general nature or a specific risk not  anticipated by the Company,  could have a
material adverse effect on the Company's  business,  results of operations,  and
financial condition.

Uncertainty  of Market  Acceptance  of  Out-Sourcing  Manufacturing  of  Medical
Instruments

         The Company  believes that the market for  out-sourcing  the design and
manufacture of advanced medical products for medical technology  companies is in
its early stages. Many of the Company's potential customers have internal design
and  manufacturing  facilities.  The  Company's  engineering  and  manufacturing
activities  require  that  customers  provide the  Company  with access to their
proprietary  technology  and  relinquish  the control  associated  with internal
engineering and manufacturing.  As a result, potential customers may decide that
the risks of out-sourcing  engineering or manufacturing  are too great or exceed
the  anticipated  benefits of  out-sourcing.  In  addition,  medical  technology
companies that have previously made substantial  investments to establish design
and  manufacturing  capabilities may be reluctant to out-source those functions.
If the medical technology  industry  generally,  or any significant  existing or
potential   customer,   concludes  that  the   disadvantages   of   out-sourcing
manufacturing  outweigh the  advantages,  the Company could suffer a substantial
reduction in the size of one or more of its current target markets,  which could
have a material  adverse  effect on its  business,  results of  operations,  and
financial condition.

Competition in Out-Sourcing Manufacturing of Medical Instruments

         The Company faces competition from design firms and other manufacturers
that  operate  in  the  medical  technology  industry.   Many  competitors  have
substantially greater financial, research, and resources than the Company. Also,
manufacturers  focusing in other industries may decide to enter into the medical
technology  industry.  Competition from any of the foregoing sources could place
pressure  on the  Company  to accept  lower  margins  on its  contracts  or lose
existing or potential business,  which could result in a material adverse effect
on the Company's business,  results of operations,  and financial condition.  To
remain   competitive,   the  Company  must   continue  to  provide  and  develop
technologically advanced manufacturing services,  maintain quality levels, offer
flexible delivery schedules,  deliver finished products on a reliable basis, and
compete  favorably  on the basis of price.  There can be no  assurance  that the
Company will be able to compete favorably with respect to these factors.

Early Termination of Agreements

         The Company's  agreements  with major  customers  generally  permit the
termination of the agreements before expiration  thereof if certain events occur
that are materially adverse to the design,  development,  manufacture or sale of
the  product.  Examples  of such  events  include  the  failure to obtain or the
withdrawal of  regulatory  clearance,  or an alteration of regulatory  clearance
that is materially adverse to the customer or which prohibits or interferes with
the  manufacture or sale of the products.  The  performance  of agreements  with
major customers may be suspended or excused,  if certain  conditions,  generally
beyond the  control of the  customer  or the Company  (so-called  force  majeure
events), cause the failure or delay of performance. Such early termination could
have a material adverse affect on the Company's business, results of operations,
and  financial  condition,  including  in  certain  instances  the  transfer  of
manufacturing know-how to the customer.

Risk Factors in Marketing the Company's Proprietary Products

         In producing  and marketing its own  proprietary  devices,  the Company
faces many of the same risks that its  design/manufacturing  customers  face. As
discussed above with respect to its customers, such risks include:

     The medical products industry is highly  competitive.  A significant number
of the Company's  competitors  have  substantially  greater  capital  resources,
research and development  staffs,  and  facilities,  and  substantially  greater
experience  in developing  new products,  obtaining  regulatory  approvals,  and
manufacturing  and  marketing  medical  products.  Competitors  may  succeed  in
marketing  products  preferable  to the  Company's  products  or  rendering  the
Company's products obsolete.

     The  medical  products  industry  is subject to  significant  technological
change  and  requires  ongoing   investment  to  keep  pace  with  technological
development,  quality, and regulatory requirements.  In order to compete in this
marketplace, the Company will be required to make ongoing investment in research
and development with respect to its existing and future products.

     The Company is subject to  substantial  risks  involved in  developing  and
marketing products  regulated by the FDA and comparable foreign agencies.  There
can be no assurance  that the Company will obtain the  necessary  FDA or foreign
clearances  on a timely  basis,  if at all. As discussed  above,  commercialized
medical  products  are  subject to further  regulatory  restrictions,  which may
adversely  affect the  Company.  Changes in  existing  laws and  regulations  or
policies  could  adversely  affect  the  ability of the  Company to comply  with
regulatory requirements. The delays and potential product cancellations inherent
in  obtaining  regulatory  approval and  maintaining  regulatory  compliance  of
products  manufactured by the Company may have a material  adverse effect on the
Company's business, reputation, results of operations, and financial condition.

     There  can be no  assurance  that  the  Company's  products  will  gain any
significant  market acceptance among physicians and other health care providers,
patients,  or health care  payors,  even if required  regulatory  approvals  are
obtained.

     Revenues  for  many  of the  devices  manufactured  by the  Company  may be
dependent in part on  availability of adequate  reimbursement  for those devices
from third-party  health care payors,  such as government and private  insurance
plans.  There is no  assurance  that the  levels of  reimbursements  offered  by
third-party  payors  will be  sufficient  to achieve  market  acceptance  of the
Company's products. The Company may not be successful in launching and marketing
its own proprietary devices, or may not respond to pricing,  marketing, or other
competitive  pressures  or the rapid  technological  innovation  demanded by the
marketplace  and, as a result,  may experience a significant drop in its product
revenues,  which could have a material adverse effect on the Company's business,
results of operations, and financial condition.
Regulatory Compliance for Manufacturing Facilities

         Applicable law requires that the Company comply with the FDA's detailed
good manufacturing  practices ("GMP") regulations for the manufacture of medical
devices.  The FDA monitors  compliance  with its GMP  regulations  by subjecting
medical product manufacturers to periodic FDA inspections of their manufacturing
facilities.  To ensure  compliance  with GMP  requirements,  the Company expends
significant time,  resources,  and effort in the areas of training,  production,
and quality assurance. In addition, the FDA typically inspects a manufacturer of
a PMA device  before  approving a PMA.  The  failure to pass such an  inspection
could  result in delay in  approving a PMA. The Company is also subject to other
regulatory  requirements  and may need to submit  reports to the FDA relating to
certain types of adverse events. Failure to comply with GMP regulations or other
applicable legal requirements can lead to warning letters,  seizure of violative
products, injunctive actions brought by the U.S. government, and potential civil
or  criminal  liability  on the  part of the  Company  and of the  officers  and
employees who are responsible for the activities that lead to any violation.  In
addition, the continued sale of any instruments  manufactured by the Company may
be halted or  otherwise  restricted.  Any such  actions  could  have a  material
adverse effect on the willingness of customers and  prospective  customers to do
business with the Company. In order for the Company's instruments to be exported
and for the Company and its  customers  to be  qualified  to use the CE Mark for
sales into the  European  Economic  Area,  the Company  maintains  International
Organization  for  Standardization  ("ISO") 9001/EN 46001  certification,  which
subjects the Company's operations to periodic  surveillance audits. The ultimate
regulatory risks present in manufacturing products for markets governed by these
standards are currently substantially similar to those posed by GMP regulations.
There can be no assurance that the Company's  manufacturing  operations  will be
found to comply with GMP regulations,  ISO standards,  or other applicable legal
requirements or that the Company will not be required to incur substantial costs
to maintain its compliance  with existing or future  manufacturing  regulations,
standards,  or other  requirements.  Any such noncompliance or increased cost of
compliance  could  have a material  adverse  effect on the  Company's  business,
results of operations, and financial condition.

         The Company is also subject to numerous federal,  state, and local laws
relating to such matters as safe working  conditions,  manufacturing  practices,
environmental  protection,  fire hazard  control,  and  disposal of hazardous or
potentially hazardous substances.  While the Company has not been the subject of
any material  proceeding  concerning  such laws, and believes it is currently in
compliance  with such laws in all material  respects,  there can be no assurance
that the Company will not be required to incur  significant costs to comply with
such laws and regulations now or in the future, or that such laws or regulations
will  not have a  material  adverse  effect  upon the  Company's  ability  to do
business.  Changes in existing  requirements or adoption of new  requirements or
policies  could  affect  adversely  the  ability of the  Company to comply  with
regulatory  requirements.  Failure to comply with regulatory  requirements could
have a material adverse effect on the Company's business, results of operations,
and financial condition.

Product Development

         The success of the Company will depend to a significant extent upon its
ability to enhance and expand on its current  offering of  proprietary  products
and to develop and  introduce  additional  innovative  products that gain market
acceptance.  While the Company maintains  research and development  programs and
has  established a Technical  Advisory Board to assist it, there is no assurance
that the Company will be successful in selecting, developing,  manufacturing and
marketing  new  products  or  enhancing  its  existing  products  on a timely or
cost-effective basis.  Moreover, the Company may encounter technical problems in
connection  with its  efforts to develop or  introduce  new  products or product
enhancements.  Some of the devices currently under  consideration by the Company
(as  well  as  devices  of  some  of its  customers)  will  require  significant
additional  development,  pre-clinical  testing and clinical  trials and related
investment prior to their commercialization. There can be no assurance that such
devices  will be  successfully  developed,  prove to be safe or  efficacious  in
clinical  trials,  meet  applicable  regulatory  standards,  be capable of being
produced in  commercial  quantities  at  reasonable  costs,  or be  successfully
marketed.  The failure of the Company to develop or  introduce  new  products or
product enhancements that achieve market acceptance on a timely basis could have
a material adverse effect on the Company's business,  results of operations, and
financial condition.

Design and Manufacturing Process Risks

         While  the  Company  has   substantial   experience  in  designing  and
manufacturing  devices, the Company may still experience technical  difficulties
and delays with the design and manufacturing of its or its customer's  products.
Such difficulties could cause significant delays in the Company's  production of
products and have a material adverse effect on the Company's  revenues.  In some
instances,  payment by a  manufacturing  customer is dependent on the  Company's
ability to meet certain  design and  production  milestones in a timely  manner.
Also, some major contracts can be canceled if purchase orders thereunder are not
completed  when due.  Potential  difficulties  in the design  and  manufacturing
process that could be experienced by the Company  include  difficulty in meeting
required   specifications,   difficulty  in  achieving  necessary  manufacturing
efficiencies,  and difficulties in obtaining  materials on a timely basis.  Such
design and  manufacturing  difficulties  could have a material adverse effect on
the Company's business, results of operations, and financial condition.

Expansion of Marketing; Limited Distribution

         The  Company  currently  has a  limited  domestic  direct  sales  force
consisting  of eight  individuals,  complemented  by a  network  of  independent
manufacturing  representatives.  The  Company  anticipates  that it will need to
increase its marketing and sales  capability  significantly  to more fully cover
its target  markets,  particularly  as  additional  proprietary  devices  become
commercially available.  There can be no assurance that the Company will be able
to compete  effectively in attracting and retaining qualified sales personnel or
independent  manufacturing  representatives as needed. There can be no assurance
that  the  Company  or its  independent  manufacturing  representatives  will be
successful  in marketing or selling the  Company's  services and  products.  The
Company's  ability to sell its devices in certain  areas may depend on alliances
with independent manufacturing  representatives.  There can be no assurance that
the  Company  will  be  able  to  identify  and  obtain   suitable   independent
manufacturing representatives in desirable markets.

Product Recalls

         If a device that is designed or manufactured by the Company is found to
be defective, whether due to design or manufacturing defects, to improper use of
the product, or to other reasons,  the device may need to be recalled,  possibly
at the Company's expense. Furthermore, the adverse effect of a product recall on
the Company might not be limited to the cost of a recall. For example, a product
recall  could  cause  a  general  investigation  of the  Company  by  applicable
regulatory   authorities  as  well  as  cause  other  customers  to  review  and
potentially terminate their relationships with the Company. Recalls,  especially
if accompanied by  unfavorable  publicity or termination of customer  contracts,
could result in  substantial  costs,  loss of revenues,  and a diminution of the
Company's reputation,  each of which would have a material adverse effect on the
Company's business, results of operations, and financial condition.

Risk of Product Liability

         The manufacture and sale of products,  and especially medical products,
entails an inherent risk of product liability. The Company does maintain product
liability  insurance  with limits of $1 million per occurrence and $2 million in
the  aggregate.  There can be no  assurance  that such  insurance is adequate to
cover  potential  claims  or that the  Company  will be able to  obtain  product
liability  insurance  on  acceptable  terms in the  future  or that any  product
liability insurance subsequently obtained will provide adequate coverage against
all  potential  claims.  Such claims may be large in the medical  products  area
where  product  failure  may  result  in loss of life or injury  to  persons.  A
successful  claim  brought  against  the  Company  in  excess  of its  insurance
coverage,  or any  material  claim for which  insurance  coverage  was denied or
limited,  could have material adverse effect on the Company's business,  results
of operations,  and financial  condition.  Additionally,  the Company  generally
provides  a  design  defect  warranty  and in  some  instances  indemnifies  its
customers for failure to conform to design specifications and against defects in
materials and workmanship.  Any substantial claim against the Company under such
warranties  or  indemnification  could  have a  material  adverse  effect on the
Company's business, results of operations, and financial condition.

Potential Inability to Sustain and Manage Growth

         The Company's need to manage its growth  effectively will require it to
continue to implement and improve its  operational,  financial,  and  management
information systems, to develop its managers' and project engineers'  management
skills, and to train, motivate, and manage its employees.  The Company must also
be able to attract  and retain a  sufficient  number of  suitable  employees  to
sustain  its  growth.  If the  Company  cannot  keep pace with the growth of its
customers, it may lose customers and its growth may be limited.

Dependence Upon Management

         The  Company  is  substantially  dependent  upon  its  key  managerial,
technical, and engineering personnel, particularly its three executive officers,
Dean G. Constantine,  Chief Executive  Officer and President,  David J. McNally,
Vice President and Marketing Director, and Phillip L. McStotts,  Chief Financial
Officer and Secretary/Treasurer. The Company must also attract and retain highly
qualified engineering, technical, and managerial personnel. Competition for such
personnel is intense, the available pool of qualified candidates is limited, and
there  can be no  assurance  that  the  Company  can  attract  and  retain  such
personnel. The loss of its key personnel could have a material adverse effect on
the Company's business,  results of operations, and financial condition. None of
the Company's key personnel have an employment agreement with the Company.

         The Company  carries  key-man life  insurance on the lives of its Chief
Executive Officer,  Chief Financial Officer, and Vice President in the amount of
$500,000  each. No  assurances  can be given that such  insurance  would provide
adequate  compensation  to the  Company  in the  event of the  death of such key
employee.

Patent Protection

         As of December 31, 1997,  the Company held six U.S.  patents on devices
developed by the Company. Such patents disclose certain aspects of the Company's
technologies  and there can be no assurance  that others will not design  around
the patent and develop similar technology. The Company believes that its devices
and other  proprietary  rights do not infringe any  proprietary  rights of third
parties. There can be no assurance,  however, that third parties will not assert
infringement claims in the future.

Control by Management and Certain Major Shareholders

         As of March 24, 1998, the current  executive  officers and directors of
the Company,  together with those persons who are the beneficial  owners of more
than 5% of the Company's  Common  Stock,  will  beneficially  own or have voting
control over  approximately  35% of the outstanding  Common Stock.  Accordingly,
these  individuals  have the ability to influence  the election of the Company's
directors and most corporate actions. This concentration of ownership,  together
with other provisions in the Company's charter and applicable corporate law, may
also have the effect of delaying,  deterring,  or preventing a change in control
of the Company.

Suppliers and Shortages of Component Parts

         The Company relies on  third-party  suppliers for each of the component
parts used in manufacturing its customers' devices. Although component parts are
generally available from multiple suppliers, certain component parts may require
long lead times,  and the Company may have to delay the  manufacture of customer
devices from time to time due to the  unavailability of certain component parts.
In addition, even if component parts are available from an alternative supplier,
the Company could experience  additional delays in obtaining  component parts if
the  supplier  has  not  met  the  Company's  vendor  qualifications.  Component
shortages for a particular  device may adversely affect the Company's ability to
satisfy  customer  orders for that device.  Such  shortages  and  extensions  of
production schedules may delay the recognition of revenue by the Company and may
in some  cases  constitute  a breach of a  customer  contract,  which may have a
material adverse effect on the Company's  business,  results of operations,  and
financial  condition.  If shortages of component parts continue or if additional
shortages  should  occur,  the  Company  may be forced to pay higher  prices for
affected  components or delay  manufacturing  and shipping  particular  devices,
either of which  could  adversely  affect  subsequent  customer  demand for such
devices  and the  Company's  business,  results  of  operations,  and  financial
condition.

Customer Conflicts

         The medical technology industry reflects vigorous competition among its
participants.  As a result, its customers sometimes require the Company to enter
into  noncompetition  agreements  that  prevent the Company  from  manufacturing
instruments for its customers' competitors.  For example, the Company has agreed
with one customer not to manufacture  certain devices for laser cataract surgery
for any other customer or potential customer.  Such restrictions generally apply
during the term of the customer's manufacturing contract and, in some instances,
for a period following termination of the contract. If the Company enters into a
noncompetition   agreement,  the  Company  may  be  adversely  affected  if  its
customer's  product is not  successful and the Company must forgo an opportunity
to  manufacture a successful  instrument  for such  customer's  competitor.  Any
conflicts  among its customers could prevent or deter the Company from obtaining
contracts  to  manufacture  successful  instruments,  which  could  result  in a
material  adverse  effect on its business,  results of operations  and financial
condition.

Future Capital Requirements

         The Company  believes that its existing  capital  resources and amounts
available  under the Company's  existing  bank line of credit,  will satisfy the
Company's  anticipated  capital  needs  for  the  next  three  years  (depending
primarily  on the  Company's  growth  rate and its results of  operations).  The
commercialization of proprietary products,  which is an element of the Company's
growth strategy, would require increased investment in working capital and could
therefore shorten this period.  Thereafter, the Company may be required to raise
additional capital or increase its borrowing capacity,  or both. There can be no
assurance  that  alternative  sources of equity or debt will be available in the
future  or,  if  available,  will be on terms  acceptance  to the  Company.  Any
additional equity financing would result in additional dilution to the Company's
shareholders.  If adequate  funds are not  available,  the  Company's  business,
results of operations,  and financial  condition  could be materially  adversely
affected.

Reliance on Efficiency of Distribution and Third Parties

         The Company believes its financial  performance is dependent in part on
its ability to provide prompt,  accurate, and complete services to its customers
on a timely and competitive  basis.  Accordingly,  delays in distribution in its
day-to-day  operations  or  material  increases  in its costs of  procuring  and
delivering  products  could have an adverse  effect on the Company's  results of
operations. Any failure of either its computer operating system or its telephone
system  could  adversely  affect its ability to receive  and process  customer's
orders  and  ship  products  on  a  timely  basis.   Strikes  or  other  service
interruptions  affecting Federal Express  Corporation,  United Parcel Service of
America, Inc., or other common carriers used by the Company to receive necessary
components  or other  materials  or to ship its  products  also could impair the
Company's ability to deliver products on a timely and cost-effective basis.

Volatility of Revenues and Product Mix

     The  Company's  annual and  quarterly  operating  results are affected by a
number of factors,  including  the volume and timing of customer  orders,  which
vary due to (i) variation in demand for the customer's  products as a result of,
among other things,  product life cycles,  competitive  conditions,  and general
economic conditions, (ii) the customer's attempt to balance its inventory, (iii)
the customer's need to adapt to changing regulatory conditions and requirements,
and  (iv)  changes  in  the   customer's   manufacturing   strategy.   Technical
difficulties  and  delays in the  design and  manufacturing  processes  may also
affect such results.  The foregoing  factors may cause  fluctuations in revenues
and  variations in product mix,  which could in turn cause  fluctuations  in the
Company's gross margin.  Under the terms of the Company's contracts with many of
its  customers,  the customers  have broad  discretion to control the volume and
timing  of  product  deliveries.  Further,  the  Company's  contracts  with  its
customers  typically  have  no  minimum  purchase  requirements.  As  a  result,
production  may be  reduced  or  discontinued  at  any  time.  Therefore,  it is
difficult  for the  Company  to  forecast  the  level of  customer  orders  with
certainty, making it difficult to schedule production and maximize manufacturing
capacity.  Other  factors that may  adversely  affect the  Company's  annual and
quarterly  results  of  operations  include   inexperience  in  manufacturing  a
particular  instrument,  inventory  shortages  or  obsolescence,  labor costs or
shortages,  low gross margins on design projects, an increase in design revenues
as  a  percentage  of  total  revenues,   price   competition,   and  regulatory
requirements.  Because the Company's business  organization and its related cost
structure  anticipate  supporting  a  certain  minimum  level of  revenues,  the
Company's limited ability to adjust its short term cost structure would compound
the  adverse  effect  of any  significant  revenue  reduction.  Any one of these
factors or a combination  thereof could result in a material  adverse  effect on
the Company's business, results of operations, and financial condition.

Uncertain Protection of Intellectual Property

     To maintain the secrecy of its proprietary information,  the Company relies
on a  combination  of trade secret laws and internal  security  procedures.  The
Company typically requires its employees,  consultants,  and advisors to execute
confidentiality  and  assignment  of  inventions  agreements.  There  can  be no
assurance,  however,  that the common law, statutory,  and contractual rights on
which the Company relies to protect its  intellectual  property and confidential
and  proprietary  information  will  provide  it  with  adequate  or  meaningful
protection.  Third parties may independently  develop products,  techniques,  or
information that are substantially  equivalent to the products,  techniques,  or
information that the Company  considers  proprietary.  In addition,  proprietary
information  regarding the Company could be disclosed in a manner  against which
the  Company  has  no  meaningful  remedy.   Disputes  regarding  the  Company's
intellectual  property  could force the Company into  expensive  and  protracted
litigation or costly agreements with third parties. An adverse  determination in
a judicial or administrative  proceeding or failure to reach an agreement with a
third party  regarding  intellectual  property  rights could prevent the Company
from  manufacturing  and selling  certain of its products.  Any of the foregoing
circumstances  could have a material  adverse effect on the Company's  business,
results of operations, or financial condition.

Limited Market for Common Stock

     Historically,  the market for the  Company's  Common Stock has been limited
due to the relatively low trading volume and the small number of brokerage firms
acting as market makers.  In May 1997, the Company's Common Stock was listed for
trading on the American Stock  Exchange,  which has increased the market for the
Common Stock. No assurance can be given, however, that the market for the Common
Stock will  continue  or  increase,  or that the prices in such  market  will be
maintained at their present levels.
Possible Volatility of Stock Price

         Announcements of technological  innovations for new commercial  devices
by the  Company  or  its  competitors,  developments  concerning  the  Company's
proprietary rights, or the public concern as to safety of its devices may have a
material adverse impact on the Company's business and on the market price of its
Common  Stock,  particularly  as the  Company  expands  its  efforts to become a
medical  technology  company that  manufactures  and markets its own proprietary
devices.  The market price of the Company's Common Stock may be volatile and may
fluctuate based on a number of factors,  including significant  announcements by
the  Company  and  its  competitors,  quarterly  fluctuations  in the  Company's
operating results, and general economic conditions and conditions in the medical
technology  industry.  In  addition,  in  recent  years  the  stock  market  has
experienced extreme price and volume fluctuations,  which have had a substantial
effect on the market prices for many medical-technology  companies and are often
unrelated to the operating performance of such companies.

Issuance of Additional Shares for Acquisition or Expansion

     Any future major  acquisition or expansion of the Company may result in the
issuance of additional  common shares or other stocks or instruments that may be
authorized without shareholder  approval.  The issuance of subsequent securities
may also result in  substantial  dilution in the  percentage of the Common Stock
held by existing shareholders at the time of any such transaction. Moreover, the
shares or warrants issued in connection with any such  transaction may be valued
by the Company's management based on factors other than the trading price on the
American Stock Exchange.



<PAGE>



Dividends

     While the Company has  declared one stock  dividend in its history,  it has
never paid a cash  dividend and there can be no assurance  that the Company will
pay a dividend on Common  Stock in the future.  Any future cash  dividends  will
depend on earnings,  if any, the  Company's  financial  requirements,  and other
factors.  The Company's  management  does not  currently  intend to pay any cash
dividends in the  foreseeable  future.  Additionally,  the Company is restricted
from declaring any cash dividends under its current line of credit arrangement.

Impact  of  Anti-Takeover  Measures;   Possible  Issuance  of  Preferred  Stock;
Classified Board

         Certain  Provisions of the Company's  Certificate of Incorporation  and
Bylaws  and  the  Delaware  General  Corporation  Law may  have  the  effect  of
preventing, discouraging, or delaying a change in the control of the Company and
may  maintain the  incumbency  of the Board of Directors  and  management.  Such
provisions could also limit the price that certain investors might be willing to
pay in the future for shares of the  Company's  Common  Stock.  Pursuant  to the
Company's Certificate of Incorporation,  the Board of Directors is authorized to
fix the rights,  preferences,  privileges,  and  restrictions,  including voting
rights,  of unissued  shares of the Company's  Preferred Stock and to issue such
stock  without any further  vote or action by the  Company's  stockholders.  The
rights of the  holders of Common  Stock will be subject to and may be  adversely
affected by the rights of the holders of any Preferred Stock that may be created
and issued in the future.  In  addition,  stockholders  do not have the right to
cumulative  voting for the election of  directors.  Furthermore,  the  Company's
Certificate  and Bylaws provide for a staggered  board whereby only one-third of
the total  number of  directors  are  replaced  or  re-elected  each  year.  The
Certificate  also provides that the  provisions of the  Certificate  relating to
number,  vacancies,  and  classification  of the Board of Directors  may only be
amended by a vote of at least 66 2/3% of the shareholders.  Finally,  the Bylaws
provide  that  special  meetings of the  stockholders  may only be called by the
President  of the Company or pursuant to a  resolution  adopted by a majority of
the Board of Directors.

         The  Company  is  subject  to  Section  203  of  the  Delaware  General
Corporation  Law ("Section  203"),  which  restricts  certain  transactions  and
business  combinations  between a corporation  and an  "Interested  Stockholder"
owning 15% or more of the corporation's outstanding voting stock for a period of
three years from the date the  stockholder  becomes an  Interested  Stockholder.
Subject  to  certain  exceptions,  unless  the  transaction  is  approved  in  a
prescribed manner,  Section 203 prohibits significant business transactions such
as a merger  with,  disposition  of assets to, or  receipt  of  disproportionate
financial benefits by the Interested Stockholder, or any other transactions that
would increase the Interested Stockholder's proportionate ownership of any class
or series of the corporation's stock.

Foreign Exchange, Currency, and Political Risk

         The Company's  international  business is subject to risks  customarily
encountered in foreign operations,  including changes in a specific country's or
region's  political or economic  conditions,  nationalization,  trade protection
measures, import or export licensing requirements,  the overlap of different tax
structures,  unexpected  changes in regulatory  requirements,  other restrictive
government  actions  such as capital  regulations,  and natural  disasters.  The
Company is also exposed to foreign  currency  exchange rate risk inherent in its
foreign  sales  commitments  and  anticipated  foreign  sales because the prices
charged for its products are  denominated  in U.S.  dollars.  Consequently,  the
Company's  foreign sales  commitments and  anticipated  sales could be adversely
affected by an appreciation  of the U.S.  dollar  relative to other  currencies,
which  in  turn  could  have  an  adverse   material  effect  on  the  Company's
consolidated financial position, results of operations and the amount and timing
of cash flows.

Year 2000

         Many computer  systems  experience  problems  handling dates beyond the
year 1999.  Therefore,  some  computer  hardware  and  software  will need to be
modified  prior to the year 2000 in order to remain  functional.  The Company is
assessing both the internal readiness of its computer systems and the compliance
of its computer  products and software  sold to customers  for handling the year
2000. The Company expects to implement  successfully the systems and programming
changes  necessary to address  year 2000  issues,  and does not believe that the
cost of such actions  will have a material  effect on the  Company's  results of
operations  or financial  condition.  There can be no assurance,  however,  that
there  will  not  be a  delay  in,  or  increased  costs  associated  with,  the
implementation  of such changes,  and the Company's  inability to implement such
changes could have an adverse effect on future results of operations.

ITEM 2.           PROPERTIES

         The information required by this item is included under "Properties and
Facilities"  in  the  Company's  1997  Annual  Report  to  Stockholders  and  is
incorporated herein by reference.

ITEM 3.           LEGAL PROCEEDINGS

         The  information  required  by  this  item  is  included  under  "Legal
Proceedings"  in  the  Company's  1997  Annual  Report  to  Stockholders  and is
incorporated herein by reference.

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

         The information  required by this item is included under "Submission of
Matters to a Vote of Security  Holders" in the  Company's  1997 Annual Report to
Stockholders and is incorporated herein by reference.

                                     PART II

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

         The  information  required by this item is included  under  "Market for
Common  Stock"  in the  Company's  1997  Annual  Report to  Stockholders  and is
incorporated herein by reference.



<PAGE>


ITEM 6.                    SELECTED FINANCIAL DATA

         The  information  required  by this item is  included  under  "Selected
Financial  Data" in the  Company's  1997 Annual  Report to  Stockholders  and is
incorporated herein by reference.


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

         The information  required by this item is included under  "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's  1997 Annual  Report to  Stockholders  and is  incorporated  herein by
reference.

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                           MARKET RISK

         Not Applicable.



ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The  information  required by this item is  included  in the  Financial
Section in the Company's 1997 Annual Report to Stockholders  and is incorporated
herein by reference.


ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                           ACCOUNTING AND FINANCIAL DISCLOSURE
         None.

                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         The  information  required by this item is included under  "Election of
Directors," "The Board of Directors and Committees," and "Executive  Officers in
the Company's  Proxy  Statement to be filed in  connection  with its 1998 Annual
Meeting of Stockholders and is incorporated herein by reference.

ITEM 11.          EXECUTIVE COMPENSATION

         The information  required by this item is included under  "Compensation
of Directors and  Executive  Officers" in the  Company's  Proxy  Statement to be
filed  in  connection  with its  1998  Annual  Meeting  of  Stockholders  and is
incorporated herein by reference.



<PAGE>


ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                           AND MANAGEMENT

         The  information  required  by this item is  included  under  "Security
Ownership of Certain  Beneficial  Owners and  Management" in the Company's Proxy
Statement to be filed in connection with its 1998 Annual Meeting of Stockholders
and is incorporated herein by reference.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The  information  required  by this  item is  included  under  "Certain
Relationships  and Related  Transactions" in the Company's Proxy Statement to be
filed  in  connection  with its  1998  Annual  Meeting  of  Stockholders  and is
incorporated herein by reference.



<PAGE>


                                     PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Documents Filed as a Part of this Report.

         (1) - Financial Statements.

The  following   Consolidated  Financial  Statements  of  the  Company  and  its
subsidiaries  are included on pages 15 through 31 of the Company's Annual Report
to Stockholders for the fiscal year ended December 31, 1997.

Consolidated  Statements of Operation - Years Ended December 31, 1997,  1996 and
1995.

Consolidated Balance Sheets at December 31, 1997 and December 31, 1996.

Consolidated  Statements of Cash Flows - Years Ended December 31, 1997, 1996 and
1995.

Consolidated Statements of Stockholders' Equity - Years Ended December 31, 1997,
1996 and 1995.

Notes to Consolidated Financial Statements

Report of Ernst & Young LLP, Independent Auditors

         (2) - Financial Statement Schedules.

         The  following  Financial  Statements  Schedules of the Company and its
subsidiaries,  together  with the  Report of Ernst & Young  LLP,  the  Company's
independent  accountants,  thereon are filed as part of this Report on Form 10-K
as  listed  below  and  should  be read in  conjunction  with  the  consolidated
financial statements of the Company:

Report of Ernst & Young LLP, Independent Accountants, on Financial Statement
Schedules.

         (3) - Exhibits

See index to Exhibits.

(b) Reports on Form 8-K,

No reports on Form 8-K were filed during the quarter ended December 31, 1997.



<PAGE>

INDEX TO EXHIBITS
(Item 14(c))
 Number                        Exhibits
3.1            Articles of  Incorporation of ZEVEX  International,  Inc.,
               a Delaware corporation (1).
3.2            Bylaws of ZEVEX International,  Inc., a Delaware corporation(1).
10.1           Amendment to Revolving Line of Credit  Agreement  between Bank
               One and Registrant,  dated December 31, 1997. The original
               agreement was filed as an exhibit to Amendment No. 1 on Form
               S-1,  filed by the Company on October 24, 1997.
10.2           Stock  Purchase  Agreement between Blosch & Holmes, LLC and
               Registrant,  dated December 1, 1996,  including one amendment
               dated September 30, 1997(1).
10.3           Registration  Rights Agreement among Kirk Blosch,  Jeff W. Holmes
               and Registrant,  dated February 1, 1998.
10.4           ZEVEX  International,  Inc., Amended 1993 Stock Option Plan (2).
10.5           Industrial Development  Bond  Offering  Memorandum,   dated
               October  30,  1996  (3).
10.6           Industrial Development Bond Reimbursement Agreement, dated
               October 30, 1996 (3).
10.7(a)        Warrant to Purchase  50,000  shares of Common  Stock  issued
               to Wedbush Morgan  Securities,  Inc., dated November 20, 1997.
10.7(b)        Warrant to Purchase 50,000 shares of Common Stock issued to
               Everen Securities,  Inc., dated November 20,  1997.
10.8           Warrant to Purchase 500,000 shares of Common Stock  originally
               issued to Blosch & Holmes, LLC, dated February 12, 1997.
10.9           Description of Property Acquisition, dated March 4, 1998.
10.10          Quit-Claim Deed - for purchase of 3.47 acres of land, dated
               March 4, 1998.
13.1           Annual Report to  Stockholders  for fiscal year ended
               December  31,1997.
21.1           List of Subsidiaries  (2).
23.1           Consent of Ernst & Young,  LLP.
23.2           Consent of Daines & Rasmussen, PC.
23.3           Consent of Nielsen, Grimmett  &  Company.
24.1           Power of Attorney (included on page 23)


(1)  Filed as an exhibit to Amendment  No. 1 on Form S-1,  filed by the
     Company on October 24, 1997.

(2) Filed as an exhibit to the  Registration  Statement on Form S-1, filed
    by the  Company  on October  3,  1997.

(3) Filed as an exhibit to  Registrant's amended  Quarterly  Report on
    Form 10Q for the quarter ended September 30, 1996, filed on
    September 29, 1997, and incorporated herein by this reference.

<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                            ZEVEX INTERNATIONAL, INC.


Dated:  March, 26 1997                      By \s\ Dean G. Constantine
                                                         Dean G. Constantine
                                                         Chief Executive Officer


                                POWER OF ATTORNEY

         Know  all men by these  presents,  that  each  person  whose  signature
appears below  constitutes and appoints each of Dean G.  Constantine and Phillip
L.  McStotts,  jointly and severally,  his true and lawful  attorney in fact and
agent, with full power of substitution for him and in his name, place and stead,
in any and all  capacities to sign any or all  amendments to this report on Form
10-K and to file the same,  with all  exhibits  thereto and other  documents  in
connection  therewith  with  the  Securities  and  Exchange  Commission,  hereby
ratifying and  confirming  all that each said attorney in fact or his substitute
or substitutes may do or cause to be done by virtue hereof.

     Signature                       Title                              Date

\s\ Dean G. Constantine  Chairman of the Board of Directors,      March, 26 1998
Dean G. Constantine      Chief Executive Officer, and President
                         (Principal Executive Officer)

\s\ David J. McNally     Director, Vice President,                March, 26 1998
David J. McNally         and Director of Marketing

\s\ Phillip L. McStotts  Director, Chief Financial Officer,       March, 26 1998
Phillip L. McStotts      Secretary, and Treasurer (Principal
                         Financial and Accounting Officer)

\s\ Bradly A. Oldroyd    Director                                 March, 26 1998
Bradly A. Oldroyd

\s\ Darla R. Gill        Director                                 March, 26 1998
Darla R. Gill
<PAGE>
Supplemental  Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Company's Which Have Not Registered  Securities  Pursuant to
Section 12 of the Act
<PAGE>