UNITED STATES
                       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, 1999

                                       or

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

         For the transition period from ______________ to _____________

                        Commission file number 001-12965

                            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)

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

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

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

                    Common Stock, par value $0.001 per share

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

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K:____

         The  aggregate  market value of the  registrant's  voting stock held by
nonaffiliates  computed  with  reference  to the closing  price as quoted on the
NASDAQ Stock Market on March 15, 2000, was  approximately  $27,441,518.  For the
purposes of the foregoing,  the registrant assumed that affiliates included only
the registrant's directors, executive officers and principal shareholders filing
Schedules 13D or 13G with respect to the registrant's common stock.

         The number of shares outstanding of the Company's Common Stock as of
           March 15, 2000 was 3,420,726

         Documents incorporated by reference: none


<PAGE>



                                TABLE OF CONTENTS

Part I

   Item 1  BUSINESS                                               -- 3
   Item 2  PROPERTIES                                            -- 22
   Item 3  LEGAL PROCEEDINGS                                     -- 22
   Item 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS   -- 22

Part II

   Item 5  MARKET FOR REGISTRANT'S COMMON EQUITY AND
                 RELATED STOCKHOLDER MATTERS                     -- 22
   Item 6  SELECTED FINANCIAL DATA                               -- 23
   Item 7  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                 CONDITION AND RESULTS OF OPERATIONS             -- 24
   Item7A  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
                 MARKET RISK                                     -- 30
   Item 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA           -- 30
   Item 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                 ON ACCOUNTING AND FINANCIAL DISCLOSURE          -- 30

Part III

   Item 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT   -- 31
   Item 11  EXECUTIVE COMPENSATION                               -- 33
   Item 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                   AND MANAGEMENT                                -- 36
   Item 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS       -- 38

Part IV

   Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
                   ON FORM 8-K                                   -- 38
   Item 14(c)  INDEX TO EXHIBITS                                 -- 41

SIGNATURES                                                       -- 40


<PAGE>


                                     PART I

ITEM 1.  BUSINESS

GENERAL

Through  its three  wholly  owned  subsidiaries,  ZEVEX(R)  International,  Inc.
("ZEVEX"),   a  Delaware   corporation,   is  in  the  business  of   designing,
manufacturing  and distributing  medical  devices.  ZEVEX' product lines include
proprietary medical devices that it designs,  manufactures, and distributes, and
contract-manufactured  products  that it designs and  manufactures  for original
equipment manufacturers (OEM's).

ZEVEX' subsidiary,  ZEVEX Inc., a Delaware  corporation  ("ZEVEX Inc.") provides
products for enteral nutrition delivery. Enteral nutrition delivery involves the
infusion  of  feeding  solutions  directly  into the  stomach or  intestines  of
patients.  These products include  electromechanical  pumps, disposable delivery
sets,  feeding tubes and accessories.  ZEVEX Inc.'s enteral  nutrition  delivery
products are sold to home health care providers, nursing homes, and hospitals.

ZEVEX Inc. is also a contract manufacturer of medical devices, which include
ultrasonic sensors, surgical handpieces, and electronic instruments.  ZEVEX Inc.
customizes the design of each of these products to meet the specific
requirements of the OEM customer.

ZEVEX' subsidiary, Aborn Electronics,  Inc., a California corporation ("Aborn"),
specializes in the design and manufacturing of optoelectronic components. At its
San Jose, California facility,  Aborn produces optical emitters,  detectors, and
transducer  assemblies that include custom integrated  circuits.  Aborn products
are used in medical  devices and  instrumentation,  as well as in industrial and
military applications.

ZEVEX' subsidiary, JTech Medical Industries, Inc., a Utah corporation ("JTech"),
provides  musculoskeletal  evaluation  products to  chiropractors,  occupational
therapists, osteopaths, and physical therapists. The JTech product line consists
of hand-held devices used for evaluating isolated muscle strength,  joint ranges
of motion, and functional capacity,  coupled through a JTech interface module to
a  standard   personal   computer.   JTech  also   develops  and  sells  unique,
user-friendly  software  that is  employed by the  customer  for  assessing  and
documenting clinical outcomes.

ZEVEX' current strategy is to continue to aggressively grow proprietary  product
revenues  with  the  acquisition  and  internal  development  of  products  that
complement its existing two lines of proprietary  products.  This is intended to
augment ZEVEX' contract manufacturing business,  which historically has been the
core competence of ZEVEX.  ZEVEX,  together with its subsidiaries,  is hereafter
collectively referred to as the "Company".

DEVELOPMENTS DURING 1999

The Company  substantially  grew  revenues  and earnings  during  1999,  further
diversifying  its offering of  proprietary  products and gaining market share in
both  markets for its  proprietary  products,  as well as growing  its  contract
manufacturing business. Key contributors to the year's growth were:

1. In July 1998,  ZEVEX Inc.  entered into an agreement with Nutrition  Medical,
Inc., a Minnesota  corporation,  to acquire Nutrition  Medical's product line of
stationary  feeding  pumps,  disposable  sets  and  feeding  tubes  for  enteral
nutrition  delivery.  Company  management  believes that the  Nutrition  Medical
stationary pump and feeding tube product line complements the line of ambulatory
enteral  feeding  pumps and  disposable  sets  that the  Company  has  developed
internally.  The Company  completed the  acquisition  of the  Nutrition  Medical
product  line on  December  23,  1998,  providing  for a full  year  of  revenue
generation in 1999.

2. On December 31, 1998,  the Company  acquired  JTech through a stock  purchase
transaction with the four shareholders of JTech.  JTech was organized in 1988 to
manufacture and sell range of motion  measurement  devices.  As mentioned above,
JTech currently  manufactures  and markets its own  proprietary  musculoskeletal
evaluation products for health care providers, a line of products not previously
manufactured  or sold by the Company.  JTech's  revenues  combined with revenues
from the Company's  proprietary  enteral nutrition delivery products,  accounted
for more than 47% of total ZEVEX revenues in 1999.

3. On December 31, 1998,  the Company  acquired  Aborn through a stock  purchase
transaction  with  the sole  shareholder  of  Aborn.  Aborn  contributed  to the
Company's  revenues and earnings  throughout  the entire 1999 year. As described
above,  Aborn  currently  designs and  manufactures  a variety of  sophisticated
optical sensors, custom computer chips, and semiconductor components for medical
technology  and other  companies,  and has brought new design and  manufacturing
expertise to the Company.

4. On May 6, 1999,  ZEVEX Inc.  entered into an agreement  with Applied  Medical
Technology,  Inc.  ("AMT"),  to distribute  AMT's  MINI(TM)  button  low-profile
gastrostomy access devices and related  accessories within the home care market.
Management believes that these important enteral nutrition delivery devices will
add significantly to the Company's growing product line.

SUBSEQUENT DEVELOPMENT

On March 29, 2000, ZEVEX Inc. entered into an agreement with Nestle USA, Inc.
("Nestle") to acquire a portion of its enteral  nutrition  delivery device
business in an asset  purchase.  The assets to be acquired  include over 19,500
enteral feeding pumps owned by Nestle and placed  with  various  health care
facilities  under  arrangements  whereby the facilities agree to purchase
disposable  accessories for use with Nestle pumps.  The assets will also include
Nestle's  line of pump  administration  sets, feeding tubes,  irrigation kits
and ancillary  devices for the pumps.  The total purchase price for the assets
will range from $1.5 million to approximately $2.7 million depending  on the
sales  generated  by the acquired assets  during  the first 12 months following
the purchase,  plus the actual cost of the inventory  acquired by the Company
which is estimated to be approximately $700,000.  The company currently
anticipates that the acquisition will close by April 5, 2000.

For a period following the closing of the purchase,  Nestle has agreed to assist
the Company with the transition of the Nestle business to the Company.  Although
there is no  assurance  that the Company will be able to generate the same level
of revenue  experienced  by Nestle from the acquired  assets,  based on Nestle's
experience the Company currently  anticipates that the acquisition of the Nestle
assets will  generate  approximately  $3 million in  additional  revenue for the
Company during 2000.

ZEVEX' PROPRIETARY PRODUCTS

         Enteral Nutrition Delivery Products

Through ZEVEX Inc.,  the Company sells two major lines of enteral  feeding pumps
and a variety of related  disposable  feeding  tubes and  delivery  sets.  These
products  are for  patients  who  require  direct  gastrointestinal  nutritional
therapy.  Enteral feeding is a means of providing  nutrition to patients who may
have experienced head or neck trauma, or have gastrointestinal  disorders,  such
as short bowel syndrome,  Crohn's Disease, bowel  pseudo-obstruction,  and other
serious  digestive  disorders,  that prevent them from  digesting food normally.
Many enteral feeding patients require  continuous  administration of nutritional
solutions  throughout  the day,  which  requires the patient to carry an enteral
feeding pump.

The Company has successfully applied its engineering and regulatory expertise to
the  development,   commercialization,   and  marketing  of  the   EnteraLite(R)
Ambulatory Enteral Feeding Pump for patients who require direct gastrointestinal
nutritional  therapy.  Management  believes  that  the  EnteraLite  pump  is the
lightest,  most  compact and most  mobile  enteral  feeding  pump on the market,
possessing  unprecedented safety and accuracy in liquid nutrition delivery.  The
EnteraLite's  unique  features  include a 24-hour  battery,  which is  one-third
longer than the battery  life of its closest  competitor.  The  EnteraLite  pump
carries a two-year warranty, twice the industry average.

First  introduced in 1996,  the EnteraLite  continues to gain  acceptance in the
home  health  care  market  due  to  the   product's   superior   mobility   and
state-of-the-art  features.  By improving the convenience of nutrition delivery,
the EnteraLite can contribute to better clinical  outcomes and improved  quality
of life for enteral  patients.  The  EnteraLite  requires the use of  disposable
feeding bags and tubing sets, which are also sold by the Company. ZEVEX Inc. has
been awarded seven U.S. patents for technology related to the EnteraLite and its
disposable sets.

The acquisition of Nutrition Medical's line of pumps,  delivery sets and feeding
tubes significantly expanded the ZEVEX line of enteral delivery products.  ZEVEX
now  manufactures and distributes the Enteral EZ(TM) enteral feeding pump, which
is a  cost-effective  pump  intended  for  applications  where  patients are not
mobile.  Complementing  this pump model is a broad line of  disposable  delivery
sets sold by ZEVEX for use with the Enteral EZ pump. These sets include bags and
bottles  of  various  sizes,  as well as  spike  sets  for use  with  pre-filled
containers.  Additionally,  as a result of the  Nutrition  Medical  acquisition,
ZEVEX now offers an array of Panda(R)  feeding  tubes,  which  include adult and
pediatric nasoenteric tubes, replacement gastrostomy tubes and a needle catheter
jejunostomy kit. These feeding tubes are expendable devices that allow access to
the gastrointestinal tract of the patient via commonly accepted procedures,  and
are discarded after use by a single patient.

Building upon the success of its enteral  nutrition  delivery pumps,  ZEVEX Inc.
has acquired distribution rights in the home care market for the AMT MINI button
product line of low-profile  gastrostomy  access  devices.  Many EnteraLite pump
customers  utilize  low-profile  gastrostomy  access devices in order to receive
nutrition  directly into their stomachs.  Management  believes that the AMT MINI
button is a premium  product with unique  features that  complements the premium
product marketing strategy for the EnteraLite Pump.

         Musculoskeletal Evaluation Products

Through JTech,  the Company is a manufacturer  and marketer of both  stand-alone
and  computerized  musculoskeletal  evaluation  products  that measure  isolated
muscle  strength,  joint  ranges  of  motion,  and  sensation  to  document  the
effectiveness  of  treatment or extent of injury.  JTech is an  internationally-
recognized  leader in physical  medicine  measurement  products,  providing both
hardware and Windows(R)-compatible software. JTech's musculoskeletal evaluation,
functional  capacity  evaluation,  upper  extremity and hand  testing,  and pain
evaluation   products  are  used,  for  example,   by  chiropractors,   physical
therapists,  osteopaths,  and  occupational  therapists  for outcome  assessment
during rehabilitation, medical-legal evaluations for personal injury and workers
compensation claims, and clinical documentation.

CONTRACT DESIGN AND MANUFACTURING SERVICES

Through  ZEVEX Inc. and Aborn,  the Company  provides  design and  manufacturing
services  to  medical  and other  technology  companies  who sell the  Company's
systems  and  devices  under  private  labels or  incorporate  them  into  their
products.  The Company  designs and  manufactures  over 120  different  surgical
systems,  device components,  and sensors for more than 85 different established
and  emerging  technology  companies,  such as  Alaris  Medical  Systems,  Inc.,
Allergan,  Inc., various divisions of Baxter Healthcare  Corporation,  Medtronic
Corporation,  Mentor Corporation,  SIMS Deltec, Inc., and Terumo. ZEVEX Inc. and
Aborn each offer their  customers over 12 years of specialized  engineering  and
manufacturing expertise in their respective areas.

Industry  sources  indicate  that there is a strong trend by medical  device and
other  companies to  outsource  their device  manufacturing  requirements.  Many
emerging  device  companies  do not  have  the  engineering,  manufacturing,  or
regulatory  expertise to quickly and efficiently  bring a device from conception
to commercial use. Even larger,  well-established  companies, which may have the
capital to develop such expertise,  may lack the required  personnel and time to
accumulate  such  expertise or may want to focus their  resources in areas other
than  manufacturing.  In the medical device  industry in  particular,  there are
substantial  regulatory compliance  requirements,  in both the United States and
overseas,  that must be addressed in designing  and  manufacturing  devices.  By
focusing its resources and expertise in the design and manufacturing  areas, the
Company  believes it offers  customers the ability to outsource  engineering and
manufacturing  needs on a cost-effective  basis,  often allowing the customer to
bring a product to market more  quickly and  efficiently,  at a lower cost,  and
with higher quality than a customer could achieve with its own resources.

The Company  uses  extensive  engineering  and  regulatory  expertise to deliver
integrated design and manufacturing solutions to its customers.  For its medical
technology customers,  ZEVEX Inc. has registered with the United States Food and
Drug  Administration  ("FDA") as a medical device manufacturer and has developed
internal   systems   intended  to  maintain   compliance  with  the  FDA's  Good
Manufacturing   Practices   ("GMP").   ZEVEX  Inc.  also  is  certified  by  the
International  Organization  for  Standardization  ("ISO")  to 9001 and  EN46001
standards,  which  means  that  it has  met  internationally-recognized  quality
standards  for the  design,  manufacture,  and testing of  products.  ZEVEX Inc.
devotes  significant  management time and financial  resources to GMP compliance
and ISO certification.

PRINCIPAL CONTRACT MANUFACURING PRODUCTS

A  majority  of the  Company's  contract  manufacturing  business  involves  the
following five general product categories:

         Ophthalmic Surgical Devices

ZEVEX Inc. designs and manufactures  ultrasonic  phacoemulsification  handpieces
and   handpiece   drive   circuits  for  the  surgical   removal  of  cataracts.
Phacoemulsification  is a method of cataract  extraction,  which uses ultrasound
waves to break the cataract-obstructed lens of the eye into small fragments that
can be removed through a hollow needle. Phacoemulsification is currently used in
more than 90 percent of cataract  procedures  in the United  States.  ZEVEX Inc.
manufactures  handpieces of several  designs for Allergan,  Inc., who is a major
customer  and a  market  leader  in  ophthalmology.  ZEVEX  Inc.  also  provides
customized  handpieces  and  handpiece  drive  circuits to many other  customers
worldwide.

In  addition  ZEVEX  Inc.  manufactures  the  KeraVision(R)  KV2000,  which is a
precision  vacuum   instrument  that  facilitates  the  surgical   insertion  of
prescription  Intacs(R)  rings  at a 2/3  depth  in  the  cornea.  These  rings,
depending upon their thickness,  will flatten the cornea, correcting an eye that
requires 1 to 5 diopters  of  correction.  The KV2000  creates a vacuum  that is
transmitted  through  tubing to a fixture  called  the  vacuum  centering  guide
("VCG"),  which is placed on top of the eye.  When a vacuum is applied,  the VCG
attaches  itself to the eye,  giving  the  surgeon  both a means to hold the eye
still and a platform through which to perform the surgery.

         Liposuction Handpieces

ZEVEX Inc.  designs and  manufactures  handpieces  for  ultrasonically  assisted
liposuction for Mentor Corporation. Liposuction, the removal of body fat, is one
of the most popular cosmetic  procedures  performed today.  Current  liposuction
procedures  involve the use of a metal cannula to sheer fat from a patient while
a vacuum is applied,  requiring  the physician to exert a great amount of force.
In  ultrasonically  assisted  liposuction,  a generator sends  ultrasonic  waves
through  a probe  that  is  inserted  under  the  skin.  The  ultrasonic  energy
emulsifies the fat, which is then easily aspirated away,  significantly reducing
patient trauma as well as the amount of force applied by the surgeon.

         Ultrasonic Sensors

ZEVEX Inc. designs and manufactures a variety of non-invasive ultrasonic sensors
for the detection of air bubbles and the  monitoring of liquid levels in medical
devices.  ZEVEX Inc.'s air bubble detectors monitor intravenous fluid lines in a
variety of devices and systems,  including  drug  infusion  pumps,  hemodialysis
machines,  blood collection systems, and cardiopulmonary  bypass systems.  ZEVEX
Inc.'s liquid level detectors are used to monitor  critical levels of liquids in
various  reservoirs used in surgery,  such as those employed in  cardiopulmonary
bypass systems.

         Optoelectronic Sensors and Custom Integrated Circuits

Aborn  designs and  manufactures  a variety of optical  emitters and  detectors,
custom  integrated  circuit  products,  and  semiconductor  components  used  in
medical,  industrial, and military applications.  Aborn's products include fiber
optic links,  integrated  optoisolators,  high-speed sensor integrated circuits,
application  specific integrated circuit (ASIC) devices, and solid state relays.
Medical  applications  for these  technology  products  include  diagnostic  and
therapeutic equipment, such as blood analyzers and dialysis machines.

         Medical Systems

The ultimate  level of product  sophistication  for ZEVEX  Inc.'s  manufacturing
services involves medical systems  manufacturing.  During 1999, ZEVEX Inc. began
manufacturing  the  Cardiac  Science  PowerHeart(R)  AECD(R),  which is a unique
external  bedside  defibrillator.  Designed  for the  unattended  monitoring  of
patients at risk for heart attacks,  the device detects  certain  abnormal heart
rates and responds  automatically by delivering a charge to restore the heart to
its normal rhythm.  According to Pacing And Clinical  Electrophysiology,  a peer
reviewed cardiology journal, by responding very quickly, the PowerHeart can save
lives and reduce  trauma to the  patient by  delivering  a lower level of energy
than would normally be required at traditional response times.

REVENUE SOURCES

The following table sets forth the source of the Company's total revenues during
the last 3 years, allocated between six product/service categories.

Revenue breakdown by product/service, by percentage
<TABLE>
<CAPTION>
<S>                             <C>                          <C>                          <C>
------------------------------- ---------------------------- ---------------------------- ----------------------------
           Product                         1999                         1998                         1997
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Enteral Nutrition Delivery                 32.7%                        29.9%                        11.8%
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Ultrasonic and Optoelectronic              18.9%                        24.5%                        35.6%
Sensors, Custom IC's
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Ophthalmic Surgical Devices                18.0%                        37.3%                        34.8%
and Liposuction Handpieces
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Musculoskeletal Evaluation                 14.2%                        0.0%                         0.0%
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Engineering/Tooling                        8.5%                         5.5%                         8.9%
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Medical Systems                            7.7%                         2.8%                         8.9%
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

CAPABILITIES

         Design and Engineering

The Company has extensive design and engineering  capabilities  that it uses for
its own product development as well as for servicing its contract  manufacturing
customers. ZEVEX Inc. engineers have broad experience in designing, engineering,
and testing an array of medical technology devices and systems,  with particular
expertise in ultrasonic  devices.  Aborn has an engineering  team experienced in
designing,   engineering,   manufacturing,   and   testing  a  broad   range  of
optical/electronic devices.

The Company's manufacturing service customers generally rely on the Company from
the  outset  of their  projects  for  complete  design,  engineering,  component
analysis,  testing,  and regulatory  compliance for their devices or systems. In
some  instances,  customers  have come to the Company  with final  drawings  for
devices  that they  believe  are ready for  manufacturing.  In such  cases,  the
Company tests the customer's existing design prior to manufacturing. Many times,
the  Company's  engineers  identify  and offer  design  alternatives,  which may
improve performance or manufacturing efficiencies.

The  Company's  engineers  assist sales and  marketing  personnel in  evaluating
requests for proposals and in developing proposed solutions, cost estimates, and
bids for each product.  The Company's project engineers act as customer contacts
throughout  the design and  engineering  phase and have  responsibility  for all
aspects of a customer's  project. A cooperative  approach is used to ensure that
customers' expectations are met or exceeded in the final product. Both Aborn and
ZEVEX  Inc.'s  design and  engineering  services  are  generally  provided  on a
time-and-materials  fee basis to a customer, and as part of a plan to eventually
manufacture the customer's product.

The Company has made significant  investments in  state-of-the-art  equipment to
support its design and engineering staff, including product performance modeling
software,  custom test  stations,  and  three-dimensional  computer aided design
("CAD")  software.  ZEVEX  Inc.  has  independently  developed  what  management
believes is the most  sophisticated  modeling  software for ultrasonic  surgical
device  development.  Management  believes that ZEVEX Inc.'s unique modeling and
design capacities hasten product  development for ultrasonic devices and improve
the quality of the final device.

         Manufacturing

The  Company's   own  products  are  generally   assembled  and  tested  at  its
manufacturing  facility  in Salt  Lake  City,  Utah.  Design,  engineering,  and
manufacturing  services for other companies are provided from the same facility.
ZEVEX Inc.'s enteral feeding disposable products are sub-contracted to specialty
manufacturers.   Aborn  provides  its  design,  engineering,  and  manufacturing
services from its facility in San Jose, California.

In most cases,  the  manufacturing  process begins with  technical  drawings and
specifications  derived  through the Company's  engineering  and design process.
Once the preliminary design has been completed,  prototypes are manufactured and
further design  refinements and adjustments are made based on the performance of
the prototypes. Following completion of final design specifications, the Company
orders  the  required  electronic  components,   piezoelectric  ceramic,  molded
plastic,  titanium and stainless  steel  components,  and other  materials  from
qualified suppliers of such items.

Inventory  management,  work order, and MRP software programs are used to manage
inventory  and control the  ordering  process for more than 20,000 parts used in
the  Company's  and its  customer's  products.  As the  evolution of a device or
system  reaches  production,   team  members  with  direct   responsibility  for
purchasing,  manufacturing,  and quality  assurance assume a greater role in the
project.  The  project  team  develops  an  assembly  process,  product  testing
protocol, and quality assurance procedures to produce high-quality products that
satisfy  internal or customer  specifications,  as well as the FDA's GMP and ISO
9001/EN 46001 quality standards.

ZEVEX  usually  provides  its  services  pursuant  to  negotiated  manufacturing
agreements,  which address quantity,  pricing,  warranty,  indemnity,  and other
terms  of  the  relationship.  Such  contracts  may  or  may  not  be  exclusive
manufacturing   arrangements,   and  may  or  may  not  include  minimum  volume
requirements.  In some cases no minimum purchase is required.  In other cases, a
customer commits to purchase a minimum quantity identified in a rolling forecast
of production.  ZEVEX generally warrants its products to be free from defects in
materials and workmanship, and may indemnify the customer against losses arising
out of such breach of warranty.

SUPPLIERS

The Company  purchases  its  component  parts and raw  materials  from  approved
suppliers.  The Company is not dependent on a single  supplier for any item, and
believes that it can acquire materials from various sources on a timely basis.

SALES AND MARKETING

         Enteral Nutrition Delivery Products

ZEVEX Inc. has a network of over 40 independent  manufacturer's  representatives
who sell  EnteraLite(R)  Ambulatory Enteral Feeding Pumps and related disposable
delivery sets.  These  representatives  have been selected for their  experience
within the markets served by the Company's pumps, and they sell directly to home
health care service providers,  hospitals, and nursing homes. The manufacturer's
representatives   are  regionally   supported  by   specialists   with  clinical
credentials  (registered  dietitians or nurses),  who are full-time employees of
the Company.

Customers  generally  purchase  EnteraLite   Ambulatory  Enteral  Feeding  Pumps
directly  from  ZEVEX  Inc.  In cases  where a lease  or  rental  is  preferred,
arrangements  are  made  through  a third  party  that  specializes  in  medical
equipment  financing.  Disposable  sets are then purchased as needed.  Customers
typically purchase 30 disposable sets per month for each pump placed in service.

In the past, due to competition, lower-cost stationary pumps have been generally
placed at no up-front  cost to the user,  in return for set  "usage"  agreements
which typically  guarantee  minimum purchases of 15 disposable sets per pump per
month, once the pumps are placed in service. In order to increase accountability
and the  efficiency  of the health care  delivery  system in the United  States,
there is a trend  beginning  which  involves  minimum  lease charges for enteral
pumps placed with customers on such "usage" programs.

The distribution of the Enteral EZ stationary  pump,  delivery sets, and feeding
tubes are serviced by a national  account  manager.  The AMT MINI Button product
will also be sold through both the  Company's  manufacturer  reps as well as its
national account manager.  During 1999, two versions of the stationary pump were
sold under private labels for distribution by two other companies, in the United
States and Europe.

For a period of ninety  (90) days  following  the  Closing of the  Nestle  asset
purchase,  Nestle on behalf of and as an  accommodation  to ZEVEX Inc. will take
orders for disposables from the pump customers, place all such orders with ZEVEX
Inc.  and  invoice  on  behalf  of ZEVEX  Inc.  ZEVEX  Inc.  will pay  Nestle in
consideration for providing such services a fee of one percent (1%) of the total
"gross" sales amount of all orders for disposable  products processed by Nestle.
Additionally, Nestle shall advise any party which is not a current pump customer
but is seeking to purchase or acquire  products that ZEVEX Inc. is a supplier of
such  products.  After the 90 day  transition  period,  ZEVEX Inc. will sell the
product  line  through  both  the  Company's  manufacturer  reps  as well as its
national account manager.

         Musculoskeletal Evaluation Products

JTech markets its products  worldwide  through a network of over 70  independent
dealers and manufacturer's  representatives.  These dealers and  representatives
were selected for their experience with marketing to chiropractors,  osteopaths,
physical therapists and occupational therapists. Dealers and representatives are
supported by regional  sales  managers,  who are  full-time  employees of JTech.
JTech also sells its products via seminars,  directed  mailings,  catalogs,  and
telemarketing through its customer service personnel.

         Contract Design and Manufacturing Services

ZEVEX  Inc.  and Aborn  generate  new  design and  manufacturing  projects  from
customers  using  direct  sales  personnel  who  are  trained  in the  Company's
engineering  expertise and  manufacturing  capabilities.  Project engineers also
participate extensively in sales and marketing activities.  The Company promotes
its  design  and   manufacturing   capabilities  at  industry  trade  shows,  by
advertising in leading industry  publications,  and by obtaining  referrals from
customers and other persons who are familiar with the Company's services.

COMPETITION

         Enteral Nutrition Delivery Products

Two major  competitors  exist in the U.S. market for ambulatory  enteral feeding
pumps.  Ross  Laboratories,  a  division  of  Abbott  Laboratories,  offers  the
Companion(R)  pump,  which was  originally  introduced to the market in the late
1980's.  The  Company  estimates  that  Ross  holds a  market  share  of 45% for
ambulatory and non-ambulatory  enteral feeding applications.  Sherwood,  Davis &
Geck, the second  competitor  offers the  kangaroo(R)  PET enteral feeding pump,
which  has a  limited  market  because  it can be  operated  only in an  upright
position.  The Company  estimates  that Sherwood,  Davis & Geck presently  holds
greater than 21% of the total market for enteral  pumps and  disposable  sets in
both ambulatory and non-ambulatory applications.

Well-established competitors such as Abbott and Sherwood, Davis & Geck typically
bundle products for the greatest advantage in group-purchasing  situations. Each
of these competitors  offers a breadth of product offerings that exceeds that of
the Company.  Key to the Company's ability to compete effectively are the unique
features of its product  offerings  and the  benefits to  customers  who utilize
them. The Company  expects to build upon its reputation for innovation  that was
earned by its EnteraLite(R)  Ambulatory  Enteral Feeding Pump for mobile enteral
patients.  In order to continue to increase revenues,  the Company plans to grow
its  product  line so that it too can  bundle a family of  products  to meet the
enteral  nutrition  delivery  needs of its  customers.  The  Company  expects to
develop and/or acquire products that are  complementary to its enteral nutrition
delivery product line, particularly those having features that can significantly
improve  the  quality  of life of  patients,  and the safety and ease of enteral
administration.

         Musculoskeletal Evaluation Products

The Company's primary competitors in the musculoskeletal evaluation market are a
limited number of small  privately held companies.  Most notable are ARCON,  The
Blankenship  System,  Key Methods,  Isernhagen,  Cedaron and Greenleaf  Medical.
Generally,   these   companies   concentrate   on   particular   areas  such  as
musculoskeletal testing,  functional capacity evaluation, or hand testing. JTech
management  believes that few  competitors  can penetrate the broad  spectrum of
medical professions possible with JTech products because their products lack the
full range of capabilities  offered by JTech and none offer a completely modular
product  line like  JTech.  Competitive  factors in the  musculoskeletal  market
include  perceived  quality,  price, name  recognition,  training  capabilities,
support, operating system, and systems integration potential.

         Contract Design and Manufacturing Services

The Company's primary competitors for design and manufacturing  services include
Plexus,  Inc.,  Colorado MedTech Inc.,  United Medical  Manufacturing,  Inc. and
Sparton Electronics  Corporation.  These contract  manufacturers  operate in the
medical technology industry,  and some have substantially  greater financial and
marketing  resources  than the Company.  Competitive  factors in medical  device
design and manufacturing  include quality,  regulatory  compliance,  engineering
competence,  cost  of  non-recurring  engineering,  price  of  the  manufactured
product, experience, customer service, and ability to meet design and production
schedules.  The Company  believes that its unique  expertise in  ultrasound  and
optoelectronics  will allow it to compete  effectively  for contracts  involving
these technologies.

Competition for design and manufacturing of medical devices is primarily limited
to those companies that meet the minimum applicable  regulatory  requirements of
the FDA and international standards for manufacturing and design. In the future,
the Company is likely to compete against new entrants as outsourcing  expands in
the medical industry. For example,  medical technology companies with design and
manufacturing  capabilities  (especially  those  with  excess  capacity),  large
electronic  contract   manufacturers  and  defense  contractors  with  extensive
engineering  expertise may undertake  the design and/or  manufacture  of medical
devices for third parties.

PATENTS AND TRADEMARKS

The Company's  subsidiaries own and have applied for numerous  trademarks in the
United  States and abroad.  The Company  believes that its  trademarks  are well
recognized  in the various  markets for its  products.  With  exception  for the
EnteraLite  trademark,  which is registered for its ambulatory  enteral  feeding
pump,  the  Company  believes  that the loss of any  trademark  would not have a
material adverse effect on its overall business operations.

In  addition,  the  Company's  subsidiaries  own twelve  patents with respect to
proprietary medical products.  Except for the patents relating to its EnteraLite
feeding pump, the Company believes that the loss of any of its patents would not
have a materially adverse effect on its overall business operations. The Company
also  relies on trade  secrets  and  confidentiality  agreements  to protect the
proprietary nature of its technologies.

RESEARCH AND DEVELOPMENT FOR THE COMPANY'S PROPRIETARY PRODUCTS

ZEVEX'  research  and  development   projects  are  primarily   focused  on  new
proprietary  products.  As of  December  31,  1999,  ZEVEX had  three  full-time
engineers in research  and  development,  and had several  other  designers  and
engineers  contributing  to research and development  projects.  During the last
three  fiscal  years,  ZEVEX  continued  independent  research  and  development
activities  with  respect to the design of new and  improved  devices,  spending
$670,886 in 1999,  $290,699 in 1998,  and  $702,563 in 1997.  In 1999,  1998 and
1997, research and development costs represented approximately 3%, 3%, and 8% of
the  Company's  revenues  in  each  of  those  years.  Significant  fluctuations
experienced  in  research  and  development  are due to timing of the  Company's
research projects.

MAJOR CUSTOMERS

The  Company's  revenues  have  historically  been  derived from the sale of its
design and manufacturing  services to a small number of major customers.  During
the  1999  fiscal  year,  however,  the  Company  grew its  proprietary  product
business,  and the  percentage  of  total  revenue  represented  by a few  major
customers  decreased.  As a result, the number of customers comprising more than
10% of the Company's revenues declined when compared to prior years.  During the
1999 fiscal year,  13% of revenues  were from  Allergan,  Inc. This was the only
customer  that  contributed  more than 10% of revenue for 1999.  During the 1998
fiscal year, 15% of revenues were from Allergan, 16% were from Mentor H/S, Inc.,
and 13% were from Alaris Medical Systems (formerly IVAC Corporation). During the
1997 fiscal year,  15% of revenues  were from  Allergan,  15% were from Paradigm
Medical, Inc., 18% were from Alaris, and 17% were from Mentor H/S. No assurances
can be given that the  Company's  major  customers  will continue to do business
with the  Company  or that the  volume of their  orders  for the  Company's  OEM
devices and proprietary products will increase or remain constant. The loss of a
major customer,  or a significant reduction in the volume of its orders from the
Company,  would 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  OEM  devices  or  proprietary
products,  the resulting lower gross margins on those devices and products would
have a materially 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 materially
adverse effect on the Company's  results of operations and financial  condition.
Company  management  expects,  however,  that with its  continued  focus  toward
proprietary  products,  the  percentage of total  revenues  represented by a few
major  customers  will continue to decline,  so that the loss of such a customer
would have less  potential to have a materially  adverse effect on the financial
condition or results of operations of the Company in the future.

BACKLOG

At December 31, 1999, the Company had a backlog of  approximately  $5,640,478 on
orders for medical  devices to be  manufactured  by ZEVEX Inc. for other medical
technology companies,  as compared to backlogs at December 31, 1998 and 1997, of
$6,092,926   and   $6,265,007,   respectively.   The  Company   estimates   that
approximately 90% of the backlog will be shipped before December 31, 2000. As of
March 15,  2000,  the Company had a backlog of  $7,716,900.  For purposes of the
above figures,  backlog  includes all orders received by the Company pursuant to
purchase  orders that have not been  completed and shipped by the Company.  This
does not include any backlog for the Company's proprietary products, because the
Company manufactures these devices and holds appropriate levels in inventory for
sale to customers. Some of the orders included in the backlog may be canceled or
modified  by  customers  without  significant  penalty.  In  addition,   because
customers  may place orders for delivery at various times  throughout  the year,
and because of the  possibility  of customer  changes in delivery  schedules  or
cancellation of orders,  the Company's backlog as of any particular date may not
necessarily be a reliable indicator of future revenue.

GOVERNMENTAL REGULATION

ZEVEX Inc.'s manufacturing  facilities,  its customer's medical devices, and its
own medical  devices are subject to  extensive  regulation  by the FDA under the
Food Drug and Cosmetics Act ("FDC Act").  Manufacturers  of medical devices must
comply with  applicable  provisions  of the FDC Act and  associated  regulations
governing the development,  testing,  manufacturing,  labeling,  marketing,  and
distribution of medical devices,  record-keeping requirements, and the reporting
of certain  information  regarding  device  safety.  In  addition,  ZEVEX Inc.'s
facilities  are subject to periodic  inspection  by the FDA (and  certain  state
agencies) for compliance with the FDA's GMP  requirements.  To ensure compliance
with GMP  requirements,  the Company expends  significant time,  resources,  and
effort in the areas of training, production, and quality assurance.

For certain medical devices  manufactured by the Company,  the customer may need
to obtain FDA  clearance  of a  premarket  approval  ("PMA")  application.  Such
applications require substantial  preclinical and clinical testing to obtain FDA
clearance.  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 medical
devices  can be marketed  without a PMA,  but only by  establishing  in a 510(k)
premarket notification "substantial equivalence" to a predicate device.

Besides the FDA  regulations  described  above,  the Company is also  subject to
various  state and  federal  regulations  with  respect to such  matters as safe
working conditions,  manufacturing practices, fire hazard control, environmental
protection,  and the disposal of hazardous or potentially  hazardous  materials.
The  Company's  operations  involve  the use and  disposal of  relatively  small
amounts of hazardous materials.

Beginning in 1998, all medical device  manufacturers were required to obtain the
"CE Mark" to sell their products in the European Common Market. The CE Mark is a
quality designation given to products that meet certain policy directives of the
European  Economic  Area.  The Company has received and  maintained ISO 9001 and
EN46001 certification,  which allows the Company to CE Mark its own products and
assist its customers with obtaining the CE Mark for their products.

EMPLOYEES

As of March 1, 2000, the Company employed a total of 179 people in the following
areas:  in Design and  Engineering,  37; in  Manufacturing  and Testing,  78; in
Quality   Assurance   and  Customer   Relations,   10;  and  in  Marketing   and
Administration,  54.  The  Company  has  163  people  located  at its  corporate
headquarters  and  manufacturing  facility  in Salt Lake  City,  Utah,  8 people
located at its San Jose, California, facility, and 8 people at various locations
throughout the United States.

The Company  also retains 4  consulting  and contract  personnel in the areas of
finance, engineering, and regulatory compliance. The Company considers its labor
relations  to be good,  and none of its  employees  are covered by a  collective
bargaining  agreement.   Currently,   the  local  economy  is  growing  and  the
unemployment  rate is low in the Salt Lake City  metropolitan  area, which means
that the Company faces competition to attract and retain qualified personnel. At
the same time, however, the Salt Lake City metropolitan area has a well-educated
work force and is  considered  an  attractive  place to live.  Accordingly,  the
Company does not  anticipate  having  difficulty  in  attracting  and  retaining
qualified personnel to meet its projected growth, although the Company is likely
to experience continued moderate growth in labor costs.

ENVIRONMENTAL COMPLIANCE COSTS

Compliance with federal,  state, and local  provisions  regarding the production
and  discharge  of  material  into  the  environment  or the  protection  of the
environment  is not  expected  to have a  material  adverse  effect  on  capital
expenditures, earnings and the competitive position of the Company

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND SALES

The Company's  revenues have  historically been largely derived from the sale of
its design  and  manufacturing  services  to a small  number of major  customers
located in the  United  States.  During the 1999  fiscal  year the  revenue  mix
changed  as a  larger  percent  of the  Company's  revenues  were  derived  from
proprietary  products in domestic  and foreign  markets.  During the 1999 fiscal
year, the Company had total  revenues of  $23,026,208,  of which  $1,567,825 was
considered foreign source revenues. During the 1998 fiscal year, the Company had
total revenues of $11,084,413,  of which $623,572 was considered  foreign source
revenues.  During the 1997  fiscal  year,  the  Company  had total  revenues  of
$8,968,425, of which $457,390 was considered foreign source revenues.

During the last three fiscal years,  the Company has had no  long-lived  assets,
long term customer relationships with a financial institution, mortgage or other
servicing rights,  deferred policy acquisition costs, or deferred assets, in any
foreign country

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

The  disclosure  and analysis  set forth in this 1999 Form 10-K 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. These statements are statements that do not relate strictly to
historical or current facts.  They use words such as "plans,"  "expects," "will"
"believes" 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,  while such statements  represent
Company  management's  current  views,  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,  in  accordance  with the Private  Securities  Litigation
Reform Act of 1995,  the Company  provides the following  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.

Additionally,  the following factors should be reviewed for a full understanding
of the  business of the Company  and  considered  in  evaluating  the  Company's
prospects  for future  growth.  The  occurrence  of one or more of the following
risks or  uncertainties  could have a material  adverse  effect on the Company's
business, results of operations, and financial condition.

         Risk Factors Relating to the Company's Customers

The Company's success in contract  manufacturing  depends largely on the success
of  the  customers  for  its  manufacturing  services  and on  the  medical  and
optical/electronic  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. Additionally, 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 and optical/electronic  product industries
as well as the enteral nutrition  delivery  business are highly  competitive and
subject to significant  technological  change.  Participation in such industries
requires  ongoing  investment to keep pace with  technological  developments and
quality  and  regulatory  requirements.  These  industries  consist 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.

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  nine customers,  representing 13% of
the  Company's  revenues in fiscal year 1999,  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.

Customer  Regulatory   Compliance.   The  FDA  regulates  many  of  the  devices
manufactured by the Company under the FDC Act, which requires certain clearances
from the FDA  before  new  medical  products  can be  marketed.  There can be no
assurance that the Company's  customers will obtain such  clearances on a timely
basis, if at all. The process of obtaining a PMA or a 510(k)  clearance from the
FDA could delay the introduction of a product to market. 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
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.  There can be no assurance that product recalls, product
defects,  or  modification  or loss of necessary  regulatory  clearance will not
occur in the future.

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. 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.

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.  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.

Changes in existing laws and regulations or policies could adversely  affect the
ability of the Company's customers to comply with regulatory requirements. 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.

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  even if required  regulatory  approvals  are  obtained.  Some of the
Company's customers,  especially emerging 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.

Product and Inventory  Obsolescence.  Rapid change and technological  innovation
characterize  the marketplace  for medical and  opto/electronic  products.  As a
result,  the  Company and its  customers  are subject to the risk of product and
inventory  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 medical product was designed is no longer an element of a generally
accepted diagnostic or treatment regimen.

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.

Uncertainty of Third-Party  Reimbursement.  Sales of many of the medical devices
manufactured  by the  Company  will be  dependent  in part  on  availability  of
adequate  reimbursement  for those  instruments  from  third-party  health  care
payers,  such as government  and private  insurance  plans,  health  maintenance
organizations,  and preferred  provider  organizations.  Third-party  payers 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 payers, the market for the products of
the Company's customers may be limited.

         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

The Company faces  competition  from design firms and other  manufacturers  that
operate  in  the  medical  and  opto/electronic   technology  industries.   Many
competitors have  substantially  greater  financial and other resources than the
Company.  Also,  manufacturers  focusing in other industries may decide to enter
into the industries served by the Company. 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.  To remain  competitive,  the
Company  must   continue  to  provide  and  develop   technologically   advanced
manufacturing  services,  maintain quality,  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 manufacturing 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.

The Company's pump usage agreements,  under which pumps are placed with users in
exchange  for a  commitment  by the  user to buy  disposable  products  from the
Company, generally require only monthly commitments, and users can terminate any
purchase  obligation  by  returning  the pump.  Thus,  there is no  assurance of
continued revenue from pumps placed with such users.

         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
medical 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.

There can be no assurance that the Company's  products will gain any significant
market acceptance in their intended target markets,  even if required regulatory
approvals are obtained.

Revenues  for many of the  medical  devices  manufactured  by the Company may be
dependent in part on  availability of adequate  reimbursement  for those devices
from third-party  health care payers,  such as government and private  insurance
plans.  There is no  assurance  that the  levels of  reimbursements  offered  by
third-party  payers  will be  sufficient  to achieve  market  acceptance  of the
Company's products.

         Regulatory Compliance for Manufacturing Facilities

The Company  expends  significant  time,  resources,  and effort in the areas of
training,   production,  and  quality  assurance  to  maintain  compliance  with
applicable regulatory requirements. There can be no assurance, however, 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.
The Company's  failure to comply with GMP regulations or other  applicable legal
requirements  can lead to warning letters,  seizure of  non-compliant  products,
injunctive  actions  brought  by the U.S.  government,  and  potential  civil or
criminal liability on the part of the Company and 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.

         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.

         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. 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 difficulty in obtaining  materials on a timely
basis.

         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 or such persons will be  successful in
marketing or selling the Company's services and products.

         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.

         Risk of Product Liability

The manufacture and sale of products,  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.  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, which could subject the Company to
a claim under such warranties or indemnification.

         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 ZEVEX' three executive  officers,  Dean G.
Constantine,  Chief Executive Officer and President, David J. McNally, Executive
Vice   President,   Phillip   L.   McStotts,   Chief   Financial   Officer   and
Secretary/Treasurer,  and key managerial personnel Leonard Smith, Vice President
of Sales and  Marketing of ZEVEX Inc. and  President of JTech,  and Vijay Lumba,
President of Aborn.  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. Only Mr. Smith and Mr.
Lumba have employment  agreements with their  respective  subsidiary  companies.
None of the Company's  other key personnel have  employment  agreements with the
Company.

The Company  carries  key-man life insurance on the lives of its Chief Executive
Officer,  Chief Financial Officer, and Executive 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,  1999,  the Company  held  twelve  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 15, 2000,  the current  executive  officers and  directors of ZEVEX,
together  with those  persons who are the  beneficial  owners of more than 5% of
ZEVEX'  Common  Stock,  will  beneficially  own  or  have  voting  control  over
approximately  34%  of  the  outstanding   Common  Stock.   Accordingly,   these
individuals  have the ability to influence the election of ZEVEX'  directors and
most corporate  actions.  This  concentration of ownership,  together with other
provisions in ZEVEX'  charter and  applicable  corporate  law, may also have the
effect of delaying, deterring, or preventing a change in control of ZEVEX.

         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.  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.

         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.

         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 two 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 acceptable to the Company. Any additional equity
financing would result in additional dilution to the Company's shareholders.

         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 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.

         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.

         Limited Market for Common Stock

Historically,  the market for ZEVEX'  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,  ZEVEX' Common Stock was listed for trading on the
American Stock Exchange.  In November 1998, ZEVEX' Common Stock was changed to a
listing on the  NASDAQ  Stock  Market,  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 ZEVEX'  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 ZEVEX' 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
NASDAQ Stock Market.

         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.

ITEM 2.  PROPERTIES

ZEVEX'  executive  offices,  and the  administrative  offices and  manufacturing
facilities  of ZEVEX Inc. and JTech,  are located in ZEVEX'  51,000 square foot,
mixed-use  building in Salt Lake City,  Utah.  This building was  constructed in
1997 to the Company's  specifications  and is subject to an  Industrial  Revenue
Bond,  (see  "Management's  Discussion  and Analysis of Financial  Condition and
Results of  Operations  Liquidity  and  Capital  Resources").  The  building  is
situated on nearly  four acres of land a few miles from the  downtown  area.  It
allows  quick  access  to two  major  interstate  freeways  and to the Salt Lake
International  Airport. The Company currently utilizes  approximately 90% of the
building's  available  space and believes  that the building will be adequate to
serve the Company's needs through the end of the year 2000.

To allow the Company to build additional  facilities as growth may require,  the
Company has acquired  approximately  3.47 vacant acres adjacent to its facility.
The Company  also leases on a month to month basis  approximately  5,000  square
foot,  adjacent to its facility for storage of its  disposable  sets for enteral
delivery.

Aborn's  administrative  and  manufacturing  operations  are located in a leased
3,300 square foot building in San Jose, California. The building was constructed
in 1979 and is adequate for Aborn's needs.

ITEM 3.  LEGAL PROCEEDINGS

The Company is not engaged in any legal proceedings.

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

No matters were submitted to ZEVEX'  shareholders for vote in the fourth quarter
of 1999.

                                     PART II

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

ZEVEX' Common Stock has been trading on the National Market system of The NASDAQ
Stock Market since November 2, 1998,  under the symbol ZVXI.  Prior to that date
the stock traded on the American  Stock Exchange  beginning May 19, 1997,  under
the symbol ZVX. Prior to May 1997,  the stock traded on the OTC Bulletin  Boards
under the symbols ZVXI and ZVXIU.  As of March 15, 2000,  there were 177 holders
of record of ZEVEX'  Common Stock  (calculated  without  reference to individual
participants  in  securities  position  listings).  Based on the number of proxy
materials  requested by brokers and other  record  holders for  distribution  to
beneficial  owners for the Company's 1999 Annual Meeting,  ZEVEX estimates there
are roughly  1,250  beneficial  owners of ZEVEX  Common  Stock.  ZEVEX has never
declared or paid any cash dividends on its Common Stock. ZEVEX currently intends
to retain all future  earnings to finance  future growth and does not anticipate
paying  any cash  dividends  in the  foreseeable  future.  ZEVEX has a  negative
covenant in its bank line of credit  agreement  that prevents the payment of any
cash dividend without prior approval of the bank.

The  following  table lists the high and low sales prices for ZEVEX Common Stock
for each full quarterly period since January 1, 1998.
<TABLE>
<CAPTION>
<S>                                   <C>                                   <C>                               <C>
                                      ------------------------------------- -------------------------------------
                                                      1999                                  1998
                                            High                Low                High                Low
                                      ------------------ ------------------ ------------------- ------------------
1st Quarter                                 $7.25              $4.75              $12.63              $7.88
2nd Quarter                                 $6.63              $4.13              $11.25              $6.75
3rd Quarter                                 $6.50              $4.13              $7.63               $4.50
4th Quarter                                 $5.50              $4.00              $7.88               $4.00
</TABLE>

During 1999, ZEVEX issued 1,850 shares of Common Stock which were not registered
under the Securities Act of 1933 (the "Securities  Act"). The shares were issued
pursuant to the  exercise of stock  options by  employees  of the Company and as
such are exempt from registration under SEC Rule 505. The exercise price on such
shares ranged from $2.50 to $5.00 per share. The aggregate exercise price of the
securities issued was $6,175.

ITEM 6.  SELECTED FINANCIAL DATA

                   SELECTED FINANCIAL DATA - FIVE-YEAR REVIEW

The following selected statement of operations data for the years ended December
31, 1999,  1998 and 1997, and the balance sheet data as of December 31, 1999 and
1998 are derived from the audited consolidated  financial statements included in
this report and should be read in conjunction with those consolidated  financial
statements and notes thereto.  The selected statement of operations data for the
years ended December 31, 1996 and 1995 and the balance sheet data as of December
31,  1997,  1996 and 1995 are derived  from the audited  consolidated  financial
statements of the Company,  which are not included herein,  and are qualified by
reference to such financial statements and the notes thereto.
<TABLE>
<CAPTION>
<S>                                               <C>            <C>               <C>          <C>         <C>    <C>

                                                         Fiscal Year Ended December 31

                                                       1999          1998         1997          1996         1995
                                                  ---------------------------------------------------------------------
Statement of Operations Data

Revenues                                           $23,026,208   $11,084,413   $8,968,425    $5,663,733   $5,295,762
Gross profit                                        10,551,998     4,237,970    4,211,368     2,727,678    2,230,209
Selling, general and administrative expenses         6,988,044     3,879,408    2,481,090     1,892,317    1,324,928
Research and development  expenses                     670,886       290,669      702,563       527,562      502,255
Other (income)/expenses                                 78,706     (407,469)     (47,136)     (243,947)     (40,829)
Provisions for taxes                                 1,187,989       113,169      356,609       206,169      127,055
Net income                                           1,626,373       362,193      718,242       345,577      316,800
Net income per share basic                                 .48           .11          .34           .25          .24
Weighted average shares outstanding                  3,413,023     3,298,150    2,097,831     1,388,511    1,305,812
Net Income per share diluted                               .47           .10          .29           .24           24
Weighted average shares outstanding`  assuming
dilution
                                                     3,431,566     3,636,434    2,443,482     1,411,687    1,333,768

-----------------------------------------------------------------------------------------------------------------------
                                                     1999           1998          1997          1996         1995
-----------------------------------------------------------------------------------------------------------------------
Balance Sheet Data

Total assets                                       $34,049,689    $33,760,979   $22,582,543   $6,368,670    $3,247,375
Total current liabilities                            5,782,319      7,395,946     1,290,466      588,009       346,504
Long-term debt (less current portion)                7,170,000      6,150,000     1,900,000    2,000,000            --
Stockholders' equity                                21,090,722     20,114,535    19,265,697    3,701,449     2,900,871
</TABLE>

Please refer to Item 7 for a discussion of the main factors causing the
substantial changes in certain of the items set forth above, particularly when
comparing 1999 to earlier periods.  Also as discussed in Item 7, the Company's
management anticipates that the financial performance during 2000 and future
periods will be materially affected by the acquisition from Nestle USA of its
enteral feeding pump and related disposable product business.

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

General

Through its subsidiaries,  ZEVEX is in the business of designing,  manufacturing
and  distributing   medical  devices.   The  Company's   product  lines  include
proprietary medical devices which it designs, manufactures, and distributes, and
contract-manufactured  products which it designs and  manufactures  for original
equipment manufacturers (OEM's).

ZEVEX' current strategy is to continue to aggressively grow proprietary  product
revenues  with  the  acquisition  and  internal  development  of  products  that
complement its existing two lines of proprietary  products.  This is intended to
augment ZEVEX' contract manufacturing business,  which historically has been the
core competence of ZEVEX.

Developments During 1999

The Company  substantially grew revenues and earnings during 1999,  diversifying
its offering of  proprietary  products  further and gaining market share in both
proprietary markets, as well as growing its contract manufacturing business. Key
contributors to the year's growth were:

1. The  acquisition  in July 1998, of Nutrition  Medical  Inc.'s product line of
stationary  feeding  pumps,  disposable  sets  and  feeding  tubes  for  enteral
nutrition delivery.

2. The acquisition on December 31, 1998, of JTech Medical Industries, Inc. JTech
manufactures and markets its own proprietary musculoskeletal evaluation products
for health care  providers,  a line of products not previously  manufactured  or
sold by ZEVEX.

3. The  acquisition  on December  31, 1998,  of Aborn  Electronics,  Inc.  Aborn
designs and  manufactures a variety of  sophisticated  optical  sensors,  custom
computer chips and  semiconductor  components  for medical  technology and other
companies,  and has  brought  new  design  and  manufacturing  expertise  to the
Company.

4. The  agreement  with  Applied  Medical  Technology,  Inc.  on May 6,  1999 to
distribute AMT's MINI(TM) button  low-profile  gastrostomy access devices within
the home care market.  Management believes that this important component used in
enteral  nutrition  delivery  will be a  significant  addition to the  Company's
growing product line.

Results of Operations

The  Company's  sales  results  for 1999  were the  strongest  in the  Company's
history. Revenues were $23,026,208, a 108% increase over revenues of $11,084,413
in 1998, which were a 23% increase over revenues of $8,968,425 in 1997. Revenues
for  1999  increased  primarily  due to  demand  for the  Company's  proprietary
products,  the  award  of  significant  engineering  and  manufacturing  service
contracts,  and the  contribution of the  acquisitions of the Nutrition  Medical
product line, Aborn, and JTech.  Also contributing to the year's performance
was a strong shift of contract manufacturing revenue from the first quarter of
2000 into the fourth quarter of 1999 due to the accelerated shipment of products
in late 1999 at the request of ZEVEX Inc.'s customers.  The Company estimates
that this shift involves $500,000 to $1 million.  Accordingly, Company
management expects the revenues for the first quarter of 2000 to be lower than
expected.  This is due not only to the shift in revenues described above, but
also due to reduced sales of enteral feeding pumps to Nestle in the first
quarter of 2000.  This reduction in sales to Nestle, estimated to be as much as
$750,000, was due to the anticipated acquisition of Nestle assets described
previously.

The Company's  current  strategy as stated above is to continue to  aggressively
grow proprietary product revenues with the acquisition and internal  development
of  proprietary  products that  complement its existing two lines of proprietary
products. This strategy is intended to augment continuing growth in ZEVEX Inc.'s
contract manufacturing business, which historically has been the core competence
of  ZEVEX.  As a result  of the  growth  of the  Company's  proprietary  product
business, the portion of the Company's revenues represented by that business has
risen  significantly over prior years. In 1999, 47% of the Company's revenue was
derived from proprietary  products sold by the Company,  in comparison to 30% in
1998  and 12% in  1997.  This  shift  in  revenue  sources  has the  benefit  of
decreasing the percentage of the Company's  revenues generated by a small number
of major customers. During 1999, only one customer accounted for over 10% of the
Company's  revenues,  generating  13% of total  revenues.  During 1998 and 1997,
three customers each accounted for over 10% of the Company's revenues,  together
generating 44% and 65% of total revenues in each year respectively.

Future  revenue  growth  for many of the  medical  devices  manufactured  by the
Company may be dependent in part on availability of adequate  reimbursement  for
those  devices from  third-party  health care  payers,  such as  government  and
private  insurance  plans.  The medical  products  industry  is also  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
investments in research and development  with respect to its existing and future
products.

Manufacturing revenue growth depends upon growth in demand for systems, devices,
and instruments manufactured by the Company, as well as on the Company's ability
to acquire  additional  manufacturing  service contracts from medical technology
companies.  The Company's contract manufacturing customers have complete control
over the marketing and sales of products that the Company manufactures for them.
The  Company  has  no  ability  to  increase  demand  for  instruments  that  it
manufactures  for its  contract-manufacturing  customers.  No assurances  can be
given that orders from any customer will increase or remain at current levels or
that they will not decline.

The Company markets its manufacturing  capabilities and rarely undertakes design
work without securing  manufacturing rights (See "Manufacturing  Capabilities").
The volume and timing of future  manufacturing  revenues related to any specific
engineering project are highly variable.  Certain  engineering  projects may not
lead to future manufacturing revenues. The manufacturing gross margin percentage
from year to year depends primarily on the product mix, as gross margins vary by
instrument  and as a result  of  negotiated  volume  discounts.  Management  may
negotiate  volume  discounts  if the larger  volume  results in smaller per unit
overhead,   improving   operating  margin.   The  gross  margin  percentage  for
manufacturing  revenues from  instruments not yet approved for commercial use is
generally lower because a smaller number of units produced limits  opportunities
to  achieve   economies  of  scale.   Additionally,   the   instrument  and  its
manufacturing  process  are being  refined,  resulting  in larger per unit costs
during the initial manufacturing phase.

The Company's annual and quarterly  operating results are affected by acceptance
of the markets for the Company's proprietary and contract manufactured products,
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. During the first quarter of 1999, the Company had continued to work with
a certain customer on a fixed price contract, which had an adverse impact on the
Company's gross margin.  Also during 1999, the Company completed a reengineering
project with a customer on a cost sharing basis which  adversely  affected gross
margin.

The  following  table  sets  forth,  for the  periods  indicated,  the  relative
percentages that certain items in the income statement bear to revenues.

Year Ended December 31, Income Statement Data -- Percentage of Gross Sales
<TABLE>
<CAPTION>
<S>                                    <C>           <C>           <C>            <C>           <C>      <C>
                                             1999          1998          1997           1996          1995
                                       ------------- ------------- -------------- ------------- -------------
Revenues                                       100%          100%           100%          100%          100%
Gross profit                                    46%           38%            47%           48%           42%
Selling, general and                            30%           34%            27%           33%           25%
administrative expenses
Research and development  expenses               3%            3%             8%           10%            9%
Operating income                                13%            1%            12%            5%            8%
Other income/(expense)                         (1)%            3%            --%            4%            1%
Income before taxes                             12%            4%            12%            9%            9%
Provisions for taxes                             5%            1%             4%            3%            3%
Net income                                       7%            3%             8%            6%            6%
</TABLE>


Sales of the Company's  proprietary  enteral feeding products line accounted for
approximately  33% of the total  revenues for the year ended  December 31, 1999,
compared  to 30% and 12% for  the  years  ended  December  31,  1998  and  1997,
respectively.  Sales of the Company's  proprietary JTech product line, accounted
for  approximately  14% of the total  revenues  for the 1999  year.  Fifty-three
percent of the  Company's  revenues  during the 1999 year were products that are
manufactured  for and sold to OEM customers,  who market the final product.  The
Company's  gross profit as a percentage of sales was 46% in 1999, as compared to
38% in 1998 and 47% in 1997.  Management attributes the increase in gross profit
percentage  from 1998 to 1999 to a number of matters,  including  (1) a shift in
the revenue mix of its  products  to higher  margin  items that were sold during
1999,  (2)  consistent  delivery  schedules  dictated  by the  Company's  larger
customers,  and (3) the Company not having  similar  costs to those  incurred in
1998  related to the  Nutrition  Medical  acquisition  as well as  non-recurring
engineering (NRE) tooling expenses.

Selling,   general  and   administrative   expenses  increased  during  1999  to
$6,988,044, 30% of gross sales, as compared to $3,879,408, 34% of gross sales in
1998,  and  $2,481,090,  27% of  gross  sales in 1997.  During  1999,  increased
expenses  resulted  from the  Company's  continuing  growth,  which has resulted
primarily  from the  acquisitions  of JTech and  Aborn.  An  expanded  sales and
marketing effort increased  staffing,  travel,  advertising,  and administrative
expenses  related  to the  Company's  proprietary  clinical  nutrition  delivery
product  line and JTech  product  lines.  The  Company  also had an  increase in
expenses related to employees,  such as insurance,  taxes, and pension benefits.
After  consideration  for the  one-time  expenditures  related to the  Nutrition
Medical  product  line  acquisition,  the  Company  believes  that  general  and
administrative   expenses  in  2000  as  related  to  sales  will   continue  at
approximately the same percentage as in the previous two years.

As of December 31, 1999, the Company had three  full-time  engineers in research
and development,  and had several other designers and engineers  contributing to
research and  development  projects.  The  Company's  research  and  development
projects are  primarily  focused on new  proprietary  products.  During the last
three fiscal years, the Company continued  independent  research and development
activities  with  respect to the design of new and  improved  devices,  spending
$670,886 in 1999,  $290,699  in 1998,  and  $702,563 in 1997.  In 1999 and 1998,
research and development costs represented  approximately 3% of revenues in each
of those years and 8% in 1997. Significant  fluctuations experienced in research
and  development  are due to  timing of the  Company's  research  projects.  The
Company expects research and  developments  costs in 2000 to be approximately 3%
of revenues.

Depreciation  and  amortization  expenses  increased to  $1,557,221 in 1999 from
$471,752  in 1998,  and  $284,174  in 1997.  This  increase  reflects  increased
depreciation due to capital expenditures for property and equipment purchased to
increase  engineering,   design,  and  manufacturing   capabilities  to  support
anticipated  growth,  as well as increased  amortization of goodwill  related to
1998 acquisitions.

Goodwill  represents  the excess of the purchase price of companies and products
the Company purchased over the fair value of the tangible and other specifically
identified   intangible  assets  of  those  companies  and  products.   Goodwill
amortization  lives were determined by comparing recent  acquisitions of similar
companies and  industries.  Goodwill is amortized over a periods ranging from 15
to 23 years. The current value of goodwill included in the financial  statements
is $10,642,304, and represents approximately 31% of total assets.

Income tax expenses  increased to $1,187,989 in 1999 from $113,169 in 1998,  and
$356,609 in 1997.  The increase is primarily due to the increased  income before
taxes and non-deductible goodwill amortization.

At December  31,  1999,  the Company had  deferred  tax assets of  approximately
$200,000.  Realization  of the deferred tax assets is dependent on the Company's
ability to generate  approximately  $600,000  in taxable  income in the year the
assets are realized.  Management  believes that sufficient income will be earned
in  the  future  to  realize   these  assets.   Management   will  evaluate  the
realizability  of the  deferred  tax  assets  annually  and  assess the need for
valuation allowances.

Operating income increased to $2,893,068,  13% of gross revenue in 1999 compared
to $67,893, 1% of gross revenue in 1998, and $1,027,715, 11% of gross revenue in
1997. Similarly, the Company had a net income of $1,626,373, 7% of gross revenue
in 1999, compared to $362,193,  3% of gross revenue in 1998, and $718,242, 6% of
gross revenue in 1997.  The changes during 1999 as compared to 1998 and 1997 are
principally due to the increase in revenues from proprietary products, the costs
addressed  above  in  relation  to  cost  of  sales  and  selling,  general  and
administrative  costs, and changes in the Company's product mix of higher margin
items delivered during the 1999 year.

Liquidity and Capital Resources

The Company increased its working capital  requirements during 1999, mostly as a
result of increasing accounts receivable  associated with growth in revenues and
the Company's  efforts to expand its operations by  acquisitions of products and
technologies.  Prior to 1997,  working  capital had been funded  primarily  by a
combination of increased  accounts  payable and  borrowings  under the Company's
revolving line of credit.  Beginning in 1997,  working capital was also provided
by a $1.25  million  private  placement  of ZEVEX'  Common Stock and warrants in
February,  1997 and a  secondary  public  offering  of  ZEVEX'  Common  Stock in
November  1997,  from which  ZEVEX  received  approximately  $13  million in net
proceeds.

During  1999,  the Company  produced  $1,626,373  in net  income.  Cash and cash
equivalents increased by $1,803,429 for 1999 from operating  activities,  as the
Company had an increase in payables  and  decreased  its  inventories  which was
offset by increased accounts receivable which increased as the Company continued
to expand its  proprietary  businesses  and meet customer  requirements.  During
1998,  the Company  had net income of  $362,193,  and cash and cash  equivalents
decreased  from  operating  activities  by  $1,837,748,  as the  Company  funded
increases in accounts  receivable and inventories.  During 1997, the Company had
net income of $718,242,  and cash and cash  equivalents  decreased by $1,362,938
from  operating  activities,  while the  Company  funded an increase in accounts
receivable.

In 1997,  the  Company  completed  construction  of its new 51,000  square  foot
headquarters  and  manufacturing  facility.  The  cost of this  undertaking  was
approximately  $2,591,177.  In  1996,  the  company  negotiated  a $2.0  million
Industrial  Development  Bond  to  finance  this  construction.   The  Company's
purchases of land, leasehold  improvements to its facilities,  and new research,
production, testing equipment, and tooling totaled $566,958 in 1999, as compared
to $1,185,805 in 1998,  and  $3,004,926 in 1997. The amount spent during 1998 is
primarily  attributed to the Company's  purchase of  approximately  3.5 acres of
land adjacent to the Company's current facility in Salt Lake City in March 1998,
as  well  as to  continued  upgrading  of the  Company's  production  fixturing,
tooling, and research and engineering capabilities.  The difference in purchases
between  1998 and 1997 is primarily  due to the  construction  of the  Company's
headquarters and manufacturing  facility and upgrading the Company's  production
fixturing, tooling and research and engineering capabilities during 1997.

The Company's working capital at December 31, 1999, was $11,935,524, compared to
$11,669,033  at December 31, 1998,  and  $17,235,516  at December 31, 1997.  The
portion of working  capital  represented by cash and  short-term  investments at
such dates was $6,608,361, $9,558,543 and $12,663,535 respectively. In 1999, the
Company's increase in working capital of $266,491 was primarily due to operating
activities.  The  decrease in working  capital  during 1998  compared to 1997 is
primarily  attributed  to (i) cash outlays and current  payables  related to the
acquisitions of the product line from Nutrition  Medical and the stock purchases
of JTech and Aborn, (ii) increases in accounts and accrued  payables,  and (iii)
an increase of the Company's  line of credit.  In 1997,  the increase in working
capital was primarily  attributed to (i)  completion of a secondary  offering of
the Company's common stock in November, 1997, of approximately $13 million, (ii)
increased income from operations  during the year, and (iii) a private placement
that was completed in February, 1997.

On December  23,  1998,  ZEVEX  issued  115,000  shares of Common Stock and paid
$500,000 to Nutrition  Medical,  Inc. as  consideration  for the  acquisition of
Nutrition  Medical's  assets  relating to its enteral  feeding  pump and related
disposable feeding product business.

On December 31, 1998,  ZEVEX  committed  to pay up to  $1,875,000  in cash and a
convertible  debentures in the aggregate amount of $1,350,000 to Vijay Lumba and
Harry  Parmar as partial  consideration  for the  acquisition  of all issued and
outstanding  stock of Aborn.  All or part of the  outstanding  principal of each
debenture  is  convertible  by the holder into ZEVEX  Common  Stock at a rate of
$11.00  per  share at any time  between  one and  three  years  from the date of
issuance.  In  1999,  the  Company  paid  cash  of  $1,850,000  related  to  the
acquisition. On December 31, 1999, ZEVEX committed to pay $950,000 in cash and a
convertible  debentures in the  aggregate  amount of $950,000 to Vijay Lumba and
Harry Parmar as payment of the earn-out portion of the acquisition of all issued
and outstanding stock of Aborn.

On December 31, 1998,  ZEVEX  committed to pay up to of $3,100,000 in cash and a
convertible  debentures in the aggregate  amount of $3,000,000 to Leonard Smith,
Tracy  Livingston,   and  David  Bernardi  as  partial   consideration  for  the
acquisition  of all issued and  outstanding  stock of JTech.  All or part of the
outstanding  principal of each debenture is convertible by the holder into ZEVEX
Common  Stock at a rate of $11.00  per share at any time  between  one and three
years from the date of issuance.  In 1999,  the Company paid cash of  $3,100,000
related to the  acquisition.  On December 31, 1999, ZEVEX committed to pay up to
of $175,000 in cash and a  convertible  debentures  in the  aggregate  amount of
$175,000 to Leonard Smith,  Tracy  Livingston,  and David Bernardi as payment of
the earn-out  portion of the acquisition of all issued and outstanding  stock of
JTech.

On February 12, 1997, the Company completed a private placement of $1,250,000 of
its  securities,  which consisted of 500,000 units at a price of $2.50 per unit.
Each unit  consisted  of one share of Common Stock and a warrant to purchase one
share of Common  Stock at a price of $3.50 per share.  As of December  31, 1998,
30,000 of the warrants included in the above units were exercised.  In June 1999
the Company  repurchased  for  $1,175,000  the  remaining  470,000  common stock
warrants related to the above units.

On December 11, 1996,  the Company  entered into a $500,000  open line of credit
arrangement  with a financial  institution.  The line of credit was increased to
$1,000,000 on September 10, 1997, and increased  again to $5,000,000 on December
31, 1997. The line matures on May 31, 2000. The line of credit is collateralized
by accounts  receivable  and  inventories,  and bears  interest at the financial
institutions  prime rate.  The Company owed  $1,613,453 on the line of credit at
December 31, 1999, $541,993 at December 31, 1998, and zero at December 31, 1997.

Inflation and Changing Prices

The Company has not been, and in the near term is not expected to be, materially
affected by inflation or changing prices.

New Accounting Pronouncements

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) 101, Revenue Recognition in Financial  Statements.  The effective
date of SAB 101 is the second  quarter of the fiscal year ending after  December
15, 1999. The SAB clarifies proper methods of revenue  recognition given certain
circumstances surrounding sales transactions.  The Company continues to evaluate
the impact of SAB 101, but believes it is in compliance  with the  provisions of
the SAB and  accordingly,  does not expect SAB 101 to have a material  effect on
its financial statements.

Subsequent Acquisition

In line with the Company's strategy of acquiring additional  proprietary product
lines, on March 29, 2000, the Company  entered into an agreement to acquire
from Nestle USA, Inc.  ("Nestle") a portion of Nestle's enteral  nutrition
delivery device  business.  In the asset purchase, the Company will acquire over
19,500 enteral feeding pumps which have been placed with various health care
facilities under arrangements  whereby the users commit to purchase  disposable
accessories  for use with the  feeding  pumps or return the  pumps.  The
assets will also  include  Nestle's  line of pump administration sets, feeding
tubes, irrigation kits and ancillary devices. Based on Nestle's historical
experience generating revenues from the acquired assets, the  Company currently
estimates   that  the  Nestle  assets  will  generate approximately  $3  million
in  additional  revenue to the  Company  during  2000 through the sale of
disposable  accessories  for the feeding pumps  currently in use.  The Company
currently anticipates that the acquisition will close by April 5, 2000.

Under the purchase agreement with Nestle, Nestle will provide certain transition
services  to assist the  Company in  acquiring  the  business  with a minimum of
disruption for the customers  using the acquired  pumps.  There is no assurance,
however,  that during the  transition of the business  from Nestle,  the Company
will not encounter difficulties which reduce the revenues generated by the pumps
following the acquisition.  In particular,  there is no assurance that the users
of  the  pumps  acquired  from  Nestle  will  continue  to  purchase  disposable
accessories from the Company at the rate historically  experienced by Nestle, in
which  case the  anticipated  revenue  estimated  by the  Company  might  not be
realized.

Year 2000 Compliance

         State of Readiness

With regard to its information systems  (financial,  supply,  inventory,  order,
office support, etc.) the Company timely converted all necessary systems and was
ready for the year 2000.  100% of the necessary  systems have been determined to
be Y2K compliant by the Company,  or have been upgraded to new systems which are
certified by the manufacturer as Year 2000 compliant.

With regard to its
non-information system
operations, the Company has
reviewed and corrected Y2K
problems in the following areas: products currently manufactured by the Company;
manufacturing and engineering systems; and building systems. This review is 100%
complete  and the  Company  has been able to  correct  each  material  Y2K issue
identified in the review.

With regard to potential Y2K issues for the Company's major material  suppliers,
the Company has not yet  identified  any major supplier that believes it will be
unable to operate  due to Y2K  problems  in 2000.  Generally,  the  Company  has
alternative  sources  for  supplies  in the event a  supplier  experiences  such
difficulties and the Company does not presently anticipate material difficulties
in obtaining materials due to suppliers' Y2K problems.

With regard to major  customers,  the Company has had  communications  with such
parties and has  reviewed  responses  regarding  Y2K  compliance.  To date,  the
Company has not experienced any problems  regarding Y2K  difficulties  with such
customers.

With regard to  third-party  utilities  and  services  (for  example,  telephone
electrical,  bankcard  processing  and shipping  services),  the Company has not
experienced any problems regarding Y2K readiness of such providers.

         Cost to Address Y2K
Issues

As of March 1, 2000,  the Company has spent  approximately  $200,000 in hardware
and  software  expenses to upgrade or correct Y2K  problems  with the  Company's
internal systems. These costs were paid out of operating cash flows. The Company
does not  expect  to  incur  any  additional  costs  for  further  upgrades  and
corrections  relating  to the Y2K  issue.  The costs  stated  above do  include,
however,  costs to upgrade and replace systems that the Company  otherwise would
have  incurred in the normal  course of  business.  The Company has not yet been
able to  estimate  the  costs  it may  incur as a result  of its  suppliers  and
customers experiencing Y2K difficulties.

         Risk of the Company's
Y2K Issues

The Company  anticipates  that the material risks related to its information and
non-information  systems has been timely  mitigated  by the efforts  made by the
Company to identify and correct  internal  Y2K  problems.  However,  there is no
guarantee  that the Company has  successfully  identified  or corrected  all Y2K
problems in a timely  manner.  For example,  due to the inherent  limitations of
real-time clock devices and system BIOS in the Company's manufacturing equipment
or building  systems,  continued  review and testing  could  uncover  additional
problems. In some cases, problems may be unforeseen, and occur regardless of the
testing and review that has been done.

Other  major  Y2K risks  for the  Company  arise  from the  potential  for major
customers to experience financial or operational difficulties resulting from Y2K
problems.  If such customers  reduce their orders for the Company's  products or
services, the Company's operations could be adversely affected.

Additionally, although the Company has not experienced any disruption in service
from  third-party  providers  that  supply  telephone,  electrical,  banking and
shipping  services,  any disruption of these critical  services would hinder the
Company's ability to receive, process and ship orders.

Other Matters

Summary of Quarterly Data
<TABLE>
<CAPTION>
<S>              <C>           <C>           <C>           <C>           <C>           <C>          <C>         <C>
                     12/99         9/99          6/99          3/99         12/98        9/98         6/98          3/98
                 ------------- ------------- ------------- ------------- ------------- -----------  -----------  -----------

Revenue            $7,195,220   $5,688,131    $5,481,404   $4,661,453    $3,451,206     $2,346,143   $3,099,353   $2,187,711
Gross profit        3,266,877    2,520,801     2,489,974    2,274,346     1,502,990        307,943    1,516,749      910,288
Net income            700,869      331,741      305,995      287,768        319,748      (419,844)      347,281      115,008
EPS basic                 .21          .10          .09          .08            .09          (.13)          .11          .04
EPS diluted               .20          .10          .09          .08            .09          (.13)          .10          .03
</TABLE>

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The  Company is exposed to market risk in the form of  fluctuations  in
interest rates and their potential  impact upon its industrial  development bond
of $1,800,000.  The variable rate on the industrial development bond is based on
a weekly  tax-exempt  floater  rate.  Principle  payments of  $100,000  are made
annually with the balance due October 1, 2016.

         Additionally, the Company holds marketable securities with a fair value
of $254,817,  at December 31, 1999 with fixed interest rates of 5.40% and 6.375%
and maturities in 2000. The Company's  marketable  equity securities with a fair
value of $2,970,000,  at December 31, 1999,  consist of public  companies in the
small-cap market.  At December 31, 1998, the Company held marketable  securities
with a fair value of  $1,209,235,  with fixed interest rates of 5.40% and 6.375%
and  maturities  ranging  from 1999 to 2000.  The  Company's  marketable  equity
securities held at December 31, 1998 had a fair value of $388,797, and consisted
of public companies in the small-cap market.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Company's financial  statements for the fiscal years ended December
31, 1999 and 1998, are included beginning at page 42, immediately following Item
14.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         The Company  has no changes in or  disagreements  with its  independent
auditors with regard to financial disclosures.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following  table sets forth the name,  age, and  principal  position of each
ZEVEX  director  and  executive  officer,  as  well  as the  expiration  of each
director's term of office.

<TABLE>
<CAPTION>
<S>                    <C>     <C>                                                           <C>
                                                                                             Expiration

Name                    Age    Position                                                        of Term

Dean G. Constantine     47     President, Chief Executive Officer and Director                   2001

David J. McNally        38     Executive Vice President and Director                             2000

Phillip L. McStotts     42     Chief Financial Officer, Secretary/Treasurer and Director         2002

Leonard C. Smith        51     Vice President Sales and Marketing and Director                   2001

Bradly A. Oldroyd       42     Director                                                          2000

Darla R. Gill           48     Director                                                          2002

Kirk Blosch             44     Director                                                          2002
</TABLE>

ZEVEX'  executive  officers  serve at the  discretion of the Board of Directors.
None of the executive  officers have  employment  agreements with ZEVEX with the
exception of Mr. Smith. Certain biographical information with respect to each of
the officers and directors is set forth below.

Dean G.  Constantine  is a  founder  of ZEVEX  and has  served  as  ZEVEX'  CEO,
President, and Chairman of the Board since its inception in 1986. He also serves
as a director of ZEVEX Inc., JTech, and Aborn, and as President and CEO of ZEVEX
Inc.  Prior to  joining  ZEVEX,  he was  employed  by EDO  Corporation,  Western
Division, in Salt Lake City, Utah, from October 1985 to September 1987, and from
January 1971 to June 1983.  During his nearly  fifteen years of employment  with
EDO Corporation,  Mr. Constantine had various responsibilities including project
supervision,   management  of   engineering   for   commercial   and  industrial
transducers, and research and development.  From July 1983 through October 1985,
Mr.   Constantine  was  employed  as  an  engineering   specialist  at  Northrop
Corporation   Electro-Mechanical   Division,  Anaheim,   California,  where  his
responsibilities   included  engineering  project  management  and  applications
engineering.

David J. McNally is a founder of ZEVEX and has served as ZEVEX'  Executive  Vice
President  and as a director  since its  inception in 1986.  He also serves as a
director of ZEVEX Inc.,  JTech, and Aborn, and as a Vice President of ZEVEX Inc.
Prior to joining  ZEVEX,  he was employed by EDO  Corporation in Salt Lake City,
Utah as a marketing  manager of transducers from October 1985 to September 1987.
From June 1984 to October 1985, Mr.  McNally was employed by Physical  Acoustics
Corporation,  a Princeton,  New Jersey based  manufacturer  of acoustic  testing
systems,  as its regional sales manager for the Southeastern United States. From
June 1983 to June 1984, he was employed by Hercules, Inc., in Magna, Utah, as an
advanced  methods  development  engineer.  Mr.  McNally  received a Bachelor  of
Science Degree in Mechanical  Engineering from LaFayette College in May 1983 and
a Master of Business  Administration  Degree from the University of Utah in June
1992.

Phillip  L.  McStotts  is a  founder  of ZEVEX and has  served  as  ZEVEX'  CFO,
Secretary,  and Treasurer, and as a director since its inception. He also serves
as a director of ZEVEX Inc.,  JTech, and Aborn, as CFO,  Secretary and Treasurer
of  ZEVEX  Inc.,  as Vice  President  and  Secretary  of  Aborn,  and as CFO and
Secretary of JTech.  In addition to running his own  professional  corporation ,
Phillip L. McStotts, CPA P.C. since October 1986, Mr. McStotts was employed from
May 1985 to September  1986,  as an  accountant  with the Salt Lake City firm of
Chachas &  Associates,  where he was tax manager.  He has also worked in the tax
departments of the regional  accounting  firms of Pearson,  Del Prete & Company,
and Petersen,  Sorensen & Brough.  Mr.  McStotts  received a Bachelor of Science
Degree in Accounting from Westminster College in May 1980, and received a Master
of Business Administration Degree in Taxation from Golden Gate University in May
1982.

Leonard C. Smith has been a director of ZEVEX since April 1999 and has served as
its Vice President of Sales and Marketing since October 1999. He is a founder of
JTech and has served as its President  since 1995.  Prior to joining  JTech,  in
1994  he  established   "The  Charles  Group,"  a  medical   marketing   company
specializing in diagnostic and rehabilitation  products.  From 1993 to 1994, Mr.
Smith was Vice President of Four Corners,  a large chain of health clubs,  based
in the southwest  United States.  From 1979 to 1993, Mr. Smith was a partner and
Vice  President  of  Sales  and  Marketing  at  Hoggan  Health   Industries,   a
manufacturer of commercial fitness  equipment.  Mr. Smith received a Bachelor of
Science Degree in Business Management from the University of Utah in June 1977.

Bradly A.  Oldroyd has been a director of ZEVEX since  October  1991.  He is the
founder and principal  shareholder  of Pinnacle  Management  Group,  a Salt Lake
City-based  personnel  services firm,  serving as its president  since 1986. Mr.
Oldroyd is also the founder  and CEO of TeamONE  Ford and Fuel  Centers,  a Salt
Lake City-based petroleum and convenience goods retailer. He is also a member of
the  faculty of the  University  of Phoenix  campus in Salt Lake City,  where he
teaches management and marketing courses in undergraduate and graduate programs.
Mr.  Oldroyd  received a Bachelor of Science degree in Marketing from Utah State
University  in 1981 and a Master  of  Business  Administration  Degree  from the
University of Utah in 1982.

Darla R. Gill has been a director of ZEVEX since May 1993.  She is a founder of
Merit Medical Systems, Inc., in Salt Lake City, and served until 1992 as
Executive Vice President and Director.  In 1999 she became Vice President of
International Sales and Marketing for Merit Medical Systems.  Ms. Gill is also
the owner of DRG Enterprises, a consulting company specializing in marketing,
sales, and new product development.  Ms.Gill was also the founder, President
and Chairman of Momentum Medical Corp., a Salt Lake City-based manufacturer and
distributor of home health care products from 1993 to 1998.  She continues to
serve as a Director for Momentum Medical.  She was also previously employed by
Utah Medical Products, Inc., a company where she served as Vice President of
Marketing and Sales.  Ms. Gill also currently serves as a Director of the Board
of NYB Corporation a company located in Salt Lake City.  Ms.Gill graduated from
the University of Phoenix with a Bachelors Degree in Business
Administration in 1988.

Kirk Blosch has been a general partner in the partnership of Blosch and Holmes ,
a business  consulting and private  venture funding  general  partnership  since
1984.  For the past  fifteen  years Mr.  Blosch has been an advisor  for various
public and private  companies.  During 1995 and 1996 Mr. Blosch  provided bridge
financing for private  companies  prior to their initial  offerings.  Mr. Blosch
graduated  from  the  University  of Utah  with a  Bachelors  Degree  in  Speech
Communications in 1977.

OTHER KEY EMPLOYEES

Vijay Lumba, 50, is the founder Aborn and has served as the President,
CEO and Director since 1983.  He was previously employed by Fairchild
Semicondutor Optoelectronics Division, where he served as a Product Manager
with responsibilities of design and development of new products and the transfer
of manufacturing technologies to the Far East for high volume production.  Mr.
Lumba graduated from Delhi University, India with a Bachelors Degree in Physics,
Chemistry and Mathematics in 1969.  Mr. Lumba also graduated from Heald
Engineering College, in San Francisco, California with a Bachelors Degree in
Electrical Engineering in 1972.



COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has two committees, the Audit Committee and the
Compensation Committee.  The Audit Committee is composed of Ms. Darla R.Gill and
Mr. Bradly A. Oldroyd.  The Compensation Committee is also composed of Ms. Gill
and Mr. Oldroyd. The Audit Committee is authorized to review proposals of ZEVEX'
independent auditors regarding annual audits, recommend the engagement or
discharge of ZEVEX' independent auditors, review recommendations of such
auditors concerning accounting principles and the adequacy of internal controls
and accounting procedures and practices, review the scope of the annual audit,
approve or reject each professional service or type of service other than
standard auditing services to be provided by the auditors, and review and
discuss the audited financial statements with the auditors.  The Compensation
Committee makes recommendations to the Board of Directors regarding remuneration
of the executive officers and directors of ZEVEX and oversees the administration
of the Company's stock option plans.

MEETINGS OF THE BOARD OF DIRECTORS

The Board of Directors held six meetings  during the last fiscal year. The Audit
Committee  held one  meeting  during  the last  fiscal  year.  The  Compensation
Committee held two meetings during the last fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation  paid by ZEVEX to each of ZEVEX'
executive officers during the three-year period ended December 31, 1999.

         SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>      <S>            <C>             <C>                    <C>                        <C>                <C>

                               Annual Compensation                               Long Term Compensation
                                                                                    Awards          Payouts
              (a)                (b)       (c)        (d)         (e)          (f)          (g)         (h)          (i)
                                                                 Other     Restricted                                All
Name and                                                         Annual       Stock                     LTIP        Other
Principal Position              Year     Salary       Bonus      Comp.       Awards       Options     Payouts       Comp.
Dean G. Constantine             1999      $114,070        $0       0            0            0           0          $4,605(1)
CEO and President               1998      $107,755     $50,000     0            0            0           0          $5,000(1)
                                1997      $105,000     $11,125     0            0            0           0          $4,207(1)

David J. McNally                1999      $114,070        $0       0            0            0           0          $4,605(1)
Executive Vice President        1998      $107,755     $50,000     0            0            0           0          $5,000(1)
                                1997      $105,000     $11,125     0            0            0           0          $4,207(1)

Phillip L. McStotts             1999      $114,070        $0       0            0            0           0          $4,605(1)
Secretary/Treasurer             1998      $107,755     $50,000     0            0            0           0          $5,000(1)
                                1997      $105,000     $11,125     0            0            0           0          $4,207(1)

Leonard C. Smith                1999      $100,000        $0       0            0            0           0          $4,000(1)
V. Pres. Sales and Marketing    1998           N/A         N/A       N/A            N/A         N/A         N/A           N/A
                                1997           N/A         N/A       N/A            N/A         N/A         N/A           N/A
</TABLE>

(1)  Represents  the amount  paid by ZEVEX as a  contribution  to ZEVEX'  401(k)
Pension and Profit Sharing Plan on the officer's behalf.

OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
<S>                          <C>             <C>           <C>            <C>            <C>         <C>            <C>
                                   Individual Grants
                                             Percent Of
                               Number of        Total

                              Securities      Options/                                    Potential Realizable Value At
                              Underlying        SAR's                                     Assumed Annual Rates Of Stock
                             Options/ SARs   Granted To     Exercise Of                  Price Appreciation For Option
                                Granted     Employees In    Base Price     Expiration                 Term
                                               Fiscal


           Name                   (#)           Year          ($/Sh)          Date           5% ($)          10% ($)
            (a)                   (b)            (c)            (d)            (e)            (f)              (g)

Dean G. Constantine             30,000          6.8%           $5.00         1/7/08         $94,334         $239,061

David J. McNally                30,000          6.8%           $5.00         1/7/08         $94,334         $239,061

Phillip L. McStotts             30,000          6.8%           $5.00         1/7/08         $94,334         $239,061

Leonard C. Smith                40,000          9.1%           $4.88         1/4/04         $53,875         $119,049
</TABLE>


 Effective  January 1, 1999, the  Compensation  Committee  approved the grant of
Common Stock  purchase  options for 30,000  shares each to Messrs.  Constantine,
McNally,  and  McStotts.  The  options  vest over a period from one years to six
years, with accelerated vesting based upon the Company meeting certain financial
goals,  but with full vesting after six years.  The options are  exercisable  at
$5.00 per share.  Effective January 1, 1999, the Compensation Committee approved
the grant of Common  Stock  purchase  options for 40,000  shares to Mr. Smith as
part of the  acquisition  of JTech.  The options  vest over a period from one to
four years and are exercisable at $4.875 per share.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES

The  following  table sets  forth the  options  exercised  during the year ended
December 31, 1999, by each  executive  officer of ZEVEX and the value of options
held by such persons at such year-end.
<TABLE>
<CAPTION>
<S>                        <C>         <C>             <C>                      <C>     <C>

                                                                                 Value of

                                                        Number of                Unexercised
                                                        Unexercised              In-the-Money
                                                        Options at               Options at
                                                        FY-End                   FY-End

                           Shares

Name and                   Acquired     Value           Exercisable/             Exercisable/
Principal Position         or Exercised Realized        Unexercisable            Unexercisable
Dean G. Constantine
CEO, President                   0           0          51,150/61,250            $14,444/7,656

David J. McNally

Executive Vice President         0           0          51,150/61,250            $14,444/7,656

Phillip L. McStotts

Secretary/Treasurer              0           0          51,150/61,250            $14,444/7,656

Leonard C. Smith

V. Pres. Sales and Marketing     0           0               0/40,000                $0/10,000
</TABLE>

Of the  unexercised  options  listed  above  for  each of  Messrs.  Constantine,
McNally,  and McStotts,  5,400 were granted on December 17, 1992,  and expire on
December  16,  2001.  The  exercise  price  on such  options  is  $5.00.  Of the
unexercised options listed above for each of Messrs.  Constantine,  McNally, and
McStotts,  7,000 were granted on February  13, 1997,  and expire on February 12,
2002. The exercise price on such options is $3.85.  Of the  unexercised  options
listed above for each of Messrs. Constantine, McNally, and McStotts, 70,000 were
granted on  September  30, 1997 and expire on September  29, 2002.  The exercise
price on such options is $5.00. Of the unexercised options listed above for each
of Messrs. Constantine, McNally, and McStotts, 30,000 were granted on January 8,
1999 and expire on January 7, 2005. The exercise price on such options is $5.00.
Of the  unexercised  options listed above for Mr. Smith,  40,000 were granted on
January  5, 1999 and  expire on January  4,  2004.  The  exercise  price on such
options  is $4.875.  The value of the  unexercised  options  was  determined  by
reference to the closing sales price for ZEVEX' Common Stock on the NASDAQ Stock
Market as of the end of 1999, which was $5.13 .

COMPENSATION OF DIRECTORS

The  Company  pays  each  director  who is  not an  employee  of the  Company  a
director's  fee of $625 per Board of Directors  meeting  attended,  $250 for any
annual meeting  attended,  and $125 per hour for any special  meeting  attended.
Additionally, the Company has issued stock options to the non-employee directors
in the past and may do so in the  future.  Although  the  Company may also issue
stock  options to directors  who are  employees  for their service as directors,
these  employee  directors  currently  receive no  additional  compensation  for
serving as directors or attending meetings of directors or shareholders.

EMPLOYMENT AGREEMENTS

Except for Leonard Smith, the Company has no employment agreements with its
executive officers.  Mr. Smith's employment agreement is for a term of  three
years beginning December 31, 1998.  Under the agreement Mr. Smith is paid a base
salary of $100,000 and cash bonuses at the end  of each year as determined by
the Company's Compensation Committee.  Termination without "cause" or
termination for "good reason" by Mr. Smith will result in certain severance
payments to Mr. Smith.  Termination for "cause" by the Company or termination
without good reason by Mr. Smith will reduce certain of the Company's further
payment obligations to Mr. Smith under the JTech Purchase Agreement between
the Company and Mr. Smith.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table  sets  forth  certain  information   regarding  beneficial
ownership of ZEVEX' Common Stock (par value $0.001) as of March 15, 2000, by (i)
each  person  (or  group  of  affiliated  persons)  who is  known  by  ZEVEX  to
beneficially own more than 5% of the outstanding  shares of ZEVEX' Common Stock,
(ii) each  director  and  executive  officer of ZEVEX,  and (iii) all  executive
officers and directors of ZEVEX as a group.  As of such date,  ZEVEX had a total
of 3,420,726 shares of Common Stock outstanding. Unless indicated otherwise, the
address  for  each   officer,   director  and  5%   shareholder   is  c/o  ZEVEX
International, Inc., 4314 ZEVEX Park Lane, Salt Lake City, Utah 84123.

                                                Number of              Percent
Name and address of beneficial owner         Shares Owned(1)         Of Class(1)

Kirk Blosch(2)                                     377,500                11.0%

Jeff Holmes(3)                                     375,000                11.0%

Blosch & Holmes, L.L.C.(4)                         250,000                 7.3%

Dean G. Constantine(5)                             309,380                 8.9%

David J. McNally(6)                                291,348                 8.4%

Phillip L. McStotts(7)                             200,550                 5.8%

Leonard C. Smith(8)                                 19,200                   *

Bradly A. Oldroyd(9)                                15,000                   *

Darla R. Gill(10)                                   12,480                   *

All Officers and Directors

as a Group (7 persons)                           1,225,458               33.9%

*Less than 1%

(1) For each  shareholder,  the number of shares owned includes shares of Common
Stock subject to options held by the shareholder that are currently  exercisable
or  exercisable  within 60 days.  For each  shareholder  the  calculation of the
percent of class is based on 3,420,726  shares  outstanding and assumes that the
shareholder  has  exercised  all options to obtain  additional  shares of common
stock  and that no other  shareholder  has  exercised  such  rights.  Except  as
indicated  otherwise  below, the persons and entity named in the table have sole
voting and investment  power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to applicable community property laws.

(2) Director.  Includes 125,000 shares of Common Stock held directly by Mr.
Blosch, 250,000 shares of Common Stock held by Blosch & Holmes, L.L.C. of which
Mr. Blosch is a principal (and which 250,000 shares are also reported as
beneficially owned by Mr. Holmes and Blosch & Holmes, L.L.C.), 2,500 shares of
Common Stock issuable upon exercise of options held by Mr. Blosch that are
currently exercisable or will become exercisable within 60 days.  Excludes 7,500
shares of Common Stock issuable upon exercise of options held by Mr. Blosch that
are not currently exercisable and will not become exercisable within 60 days.
Mr. Blosch's address is 2081 S.Lakeline Drive, Salt Lake City, UT 84109.

(3) Includes 125,000 shares of Common Stock held directly by Mr. Holmes and
250,000 shares of Common Stock held by Blosch & Holmes, L.L.C. of which Mr.
Holmes is a principal (and which 250,000 shares are also reported as
beneficially owned by Mr. Blosch and Blosch & Holmes, L.L.C.).  Mr. Holmes'
address is 8555 E. Voltaire Ave., Scottsdale, AZ 85260.

(4) Includes 250,000 shares of Common Stock held by Blosch & Holmes, L.L.C. of
which Messrs. Blosch and Holmes are principals (and which 250,000 shares are
also separately reported as beneficially owned by Mr. Holmes and Mr. Blosch).
The address for Blosch & Holmes, L.L.C. is 2081 S. Lakeline Drive, Salt Lake
City, UT 84109.

(5) Chief Executive Officer,  President and Chairman of ZEVEX.  Includes 258,000
shares of Common Stock held  directly,  51,150  shares of Common Stock  issuable
upon exercise of options held by Mr. Constantine that are currently  exercisable
or will become  exercisable within 60 days, and 230 shares of Common Stock owned
by his dependent  child.  Excludes  61,250 shares of Common Stock  issuable upon
exercise of options held by Mr.  Constantine that are not currently  exercisable
and will not become exercisable within 60 days.

(6) Executive Vice President and director of ZEVEX.  Includes  240,198 shares of
Common Stock held  directly  and 51,150  shares of Common  Stock  issuable  upon
exercise of options held by Mr.  McNally that are currently  exercisable or will
become  exercisable  within 60 days.  Excludes  61,250  shares  of Common  Stock
issuable  upon  exercise of options held by Mr.  McNally that are not  currently
exercisable and will not become exercisable within 60 days.

(7) Chief  Financial  Officer,  Secretary,  Treasurer,  and  director  of ZEVEX.
Includes  149,400  shares of Common  Stock held  directly  and 51,150  shares of
Common Stock  issuable  upon  exercise of options held by Mr.  McStotts that are
currently exercisable or will become exercisable within 60 days. Excludes 61,250
shares of Common Stock  issuable upon  exercise of options held by Mr.  McStotts
that are not currently  exercisable  and will not become  exercisable  within 60
days.

(8) Vice President  Sales and Marketing,  and director of ZEVEX.  Includes 9,200
shares of Common Stock held directly and 10,000 shares of Common Stock  issuable
upon  exercise of options held by Mr. Smith that are  currently  exercisable  or
will become exercisable  within 60 days.  Excludes 30,000 shares of Common Stock
issuable  upon  exercise  of options  held by Mr.  Smith that are not  currently
exercisable and will not become exercisable within 60 days.

(9) Director.  Includes  15,000 shares of Common Stock issuable upon exercise of
options that are  currently  exercisable  or will become  exercisable  within 60
days.  Excludes  7,000 shares of Common Stock  issuable upon exercise of options
held by Mr.  Oldroyd  that are not  currently  exercisable  and will not  become
exercisable within 60 days.

(10)  Director.  Includes  480 shares of Common  Stock held  directly and 12,000
shares of Common Stock  issuable  upon  exercise of options  that are  currently
exercisable or will become exercisable within 60 days.  Excludes 6,000 shares of
Common  Stock  issuable  upon  exercise of options held by Ms. Gill that are not
currently exercisable and will not become exercisable within 60 days.

SECTION 16(a) BENEFICIAL REPORTING COMPLIANCE

Section 16(a) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act"),  requires ZEVEX' directors,  executive officers,  and 10% shareholders to
file with the Securities and Exchange  Commission  initial  reports of ownership
and reports of changes in ownership of Common Stock. Based solely on a review of
the copies of such reports furnished to ZEVEX and written  representations  that
no other reports were  required,  ZEVEX believes that during 1999 all directors,
executive  officers,  and 10%  shareholders  complied on a timely basis with all
applicable filing  requirements  under Section 16(a) of the Exchange Act, except
as follows:  Leonard Smith filed one late report on Form 4, due in October 1999,
for one  transaction  regarding  the purchase of common shares of the Company in
September 1999.  Messrs.  Constantine,  McNally and McStotts each filed one late
report on Form 4, for the grant of Company options to purchase common stock.

CONTROL ARRANGEMENTS

Pursuant to a Stock  Purchase  Agreement,  dated December 31, 1996 between ZEVEX
and  Blosch & Holmes,  L.L.C.,  a Utah  limited  liability  company  ("Blosch  &
Holmes"),  as amended on September  30,  1997,  Blosch & Holmes has the right to
appoint one member of ZEVEX' board of directors, provided that such nominee must
be acceptable to ZEVEX. Kirk Blosch and Jeff W. Holmes,  principal  shareholders
of ZEVEX, are the two member/managers of Blosch & Holmes. The right to appoint a
member of ZEVEX' board of directors expires when Blosch & Holmes,  together with
Kirk  Blosch  and Jeff W.  Holmes,  no longer  holds at least 6.5% of the voting
stock of ZEVEX.  Blosch & Holmes have exercised this right with the  appointment
of Mr. Blosch to the board in June 1998.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On May 31, 1999, ZEVEX repurchased 470,000 outstanding Common Stock Warrants for
$1,175,000,  of which  350,000 of the Common  Stock  Warrants  were held by Kirk
Blosch and Jeff W. Holmes, two of ZEVEX' principal shareholders.

On April 15, 1997, ZEVEX  International  entered into a consulting contract with
DMG Advisors,  L.L.C., a Nevada limited liability  company ("DMG").  Kirk Blosch
and Jeff W.  Holmes,  two of ZEVEX'  principal  shareholders,  are  members  and
managers of DMG.  Under the consulting  contract,  ZEVEX  International  paid an
initial fee of $50,000 and is paying $10,000 per month for a two year period, in
exchange for the consulting services of DMG in the nature of strategic planning,
public  relations,  advice  regarding  financings,  and the  identification  and
evaluation of potential acquisitions of new products or companies.

This agreement expired in April 1999.

Please also refer to the description of Mr. Leonard Smith's employment agreement
in Item 11 and his involvement with the Company's acquisition of JTech described
in Item 7.

                                     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 ZEVEX' for the years ended
December  31,  1999  and  1998,  and  the  related  consolidated  statements  of
operations,  stockholders'  equity and cash flows for each of the three years in
the period ended December 31, 1999, are filed as part of this report:

Report of Ernst & Young LLP, Independent Auditors

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Consolidated Statements of Stockholders' Equity

Notes to Consolidated Financial Statements

         (2) - Financial Statement Schedules.

Not required in accordance with the applicable rules and regulations.

         (3) - Exhibits

A list of  exhibits  required to be filed as part of this report is set forth in
the  Index  to  Exhibits,  which  immediately  precedes  such  exhibits,  and is
incorporated herein by reference.

(b) No reports on Form 8-K were filed  during the  quarter  ended  December  31,
1999.


<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                                     ZEVEX INTERNATIONAL, INC.

Dated:  March 29, 2000                               By: /s/ DEAN G. CONSTANTINE
                                                     Dean G. Constantine
                                                     Chief Executive Officer

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

                                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.
<TABLE>
<CAPTION>
<S>                         <C>             <C>                       <C>         <C>

  Signature                                 Title                           Date

/s/ DEAN G. CONSTANTINE    Chairman of the Board of Directors,         March 29, 2000
Dean G. Constantine        Chief Executive Officer, and President
                           (Principal Executive Officer)

/s/ DAVID J. MCNALLY       Director, Executive Vice President,         March 29, 2000
David J. McNally

/s/ PHILLIP L. McSTOTTS    Director, Chief Financial Officer,          March 29, 2000
Phillip L. McStotts        Secretary, and Treasurer (Principal
                           Financial and Accounting Officer)

/s/ LEONARD C. SMITH       Director, V. Pres. Sales and Marketing,     March 29, 2000
Leonard C. Smith

/s/ BRADLY A. OLDROYD      Director                                    March 29, 2000
Bradly A. Oldroyd

/s/ DARLA R. GILL          Director                                    March 29, 2000
Darla R. Gill

/s/ KIRK BLOSCH            Director                                    March 29, 2000
Kirk Blosch
</TABLE>


<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              Revolving Line of Credit Agreement between Bank One and ZEVEX
                  International, Inc.,dated September 29, 1997 (1).
10.2              Amendment to Revolving Line of Credit Agreement between Bank
                  One and ZEVEX International, Inc., dated December 31,1997 (2).

10.3              Stock Purchase Agreement between Blosch & Holmes, LLC and
                  ZEVEX International, Inc., dated December 1, 1996, including
                  one amendment dated September 30, 1997 (1).
10.4              Registration Rights Agreement among Kirk Blosch, Jeff W.
                  Holmes and ZEVEX International, Inc., dated February 1,
                  1998 (2).

10.5#             ZEVEX International, Inc., Amended 1993 Stock Option Plan (3).
10.6              Industrial Development Bond Offering Memorandum, dated October
                  30, 1996 (4).
10.7              Industrial Development Bond Reimbursement Agreement, dated
                  October 30, 1996 (4).
10.8              Warrant to Purchase 50,000 shares of Common Stock issued to
                  Wedbush Morgan Securities, Inc., dated November 20, 1997(2).

10.9              Warrant to Purchase 50,000 shares of Common Stock issued to
                  Everen Securities, Inc., dated November 20, 1997 (2).
10.10             Warrant to Purchase 500,000 shares of Common Stock originally
                  issued to Blosch & Holmes, LLC, dated February 12, 1997 (2).

10.11             Description of Property Acquisition, dated March 4, 1998 (2).
10.12             Quit-Claim Deed for purchase of 3.47 acres of land, dated
                  March 4, 1998 (2).
10.13             Stock Purchase Agreement, dated December 31, 1998, between
                  ZEVEX International, Inc., and Vijay Lumba (5).
10.14             Stock Purchase Agreement, dated December 31, 1998, among ZEVEX
                  International, Inc., Leonard Smith, Tracy Livingston,
                  David Bernardi, and Corporation of the President of the Church
                  of Jesus Christ of Latter Day Saints   (5).
10.15             Convertible Debenture, dated January 6, 1999, issued to Vijay
                  Lumba (6).
10.16             Convertible Debenture, dated January 6, 1999, issued to
                  Leonard Smith (6).
10.17             Convertible Debenture, dated January 6, 1999, issued to Tracy
                  Livingston (6).
10.18             Convertible Debenture, dated January 6, 1999, issued to David
                  Bernardi (6).
10.19#            ZEVEX International, Inc., 1999 Stock Option Plan and Form of
                  Stock Option Grant (6).
10.20             Form of January 1, 1999, Stock Option Grant to Messrs.
                  Constantine, McNally, McStotts.
10.21             Asset Purchase Agreement, dated March 29, 2000, between ZEVEX,
                  Inc. and Nestle USA, Inc.
21                List of Subsidiaries.
27                Financial Data Schedule.

(1)      Incorporated by reference to Amendment No. 1 on Registration Statement
on Form S-1 filed October 24, 1997 (File No. 333-37189).

(2)      Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 (File No. 001-12965).

(3)      Incorporated by reference to Registration Statement on Form S-1 filed
October 3, 1997 (File No. 001-12965).

(4)      Incorporated by reference to the Company's amended Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996 (File No. 033-19583).

(5)      Incorporated by reference to the Company's Current Report on Form 8-K
filed January 14, 1999 (File No. 001-12965).

(6)      Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998 (File No. 001-12965).

# Identifies a "management contract or compensatory plan or arrangement".

<PAGE>

                                      Consolidated Financial Statements

                                     ZEVEX International, Inc.

                                   Years ended December 31, 1999, 1998 and 1997
                                   with Independent Auditors' Reports



<PAGE>




                          Independent Auditors' Report

Board of Directors and Stockholders
ZEVEX International, Inc.

We  have  audited  the  accompanying   consolidated   balance  sheets  of  ZEVEX
International,  Inc. and its  subsidiaries  as of December 31, 1999 and 1998 and
the related  consolidated  statements of operations,  stockholders'  equity, and
cash flows for each of the three years in the period  ended  December  31, 1999.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to  obtain  reasonable  assurance  about  whether  the  consolidated   financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated  financial position of ZEVEX
International,  Inc. and its  subsidiaries as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999 in conformity with  accounting  principles
generally accepted in the United States.

February 25, 2000, except for Note 15, as to
     which the date is March 29, 2000


<PAGE>



                            ZEVEX International, Inc.

                           Consolidated Balance Sheets
<TABLE>
<CAPTION>
<S>                                                                    <C>         <C>         <C>     <C>
                                                                                   December 31
                                                                             1999              1998
                                                                       ------------------------------------
Assets
Current assets:

   Cash and cash equivalents                                              $   3,383,544    $   7,960,511
   Cash restricted for sinking fund payment on industrial
     development bond                                                            86,549          182,049
   Accounts receivable, net of allowance for doubtful
     accounts of $175,000 in 1999 and $138,000 in 1998                        5,843,229        3,435,181
   Inventories                                                                5,119,291        5,574,394
   Marketable securities                                                      3,224,817        1,598,032
   Deferred income taxes                                                              -          198,993
   Prepaid expenses                                                              33,554           65,561
   Other current assets                                                          26,859                -
                                                                       ------------------------------------
                                                                       ------------------------------------
Total current assets                                                         17,717,843       19,014,721

Property and equipment, net                                                   5,333,577        5,505,643
Patents, trademarks, and acquisition costs, net                                 349,354          371,038
Goodwill, net                                                                10,642,304        8,780,621
Other assets                                                                      6,611           38,698
                                                                       ------------------------------------
                                                                          $  34,049,689    $  33,710,721
                                                                       ====================================

Liabilities and stockholders' equity Current liabilities:

   Accounts payable                                                       $   1,134,946    $   1,076,110
   Accrued liabilities                                                          731,852          469,079
   Income taxes payable                                                         957,309           50,891
   Bank line of credit                                                        1,613,453          541,993
   Current portion of long-term debt                                          1,234,483        5,042,000
   Deferred income taxes                                                        110,276                -
   Other                                                                              -          215,873
                                                                       ------------------------------------
Total current liabilities                                                     5,782,319        7,395,946

Deferred income taxes                                                             6,648           46,970
Industrial development bond                                                   1,700,000        1,800,000
Convertible debt, long-term portion                                           5,470,000        4,350,000
Other long-term liabilities                                                           -            3,270

Stockholders' equity:
   Common stock, $.001 par value: 10,000,000 shares
     authorized; 3,420,726 and 3,418,876 shares issued
     and outstanding in 1999 and 1998, respectively                               3,421            3,419
   Additional paid in capital                                                16,212,966       17,381,793
   Retained earnings                                                          4,542,851        2,927,422
   Treasury stock, at cost                                                            -          (50,790)
   Unrealized gain (loss) on available-for-sale
     securities, net of tax (expense) benefit of
     $(197,199) and $87,633 in 1999 and 1998, respectively                      331,484         (147,309)
                                                                       ------------------------------------
Total stockholders' equity                                                   21,090,722       20,114,535
                                                                       ------------------------------------
                                                                          $  34,049,689    $  33,710,721
                                                                       ====================================
</TABLE>


See accompanying notes.


<PAGE>



                            ZEVEX International, Inc.

                      Consolidated Statements of Operations
<TABLE>
<CAPTION>
<S>                                                       <C>            <C>                       <C>      <C>

                                                                         Year ended December 31
                                                          -----------------------------------------------------
                                                                 1999             1998             1997
                                                          -----------------------------------------------------
Revenues:
   Product sales                                              $21,070,153       $10,475,256     $  8,176,155
   Engineering services                                         1,956,055           609,157          792,270
                                                          -----------------------------------------------------
                                                               23,026,208        11,084,413        8,968,425

   Cost of sales                                               12,474,210         6,846,443        4,757,057
                                                          -----------------------------------------------------
Gross profit                                                   10,551,998         4,237,970        4,211,368

Operating expenses:
   General and administrative                                   4,357,273         2,609,763        1,738,375
   Selling and marketing                                        2,238,629         1,269,645          742,715
   Research and development                                       670,886           290,669          702,563
   Goodwill amortization                                          392,142                 -                -
                                                          -----------------------------------------------------
                                                                7,658,930         4,170,077        3,183,653
                                                          -----------------------------------------------------

Operating income                                                2,893,068            67,893        1,027,715

Other income (expense):
   Interest income                                                235,148           567,991          125,315
   Interest expense                                              (481,615)          (92,152)         (78,179)
   Unrealized gain (loss) on marketable securities                167,761           (68,370)               -
                                                          -----------------------------------------------------
Income before provision for income taxes                        2,814,362           475,362        1,074,851

Provision for income taxes                                      1,187,989          (113,169)        (356,609)
                                                          -----------------------------------------------------

Net income                                                    $ 1,626,373     $     362,193    $     718,242
                                                          =====================================================

Basic net income per common share                         $            .48  $             .11  $         .34
                                                          =====================================================

Diluted net income per common share                       $            .47  $             .10  $         .29
                                                          =====================================================
</TABLE>

  See accompanying notes.


<PAGE>



                            ZEVEX International, Inc.

                 Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
<S>                                  <C>                     <C>          <C>         <C>       <C>                     <C>
                                                                                                 Unrealized
                                                                                                 Gain (Loss)

                                                              Additional                         on Available-
                                                                                                   for-Sale

                                          Common Stock         Paid-in     Retained    Treasury
                                    -------------------------
                                      Shares       Amount      Capital     Earnings      Stock     Securities       Total
                                    -----------------------------------------------------------------------------------------

Balances at December 31, 1996        1,495,716     $1,496    $  1,852,966  $1,846,987         -                 $  3,701,449
   Issuance of common stock for      1,700,000      1,700      14,592,681           -         -            -      14,594,381
     cash

   Exercise of stock options for        44,610         45          70,580           -         -            -          70,625
     cash

   Exercise of warrants for cash        24,000         24         179,976           -         -            -         180,000
   Issuance of warrants to
     purchase 100,000 shares of
     common stock for cash                   -          -           1,000           -         -            -           1,000
   Net income                                -          -               -     718,242         -            -         718,242
                                    -----------------------------------------------------------------------------------------
Balances at December 31, 1997        3,264,326      3,265      16,697,203   2,565,229         -            -      19,265,697

   Comprehensive income:
     Net income                              -          -               -     362,193         -            -         362,193
     Other comprehensive income,
        net of tax:
          Unrealized loss on
            available-for-sale

            securities                       -          -               -           -         -     (147,309)       (147,309)
                                                                                                                -------------
   Total comprehensive income                                                                                        214,884

   Exercise of stock options for         9,550          9          33,485           -         -            -          33,494
     cash

   Exercise of warrants for cash        30,000         30         104,970           -         -            -         105,000
   Issuance of common stock for
     product line acquisition          115,000        115         546,135           -         -            -         546,250
   Purchase of 6,700 shares of
     treasury stock                          -          -               -           -   (50,790)           -         (50,790)
                                    -----------------------------------------------------------------------------------------
Balances at December 31, 1998        3,418,876      3,419      17,381,793   2,927,422   (50,790)    (147,309)     20,114,535

   Comprehensive income:
     Net income                              -          -               -   1,626,373         -            -       1,626,373
     Other comprehensive income,
        net of tax:
          Unrealized gain on
            available-for-sale

            securities                       -          -               -           -         -      478,793         478,793
                                                                                                                -------------
   Total comprehensive income                                                                                      2,105,166

   Exercise of stock options for         1,850          2           6,173           -         -            -           6,175
     cash

   Purchase of warrants for cash             -          -      (1,175,000)          -         -            -      (1,175,000)
   Purchase of 10,000 shares of
     treasury stock                          -          -               -           -   (45,731)           -         (45,731)
   Transfer of 16,700 shares of
     treasury stock to ESOP                  -          -               -     (10,944)   96,521            -          85,577
                                    -----------------------------------------------------------------------------------------
Balances at December 31, 1999        3,420,726     $3,421     $16,212,966  $4,542,851 $             $331,484     $21,090,722
                                                                                              -
                                    =========================================================================================
</TABLE>

See accompanying notes.


<PAGE>



                            ZEVEX International, Inc.

                      Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
<S>                                                       <C>       <C>        <C>           <C>     <C>


                                                                     Year ended December 31,
                                                          -----------------------------------------------
                                                               1999            1998           1997
                                                          -----------------------------------------------
 Cash flows from operating activities
 Net income                                                 $ 1,626,373    $   362,193     $   718,242
 Adjustments to reconcile net income to net cash provided
   by (used in) operating activities:
      Depreciation and amortization expense                   1,157,221        471,752         284,174
      Provision (benefit) for deferred income taxes             (15,885)      (136,473)        (35,762)
      Realized gain on marketable securities                    (65,816)             -               -
      Unrealized (gain) loss on trading marketable                                                   -
        securities                                             (167,761)        68,370
      Changes in operating assets and liabilities, net of
        acquisitions:
        Increase (decrease) in restricted cash for
          sinking fund payment on industrial development         95,500       (105,885)        (76,164)
          bond

        Increase in accounts receivable                      (2,408,048)      (989,046)       (665,934)
        Decrease in trading securities                           80,623              -               -
        Decrease (increase) in inventories                      455,103     (1,612,638)     (2,196,294)
        Decrease (increase) in prepaid expenses                  32,007         12,411         (20,499)
        Decrease (increase) in other assets                       5,228        (46,539)          2,734
        Increase in accounts payable                             58,836        260,235         301,556
        Increase in accrued liabilities and other                43,630        112,384          75,606
        Increase (decrease) in income taxes payable             906,418       (234,512)        285,403
                                                          -----------------------------------------------
 Net cash flows provided by (used in) operating activities    1,803,429     (1,837,748)     (1,326,938)

 Cash flows from investing activities
 Purchase of property and equipment                            (566,958)    (1,185,805)     (3,004,926)
 Purchase of businesses, net of cash acquired                         -     (9,480,313)              -
 Purchases of available-for-sale marketable securities       (1,827,150)    (1,698,235)    (10,200,000)
 Redemption of available-for-sale marketable securities       1,116,944     10,200,000               -
 Addition of patents and trademarks                              (4,370)       (27,511)        (78,663)
                                                          -----------------------------------------------
 Net cash flows used in investing activities                 (1,281,534)    (2,191,864)    (13,283,589)

 Cash flows from financing activities
 Proceeds from issuance of common stock                               -              -      14,594,381
 Proceeds from exercise of warrants                                   -        105,000         180,000
 Repurchase of common stock warrants                         (1,175,000)             -               -
 Proceeds from exercise of stock options                          6,175         33,494          70,625
 Proceeds from sale of 100,000 warrants                               -              -           1,000
 Issuance of debt related to business acquisitions                    -      9,300,000               -
 Net proceeds from (repayments of) bank line of credit        1,071,460        441,993         (60,108)
 Stock contribution to Employee Stock Ownership Plan             85,577              -               -
 Purchase of treasury stock                                     (45,731)       (50,790)              -
 Payment on debt from business acquisition                   (4,941,343)             -               -
 Payments on industrial development bond                       (100,000)      (100,000)              -
                                                          -----------------------------------------------
 Net cash flows (used in) provided by financing activities   (5,098,862)     9,729,697      14,785,898
                                                          -----------------------------------------------
 Net (decrease) increase in cash and cash equivalents        (4,576,967)     5,700,085         175,371
 Cash and cash equivalents at beginning of year               7,960,511      2,260,426       2,085,055
                                                          -----------------------------------------------
 Cash and cash equivalents at end of year                   $3,383,544     $ 7,960,511     $ 2,260,426
                                                          ===============================================

</TABLE>

See accompanying notes


<PAGE>

1. Summary of Significant Accounting Policies

Description of Organization and Business

The Company was  incorporated  under the laws of the State of Nevada on December
30, 1987. The Company was originally incorporated as Downey Industries, Inc. and
changed its name to ZEVEX  International,  Inc. on August 15, 1988.  In November
1997 the Company  reincorporated  into  Delaware.  In December 1998, the Company
acquired  an  additional  product  line and  completed  the  acquisition  of two
additional  subsidiaries  (See Note 2). The Company and its subsidiaries  design
and manufacture  advanced medical devices,  including  surgical systems,  device
components,  and sensors for medical and industrial  technology  companies.  The
Company and its  subsidiaries  also  design,  manufacture,  and market their own
medical devices using its  proprietary  technologies.  The Company's  design and
manufacturing  service  customers are primarily  medical  technology  companies,
which sell the Company's systems and devices under private labels or incorporate
the Company's devices into their products.

Principles of Consolidation

The consolidated  financial statements at December 31, 1999 include the accounts
of  ZEVEX   International,   Inc.  (Company)  and  its  wholly-owned   operating
subsidiaries ZEVEX, Inc., Aborn Electronics, Inc., and JTech Medical Industries,
Inc. The  consolidated  statement of operations for 1998 excludes the results of
Aborn and JTech,  because these two acquisitions were consummated as of December
31, 1998.  All  significant  intercompany  balances and  transactions  have been
eliminated in consolidation.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year
presentation.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Actual results could differ from those estimates.

Cash and Cash Equivalents

The  Company  considers  all  certificates  of deposit  and highly  liquid  debt
instruments  with a maturity of three  months or less when  purchased to be cash
equivalents.

Concentration of Credit Risk

The Company's financial instruments consist primarily of cash, cash equivalents,
marketable securities, trade accounts receivable and certain debt issuances (see
Note 8).  Cash and cash  equivalents  are held in  federally  insured  financial
institutions  or invested in high grade  short-term  commercial  paper issued by
major United States corporations.  Marketable  securities consist principally of
corporate stocks and high grade corporate and municipal bonds. The Company sells
its products primarily to, and has trade receivables with,  independent  durable
medical equipment manufacturers and dealers in the United States and abroad. The
Company's customers  accounting for more than 10% of net product sales were one,
three,  and  four for the  years  ended  December  31,  1999,  1998,  and  1997,
respectively. Less than 10% of product sales are to foreign customers.

1. Summary of Significant Accounting Policies (continued)

Concentration of Credit Risk (continued)

As a  general  policy,  collateral  is not  required  for  accounts  receivable;
however,  the  Company  periodically  monitors  the  need for an  allowance  for
doubtful  accounts based upon expected  collections  of accounts  receivable and
specific  identification  of uncollectible  accounts.  Additionally,  customers'
financial  condition and credit worthiness are regularly  evaluated.  Historical
losses have not been material.

Inventories

Inventories are stated at the lower of cost or market;  cost is determined using
the first-in, first-out method.

Marketable Securities

The  Company's   short-term   investments  are  comprised  of  debt  and  equity
securities,  all classified as either trading or available-for-sale  securities,
which are carried at their fair value based upon quoted  market  prices of those
investments  at  December  31,  1999 and 1998.  Unrealized  gains or losses  for
trading  securities  are  included  in  income.  Unrealized  gains and losses on
available-for-sale  securities are reported, net of tax, in a separate component
of stockholders'  equity. The amortized cost of debt securities in this category
is adjusted for amortization of premiums and accretion of discounts to maturity.
Such  amortization is included in investment  income.  Realized gains and losses
and declines in value judged to be  other-than-temporary  on  available-for-sale
securities  are included in investment  income.  The cost of securities  sold is
based  on  the  specific   identification  method.  Interest  and  dividends  on
securities classified as available-for-sale are included in investment income.

Net  unrealized  holding gains  (losses) on trading  securities  for the periods
ending December 31, 1999 and 1998 of $167,761 and ($68,370),  respectively,  are
included in net income; and, net unrealized holding gains on  available-for-sale
securities for the period ending December 31, 1999 of $528,683  ($331,484 net of
taxes) and net unrealized holding losses for the period ending December 31, 1998
of $234,942 ($147,309 net of taxes), are included in stockholders' equity.

Property and Equipment

Property  and  equipment  are  stated  at cost  less  accumulated  depreciation.
Depreciation  is provided  over  expected  useful lives of three to  twenty-five
years using the straight-line method.  Leasehold improvements are amortized on a
straight-line  basis  over  the  lesser  of the  remaining  lease  term or their
estimated useful lives.

Major replacements,  which extend the useful lives of equipment, are capitalized
and depreciated  over the remaining useful life.  Normal  maintenance and repair
items are charged to costs and expenses as incurred.

Patents, Trademarks, and Acquisition Costs

Acquisition costs and the costs of acquired and internally developed patents and
trademarks  are  amortized  over the  lesser of fifteen  years or the  estimated
useful life of the  intangible  asset on a  straight-line  basis.  For the years
ended December 31, 1999 and 1998,  accumulated  amortization related to patents,
trademarks, and acquisition costs of $43,493 and $17,439, respectively, has been
recorded by the Company.  The Company periodically reviews the recoverability of
its intangible assets as well as other long-term assets and, where impairment in
value has occurred, such intangibles are written down to net realizable value.

1. Summary of Significant Accounting Policies (continued)

Goodwill

Goodwill  is recorded  at the lower of cost or its net  realizable  value and is
being  amortized on a  straight-line  basis over 15 to 23 years. At December 31,
1998,  no  accumulated   amortization  for  goodwill  was  recorded,  since  the
acquisitions giving rise to the goodwill were consummated December 31, 1998 (see
Note 2). For the year ended December 31, 1999, the Company recorded  $392,142 of
goodwill  amortization.  The Company  periodically reviews the recoverability of
these intangible assets in order to record them at their net realizable value.

Impairment of Long-Lived Assets

In accordance with Statement of Financial  Accounting  Standards (SFAS) No. 121,
"Accounting  for the  Impairment  of  Long-Lived  Assets to be Disposed Of," the
Company assesses on an ongoing basis the  recoverability  of long-lived  assets,
comparing  estimates  of future  undiscounted  cash flows to net book value.  If
future  undiscounted cash flow estimates were less than net book value, net book
value  would be reduced to fair value  based on  estimates  of  discounted  cash
flows.  The Company also  evaluates  amortization  periods of assets,  including
goodwill and other  intangible  costs,  to determine if events or  circumstances
warrant revised estimates of useful lives.

Income Taxes

The Company  provides  for income  taxes based on the  liability  method,  which
requires recognition of deferred tax assets and liabilities based on differences
between  financial  reporting and tax bases of assets and  liabilities  measured
using  enacted  tax rates and laws that are  expected  to be in effect  when the
differences are expected to reverse.

Stock Options

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25) and related Interpretations in
accounting for its employee  stock options rather than adopting the  alternative
fair value  accounting  provided for under  Statement  of  Financial  Accounting
Standards (SFAS) No. 123, Accounting for Stock-based Compensation. Under APB 25,
because the exercise  price of the  Company's  stock  options  equals the market
price of the underlying  stock on the date of grant, no compensation  expense is
recognized.

Revenue Recognition

The  Company  records  revenue  from  the  sale of  manufactured  products  upon
shipment.  Revenue  from  contracts  to perform  engineering  design and product
development services are generally recognized as milestones are achieved;  costs
are expensed as incurred.

New Accounting Pronouncements

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) 101, Revenue Recognition in Financial  Statements.  The effective
date of SAB 101 is the second  quarter of the fiscal year ending after  December
15, 1999. The SAB clarifies proper methods of revenue  recognition given certain
circumstances surrounding sales transactions.  The Company continues to evaluate
the impact of SAB 101, but believes it is in compliance  with the  provisions of
the SAB and  accordingly,  does not expect SAB 101 to have a material  effect on
its financial statements.

1.       Summary of Significant Accounting Policies (continued)

Advertising Costs

Advertising  costs are  expensed  during  the year in which  they are  incurred.
Advertising expenses were $284,452, $137,627, and $82,530,  respectively for the
years ended December 31, 1999, 1998 and 1997.

Net Income Per Common Share

Basic net income per common share is  calculated  by dividing net income for the
period  by  the   weighted-average   number  of  the  Company's   common  shares
outstanding.

Diluted net income per common share  includes  the  dilutive  effect of options,
convertible  debentures  and  warrants  in the  weighted-average  number  of the
Company's  common  shares  outstanding  as calculated  using the treasury  stock
method.

Net income as presented on the statements of operations represents the numerator
used in calculating basic and diluted net income per common share. The following
table sets forth the  computation  of the shares used in  determining  basic and
diluted net income per common share:
<TABLE>
<CAPTION>
<S>                                                              <C>              <C>            <C>     <C>

(in thousands)                                                       1999            1998           1997
                                                                  -----------     -----------    ------------
Denominator for basic net income per common share -
   weighted average shares                                           3,413           3,298          2,098
Dilutive securities: warrants and stock options                         25             428            345
                                                                  -----------     -----------    ------------
Denominator for diluted net income per common share -
   adjusted weighted average shares                                  3,438           3,726          2,443
                                                                  ===========     ===========    ============
</TABLE>


Options,  convertible debentures and warrants to purchase approximately 597,000,
495,000,  and 312,000  shares of common stock were  outstanding  at December 31,
1999, 1998, and 1997, respectively,  but were not included in the computation of
diluted earnings per share because they were anti-dilutive.

All shares  held in the  Company's  Employee  Stock  Ownership  Plan  (ESOP) are
considered   outstanding   for  both  basic  and  diluted   earnings  per  share
calculations.

Supplemental Cash Flow Information

 Supplemental disclosures of cash flow information were as follows:
<TABLE>
<CAPTION>
<S>                                                       <C>                  <C>            <C>     <C>

                                                               1999            1998           1997
                                                          -----------------------------------------------
 Cash paid during the year for:

    Interest                                                $   402,191    $    92,887     $    77,641
    Income taxes                                                263,279        481,589          71,206

 Schedule of non cash financing activities:
    Issuance of common stock for acquisition
      of Nutrition Medical product line                               -        546,250               -
    Issuance of convertible debentures for earn-out
      provisions relating to prior year acquisitions          2,253,826
</TABLE>


2. Acquisitions

On December 23,  1998,  the Company  acquired a product line of enteral  feeding
pumps from Nutrition Medical,  Inc. to complement its own existing product line.
The  aggregate  purchase  price of  $1,072,469  was paid in cash of $500,000 and
115,000 shares of the Company's  common stock. In addition,  Nutrition  Medical,
Inc. entered into a noncompete agreement. The acquisition has been accounted for
as a purchase.

On December 31,  1998,  the Company  acquired all of the issued and  outstanding
capital  stock of Aborn  Electronics,  Inc.  (Aborn),  a California  corporation
engaged in designing, developing and manufacturing optical sensor components for
medical and industrial applications.  These components are incorporated into the
end products of Aborn's design and manufacturing  service  customers,  which are
primarily  medical  products and electronic  products  companies.  The aggregate
purchase  price of $5,100,000  was paid in cash of $1,850,000  and a 7% interest
bearing convertible debenture of $1,350,000. The purchase price also included an
earn-out provision that provides additional consideration, not to exceed cash of
$950,000 and a convertible  debenture of $950,000,  which is triggered  based on
Aborn achieving  certain levels of revenue and pretax income for the year ending
December 31, 1999. Based on the earn-out formula, additional consideration equal
to the full  $1,900,000  has been earned and was  recorded as an  adjustment  to
goodwill at December 31, 1999. The convertible  debentures are convertible  into
ZEVEX common stock at $11 per share between one to three years from the issuance
dates. The acquisition has been accounted for as a purchase.

On December 31,  1998,  the Company  acquired all of the issued and  outstanding
capital stock of JTech Medical  Industries,  Inc.  (JTech),  a Utah  corporation
engaged in designing,  developing and manufacturing advanced medical devices for
use  in  several   medical   specialties,   including   occupational   medicine,
orthopedics,  physical  medicine  and  rehabilitation,   chiropractic,  physical
therapy,  neurology,   podiatry  and  athletic  training.  JTech  also  provides
educational  products and services,  such as in-office training,  seminars,  and
multimedia disks. The aggregate purchase price of $7,250,000 was paid in cash of
$3,100,000 and a 8% interest bearing  convertible  debenture of $3,000,000.  The
purchase price also included  earn-out  provisions  over the following two years
that provide additional consideration, not to exceed, in total, cash of $575,000
and a  convertible  debenture of $575,000,  which are  triggered  based on JTech
achieving  certain  levels of revenue and pretax  income.  Based on the earn-out
formula,  additional  consideration  equal to  approximately  $350,000  has been
earned for the year ended December 31, 1999 and was recorded as an adjustment to
goodwill at that date.

The convertible  debentures are  convertible  into common stock at $11 per share
between one to three years from the issuance  dates.  The  acquisition  has been
accounted for as a purchase.

The unaudited pro forma results of  operations  assuming  consummation  of these
acquisitions as of January 1, 1997 are as follows:
<TABLE>
<CAPTION>
<S>                                                  <C>                        <C>       <C>
                                                            1998                1997
                                                     ----------------------------------------

Revenues                                               $    15,131,000    $    13,049,000
Net income                                                     461,000            894,000

Basic net income per common share                      $             .14  $             .43
Diluted net income per common share                    $             .12  $             .37
                                                     ========================================
</TABLE>



3. Inventories

Inventories consist of the following at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
<S>                                                   <C>                       <C>       <C>

                                                             1999               1998
                                                      ---------------------------------------

Materials                                               $     2,228,174     $    3,156,276
Work in Progress                                              1,867,894          1,831,112
Finished goods, including completed subassemblies
                                                              1,023,223            587,006
                                                      ---------------------------------------
                                                        $     5,119,291     $    5,574,394
                                                      =======================================
</TABLE>

4. Marketable Securities

The following is a summary of marketable securities at December 31, 1999:
<TABLE>
<CAPTION>
<S>                              <C>              <C>              <C>                <C>         <C>

                                                        Gross       Gross Unrealized  Estimated Fair
                                                     Unrealized

                                       Cost             Gains            Losses            Value
                                 ----------------- ---------------- ----------------- ----------------
Available for Sale

U.S. corporate securities           $   254,817        $         -     $          -      $   254,817
Equity securities                     2,138,817          528,683                   -       2,667,500
                                 ----------------- ---------------- ----------------- ----------------
                                      2,393,634          528,683                   -       2,922,317
Trading

Equity Securities                             -          302,500                   -         302,500
                                 ----------------- ---------------- ----------------- ----------------
Total Marketable Securities          $2,393,634        $831,183        $          -       $3,224,817
                                 ================= ================ ================= ================

The following is a summary of marketable securities at December 31, 1998:

                                                        Gross       Gross Unrealized  Estimated Fair
                                                     Unrealized

                                       Cost             Gains            Losses            Value
                                 ----------------- ---------------- ----------------- ----------------
Available for Sale

U.S. corporate securities         $   1,209,235        $         -     $          -      $ 1,209,235
Equity securities                       489,000                           234,942            254,058
                                                   -
                                 ----------------- ---------------- ----------------- ----------------
                                      1,698,235                           234,942          1,463,293
                                                   -
Trading

Equity Securities                               -        134,739                  -          134,739
                                 ----------------- ---------------- ----------------- ----------------
Total Marketable Securities       $   1,698,235        $ 134,739       $ 234,942         $ 1,598,032
                                 ================= ================ ================= ================
</TABLE>


The  amortized  cost and  estimated  fair  value of debt and  marketable  equity
securities,  by contractual maturity,  are shown below. Expected maturities will
differ from  contractual  maturities  because the issuers of the  securities may
have the right to prepay obligations without prepayment penalties.

4. Marketable Securities (continued)
<TABLE>
<CAPTION>
<S>                             <C>                <C>               <C>               <C>           <C>

                                December 31, 1999                 December 31, 1998
                                                      Estimated                          Estimated
                                      Cost           Fair Value            Cost          Fair Value
                                ------------------ ----------------  ----------------- -----------------
U.S. corporate securities:
   Due within 1 year               $   254,817        $   254,817       $ 1,209,235     $ 1,209,235
Equity securities                    2,138,817          2,970,000           489,000         388,797
                                ------------------ ----------------  ----------------  -----------------
Total                               $2,393,634         $3,224,817       $ 1,698,235     $ 1,598,032
                                ================== ================  ================= ==================
</TABLE>


5. Property and Equipment

Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
<S>                                                    <C>                <C>             <C>

                                                             1999                1998
                                                       ------------------ -------------------

Machinery and equipment                                     $1,440,031     $    1,351,078
Furniture and fixtures                                       1,290,979          1,017,847
Vehicles                                                         8,500             13,000
Tooling costs                                                  914,610            753,786
Building                                                     2,841,005          2,755,644
Land                                                         1,084,415          1,084,415
                                                       ------------------ -------------------
                                                             7,579,540          6,975,770
Less accumulated depreciation and amortization
                                                             2,245,963          1,470,127
                                                       ------------------ -------------------
                                                        $    5,333,577     $    5,505,643
                                                       ================== ===================
</TABLE>


Depreciation  expense  for the years  ended  December  31,  1999,  1998 and 1997
amounted to $739,024, $462,031, and $278,156, respectively.

6. Accrued Liabilities

Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
<S>                                                    <C>                <C>             <C>
                                                             1999                1998
                                                       ------------------ -------------------

Accrued payroll and related taxes and benefits
                                                              $478,639           $311,558
Accrued vacation                                               102,535             86,267
Warranty reserve                                                65,000             65,000
Accrued interest                                                85,678              6,254
                                                       ------------------ -------------------
                                                              $731,852           $469,079
                                                       ================== ===================
</TABLE>




7. Income Taxes

The provision for income taxes is made,  at Federal and State  statutory  rates,
based on pre-tax income reported in the financial statements.

Deferred  taxes are  classified  as current  or  non-current,  depending  on the
classification  of the assets and  liabilities  to which they  relate.  Deferred
taxes  arising from  temporary  differences  that are not related to an asset or
liability are classified as current or  non-current  depending on the periods in
which the temporary differences are expected to reverse.

Significant components of the Company's net deferred income taxes as of December
31 are as follows:
<TABLE>
<CAPTION>
<S>                                                                  <C>             <C>  <C>             <C>
                                                                          1999                1998
                                                                     ------------------- --------------------
Deferred tax assets:
    Non-deductible accruals and expenses                                   $199,755            $ 161,618
    Unrealized loss on available-for-sale securities                              -               87,633
                                                                     ------------------- --------------------
Total deferred tax assets                                                   199,755              249,251

Deferred tax liabilities:
    Accelerated depreciation                                                  (6,648)            (46,970)
    Unrealized gains on trading securities                                  (112,833)            (50,258)
    Unrealized gains on available-for-sale securities                       (197,198)                  -
                                                                     ------------------- --------------------
Total deferred tax liabilities                                              (316,679)            (97,228)
                                                                     ------------------- --------------------
                                                                           $(116,924)          $ 152,023
                                                                     =================== ====================
</TABLE>


The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
<S>                                                     <C>                 <C>              <C>          <C>
                                                               1999              1998             1997
                                                        ------------------- ---------------- ----------------
Current taxes:
Federal                                                     $(1,063,807)      $  (165,840)       $(333,620)
State                                                          (199,595)          (24,244)         (56,793)
R&D credit                                                       59,528            28,075           69,565

Deferred taxes:
Federal                                                          14,480            44,519          (31,176)
State                                                             1,405             4,321           (4,585)
                                                        ------------------- ---------------- ----------------

Provision for income taxes                                 $(1,187,989)       $  (113,169)       $(356,609)
                                                        =================== ================ ================
</TABLE>




<PAGE>


7. Income Taxes (continued)

The actual tax expense differs from the 34% Federal statutory rate as follows:
<TABLE>
<CAPTION>
<S>                                                     <C>                  <C>             <C>          <C>   <C>

                                                               1999              1998             1997
                                                        ------------------- ---------------- ----------------

Expected tax (expense) at federal rate                    $  (956,883)          $(161,623)       $(365,449)
State income tax expense, net of federal benefit
                                                             (130,805)            (15,687)         (35,470)
Research and development credit                                 59,528              28,075           69,565
Non-deductible goodwill amortization                         (135,142)
Other non-deductible expenses                                 (28,750)            (11,985)          (8,782)
Tax-exempt interest                                                 -               57,549            7,381
Other                                                           4,063              (9,498)         (23,854)
                                                        ------------------- ---------------- ----------------
Total provision for income taxes                          $(1,187,989)          $(113,169)       $(356,609)
                                                        =================== ================ ================
</TABLE>


8. Debt

Bank Lines of Credit

The Company renewed its line of credit arrangement with a financial  institution
for $5  million.  The  line  matures  on May 31,  2000.  The line of  credit  is
collateralized  by accounts  receivable  and inventory and bears interest at the
prime rate,  which is 8.5% at December  31, 1999 and 7.75% at December 31, 1998.
The Company's  balance on its line of credit was $1,613,453 at December 31, 1999
and  $441,993 at December  31,  1998.  Under the line of credit  agreement,  the
Company is restricted  from declaring  cash dividends and must maintain  certain
levels of working capital and meet certain other financial covenants.

Industrial Development Bond

On October 30,  1996,  the Company  completed a  transaction  defined as "Murray
City, Utah,  Adjustable Rate Industrial  Development  Revenue Bonds, Series 1997
(ZEVEX, Inc. Project)" in the amount of $2,000,000.  The bonds are secured by an
irrevocable Letter of Credit issued by a bank, which is subject to expiration no
later than April 15, 2002.  The bonds bear interest at an adjustable  rate based
on the weekly  tax-exempt  floater rate as determined by the remarketing  agent.
The bonds mature on October 1, 2016. Principal reductions occur in the amount of
$100,000  per year at a rate of $8,333 per month  starting  April 1,  1997.  The
outstanding  balance was  $1,800,000 at December 31, 1999, of which  $100,000 is
classified as current.

Convertible Debt

In  connection  with the  acquisitions  of Aborn and JTech,  the Company  issued
$1,350,000 in 7% interest  bearing  convertible  debentures and $3,000,000 in 8%
interest  bearing  convertible  debentures,  respectively  (See Note 2). Accrued
interest is due and payable  quarterly  beginning on April 1, 1999.  All accrued
interest and principal is due and payable  January 6, 2002.  The  debentures are
convertible  to common stock between  January 6, 2000 and January 6, 2002 at $11
per share.  The convertible  debt increased to $5,470,000 at the end of 1999 due
to the earn-out provisions (See Note 2).

9. Employee Benefit Plans

401(k) Profit Sharing Plan

During 1991,  the Company  established a qualified  401(k)  profit  sharing plan
covering substantially all employees.  Eligible employees may defer a portion of
their salary. At the discretion of the Board of Directors,  the Company may make
a  contribution  of an  additional  amount  of up to  four  percent  (4%) of the
eligible employees' salary and a discretionary amount to be determined each year
by the  Board of  Directors.  Employees  are fully  vested  after  seven  years.
Contributions  to the plan for the year ended December 31, 1999,  1998, and 1997
were $143,645,  $98,865, and $60,274,  respectively.  The Company has recorded a
payable  to the plan of  $1,630  and  $18,844  at  December  31,  1999 and 1998,
respectively, which is included in accrued liabilities.

Employees' Stock Ownership Plan

Effective October 14, 1993, the Company adopted an Employee Stock Ownership Plan
that covers all  employees who are over the age of 21, have been employed for at
least 90 days and who provide at least 1,000 hours of service.

Full vesting  will occur after seven years of service or upon normal  retirement
at 65 years of age. Contributions to the plan are at the discretion of the Board
of Directors with no minimum annual funding  requirements.  Contributions to the
plan will be primarily made with common stock of the Company.

A contribution of 16,700 shares with a value of $85,577 was made to the Employee
Stock Ownership Plan in December of 1999. No contribution was made for the years
ended December 31, 1998 and 1997.

10. Stockholders' Equity

Change in Authorized Shares and Par Value

In connection with the 1997 reincorporation  into Delaware,  the Company adopted
an Amended and Restated  Certificate  of  Incorporation  which provides that the
Company is authorized  to issue  2,000,000  shares of $.001 par value  preferred
stock and 10,000,000 shares of $.001 par value common stock.

Issuance of Common Stock

On February 12, 1997,  the Company  completed a private  placement  offering for
$1,250,000 of its securities, which consist of 500,000 units at a price of $2.50
per unit.  Each unit  consists  of one  share of common  stock and a warrant  to
purchase  one share of common  stock at a price of $3.50 per  share.  The issued
shares and shares  underlying the warrants are entitled to  registration  rights
for a period of five years from completion of the offering.

In November 1997 the Company  completed a secondary public offering of 1,200,000
shares  of  its  common  stock.  Total  net  proceeds  from  the  offering  were
$13,344,381.

10. Stockholders' Equity (continued)

Warrants

In February  1997,  the Company  issued  500,000  warrants in connection  with a
$1,250,000 private placement  offering,  as discussed above. During 1998, 30,000
warrants were exercised for a total  consideration  of $105,000 and in 1999, the
remaining 470,000 warrants were purchased by the Company for $1,175,000.

In connection  with the secondary  public offering in November 1997, the Company
issued the  underwriters  warrants to purchase 100,000 shares of common stock at
$15 per share. The underwriters paid a price of $.01 per warrant. These warrants
expire 5 years from the date of the  offering.  The  underwriters'  warrants are
restricted from exercise,  sale,  transfer,  assignment or  hypothecation  for a
period  of one year  commencing  from the  offering  date.  These  warrants  are
entitled to certain registration rights.

Common Stock Reserved for Future Issuance

At December 31, 1999, the Company had reserved  1,243,990 shares of common stock
for future issuance,  including 100,000 shares reserved for exercise of warrants
and 1,143,990 shares reserved under the Company's stock option plan.

Stock Option Plans

In September 1997, the Board of Directors  consolidated its previous three stock
option  plans into one plan and  established  the Amended 1993 Stock Option Plan
(the "1993  Plan").  Under the 1993 Plan,  600,000  shares of common  stock were
authorized for issuance,  subject to adjustment for such matters as stock splits
and stock dividends.

The  1993  Plan  provides  for the  grant  of  incentive  stock  options,  stock
appreciation  rights  and  stock  awards  to  eligible  participants  and may be
administered by the Board of Directors or by the Compensation Committee.

On September 30, 1997, the Company  granted a total of 210,000 options under the
1993 Plan with an exercise price of $16.44 to three officers/directors. In 1998,
the options were  subsequently  repriced  with an exercise  price of $5.00.  The
options vest ratably over a four-year period from the grant date.

All options  granted  under the 1993 Plan expire  after five to seven years from
the grant  date and become  exercisable  no later than four years from the grant
date.

During 1999 the Board of Directors  established  the 1999 Stock Option Plan (the
"1999 Plan"),  which was ratified by  shareholders  in June 1999.  The 1999 Plan
authorized  600,000  shares of common stock for issuance,  subject to adjustment
for such matters as stock splits and stock dividends.

The  1999  Plan  provides  for the  grant  of  incentive  stock  options,  stock
appreciation  rights  and  stock  awards  to  eligible  participants  and may be
administered by the Board of Directors or by the Compensation Committee.

In  January  1999,  331,000  options  were  granted  under the 1999 Plan with an
exercise price equal to the corresponding stock price on the grant date.

10. Stockholders' Equity (continued)

Stock Option Plans (continued)

All options  granted under the 1999 Plan expire after five to ten years from the
grant date and become exercisable between one and six years from the grant date.

A summary of stock option activity for both plans,  and related  information for
the years ended December 31, 1997, 1998 and 1999 follows:
<TABLE>
<CAPTION>
<S>                              <C>                <C>                <C>               <C>           <C>
                                       Shares            Outstanding Stock Options           Weighted-
                                                    ------------------------------------
                                      Available         Number of           Price             Average
                                      for Grant          shares           Per Share       Exercise Price
                                  ------------------------------------ ----------------- ------------------

Balance at December 31, 1996            313,900           86,100          $ .79-5.00          $  2.93
   Additional authorization             200,000                -              -                     -
   Options granted                     (275,050)         275,050           3.50-17.50           13.51
   Options exercised                          -          (44,610)           .79-$5.00            1.58
   Options canceled                       2,850           (2,850)          3.50-$5.00            3.97
                                  ------------------------------------ ----------------- ------------------

Balance at December 31, 1997            241,700          313,690           2.50-17.50           12.39
   Options granted                     (390,000)         390,000            5.00-7.64            6.48
   Options exercised                          -           (9,550)           2.50-5.00            3.51
   Options canceled                     299,500         (299,500)          3.50-17.50           15.77
                                  ------------------------------------ ----------------- ------------------

Balance at December 31, 1998            151,200          394,640            2.50-5.00            4.76
   Additional authorization             600,000                -              -                    -
   Options granted                     (331,000)         331,000            4.88-5.00            4.98
   Options exercised                          -           (1,850)           2.50-5.00            3.34
   Options canceled                      19,750          (19,750)           2.50-5.00            4.71
                                  ------------------------------------ ----------------- ------------------

Balance at December 31, 1999            439,950          704,040          $ 2.50-5.00         $  4.80
                                  ==================================== ================= ==================
</TABLE>


During 1998, the Company  canceled options to purchase up to 298,000 shares with
exercise  prices ranging from $7.63 to $17.50 and regranted  options to purchase
the same number shares at an exercise price of $5.00 per share. Of these 298,000
options,  212,000  were  outstanding  at the  beginning  of the  year,  with the
remaining 86,000 shares granted in early 1998.

Pro forma information regarding net income and earnings per share is required by
SFAS 123,  and has been  determined  as if the  Company  had  accounted  for its
employee  stock  options  under the fair value  method.  The fair value of these
options was estimated at the date of grant using a Black-Scholes  option pricing
model with the following weighted average  assumptions for 1999, 1998, and 1997,
respectively: risk-free interest rate of 4.7%, 5.3%, and 5.9%; dividend yield of
0%;  volatility  factors of the expected  market price of the  Company's  common
stock of .68, .88, and .90; and a  weighted-average  expected life of the option
of 3.6, 4, and 4 years.  The  estimated  weighted  average fair value of options
granted in the years ended December 31, 1999, 1998, and 1997 were $2.53,  $3.29,
and $9.98, respectively.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the Company's employee stock options have  characteristics  different from those
of traded options,  and because changes in the subjective input  assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options.

10. Stockholders' Equity (continued)

Stock Option Plans (continued)

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized over the options'  vesting  period.  Because the effect of SFAS No.
123 is  prospective,  the  initial  impact on pro forma  net  income  may not be
representative of compensation expense in future years.

For the years ended December 31, 1999,  1998, and 1997, pro forma net income and
pro forma net income per common share were as follows:
<TABLE>
<CAPTION>
<S>                                                        <C>              <C>               <C>        <C>    <C>

                                                                1999              1998             1997
                                                           ---------------- ----------------- ---------------

Pro forma net income                                        $  1,072,713          $(96,762)         $553,214
Pro forma basic net income per common share                          .31              (.03)              .26
Pro forma diluted net income per common share                        .31              (.03)              .23
</TABLE>


Additionally,  SFAS No. 123 requires that companies with wide ranges between the
high and low exercise prices of its stock options  segregate the exercise prices
into  ranges  that are  meaningful  for  assessing  the  timing  and  number  of
additional  shares  that may be issued  and the cash that may be  received  as a
result of the option  exercises.  Below are the  segregated  ranges of  exercise
prices as of December 31, 1999:
<TABLE>
<CAPTION>
<S>                      <C>                                              <C>                        <C>
                         Options Outstanding                                   Options Exercisable

----------------------------------------------------------------------    -------------------------------
                                       Weighted

                                        Average          Weighted                            Weighted
    Range of                           Remaining         Average                             Average
    Exercise           Number         Contractual        Exercise             Number         Exercise
     Prices         Outstanding          Life             Price            Exercisable        Price
----------------- ----------------- ---------------- -----------------    --------------- ---------------

   $2.50-3.50           29,840        2.07 years            $3.19              29,840           $3.19
    3.85-5.00          674,200        4.31 years             4.94             201,600            4.85
----------------- ----------------- ---------------- -----------------    --------------- ---------------

   $2.50-5.00          704,040        4.21 years            $4.86             231,440           $4.64
================= ================= ================ =================    =============== ===============
</TABLE>



11. Lease Commitments

In  1996  the  Company  and  its  subsidiary   occupied  an  administrative  and
manufacturing facility under the terms of an operating lease agreement.  In June
1997 the Company  moved into a new  facility  owned by and  constructed  for the
Company.

Lease  expense of $55,695  has been  charged  to  operations  for the year ended
December 31, 1997. The lease expired in April 1997.

12. Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

     Cash and cash  equivalents:  The  carrying  amount  reported in the balance
     sheet for cash and cash equivalents approximates its fair value.

     Marketable  securities:  The Company determines fair values based on quoted
market prices.

     Convertible  debt and industrial  development  bond: The fair values of the
     Company's long-term debt are estimated using discounted cash flow analyses,
     based on the  Company's  current  incremental  borrowing  rates for similar
     types of borrowing arrangements.

The carrying amounts and fair values of the Company's financial  instruments are
as follows:
<TABLE>
<CAPTION>
<S>                                  <C>            <C>                 <C>            <C>             <C>

                                                    1999                               1998
                                     ----------------------------------------------------------------------
                                     Carrying Amount         Fair       Carrying Amount         Fair
                                                            Value                              Value
                                     ----------------- ---------------------------------- -----------------

Cash and cash equivalents            $  3,383,544      $   3,383,544     $   7,960,511      $   7,960,511
Marketable securities:
   Trading securities                       302,500            302,500         134,739            134,739
   Available-for-sale securities          2,922,317          2,922,317       1,463,293          1,463,293
Convertible debt                          5,470,000          5,378,376       4,350,000          4,350,000
Industrial development bond               1,800,000          1,800,000       1,900,000          1,900,000
</TABLE>


13. Major Customers

Sales to major  customers for the years ended December 31, 1999,  1998 and 1997,
are summarized as follows (percent of product sales):

                                              Year ended December 31,
                                -----------------------------------------------
                                      1999             1998              1997
                                ----------------- ---------------- ------------

Customer A                               *%                16%              17%
Customer B                              13%                15%              15%
Customer C                               *%                13%              18%
Customer D                               *%                 *%              15%
                                ----------------- ---------------- ------------

                                        13%                44%              65%
                                ================= ================ ============
-----------------
* Less than 10% of sales.

14. Related Party Transactions

On April 15, 1997, the Company entered into a consulting  agreement with another
company owned by certain  stockholders to provide  services related to strategic
planning, public relations,  financing and potential acquisition of new products
or companies. Under the consulting agreement, the Company paid an initial fee of
$50,000 and paid $10,000 per month for two years. The agreement expired in April
1999. In

14. Related Party Transactions (continued)

addition,  these certain  stockholders have the right to appoint one director to
the Company's Board of Directors.  The certain stockholders exercised this right
with its  nomination of Kirk Blosch in June 1998. Mr. Blosch is serving a 3-year
term as a director,  which term expires at the annual meeting of shareholders in
June 2002.

Of the 470,000 warrants  purchased by the Company in 1999 (See Note 10), 350,000
were purchased from a related party for $875,000.

On December 31, 1998,  the Company  acquired  JTech pursuant to a Stock Purchase
Agreement among the Company and the four shareholders of JTech (the "JTech Stock
Purchase").  Leonard C. Smith, one of the selling JTech  shareholders,  received
$1,257,900  in cash and a  convertible  debenture in  connection  with the JTech
Stock Purchase. The convertible debenture, in the principal amount of $1,365,250
(inclusive  of the  1999  earn-out  provision)  is due  January  6,  2002 and is
convertible to common stock at Mr. Smith's option during the period from January
6, 2000 to January 6, 2002 at $11 per share.

JTech also entered into an  Employment  Agreement  with Leonard C. Smith,  dated
December 31, 1998, which provides that Mr. Smith serve as President of JTech for
three  years at a salary  of  $100,000  per  year.  Pursuant  to the  employment
agreement,  Mr. Smith also  received an option to purchase  40,000 shares of the
Company's common stock, vesting over four years, at $5.00 per share, the closing
price of such stock on Nasdaq on the date of the JTech Stock Purchase. Mr. Smith
was appointed to fill a vacancy on the Company's  Board of Directors,  effective
April 26,  1999.  Mr.  Smith's  term on the Board will expire at the 2001 annual
meeting of shareholders, but is subject to extension based upon election.

15. Subsequent Event

On March 29, 2000,  the Company entered into an agreement to acquire  certain
assets from Nestle USA, Inc. ("Nestle") relating to Nestle's enteral nutrition
delivery devices. The purchase price will range from $1.5 million to
approximately  to $2.7 million,  depending  upon sales  generated by the
acquired assets during the 12 months following the closing of the purchase,
plus the actual cost of certain inventory acquired by the Company which is
estimated to be approximately  $700,000.  Upon closing of the acquisition, cash
of  $500,000 will be paid,  and a note  payable of $1 million will be issued
in connection with this purchase.  The remainder of the purchase  price will be
settled  upon resolution of contingencies  within the purchase agreement.

<PAGE>

EXHIBIT 10.20
                                                              Grant No.

                            ZEVEX INTERNATIONAL, INC.

                               STOCK OPTION GRANT

         Optionee:

         Address:

         Grant Date:         January 8, 1999
                           -----------------

         Exercise Price:   $5.00  per share

         Number of Option Shares:    30,000   shares

         Expiration Date:             January 7, 2008
                                    -----------------

         Type of Option:     X   Incentive Option     X    Non-Statutory Option
                           -----                     -----

         Exercise Schedule: All of the Option Shares shall become purchasable by
         the Optionee the date which is nine years and nine months following the
         Grant  Date if the  Optionee  is  continuously  in the  Service  of the
         Corporation  during that time.  Additionally,  one-third  of the Option
         Shares (10,000 shares or a portion  thereof,  as described below) shall
         become purchasable  following each of the first three anniversary dates
         of the Grant Date upon the  Corporation's  achieving annual revenue and
         earnings in the three fiscal years ending December 31, 1999,  2000, and
         2001 as follows:
<TABLE>
<CAPTION>
<S>                             <C>                           <C>                         <C>                      <C>

------------------------------- ---------------------------- ---------------------------- ----------------------------
         YEAR                            1999                         2000                         2001
                                         ----                         ----                         ----
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
         REVENUE                         $24,640,000                  $30,900,000                  $38,600,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
         EARNINGS                        $ 1,987,000                  $ 2,886,000                  $ 3,774,000
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

         For the  purpose of  calculating  the number of Option  Shares that may
         become  purchasable at the end of each of these first three years,  the
         relevant  revenue  and  earnings  targets  shall each  account  for the
         vesting of 50% of the Option Shares.  Furthermore,  within each target,
         25% of the Option Shares shall become  purchasable if 80% of the target
         is achieved,  50% of the Option Shares shall become  purchasable if 90%
         of the target is achieved,  and 100% of the Option  Shares shall become
         purchasable if 100% of the target is achieved.  By way of example,  for
         the year 1999,  one-third (10,000) of the Option Shares potentially may
         become purchasable,  with 5,000 shares potentially becoming purchasable
         if 100% of the  revenue  target  is  achieved,  and with  5,000  shares
         potentially  becoming  purchasable  if 100% of the  earnings  target is
         achieved.  However,  if the  Corporation's  revenue  for  1999 are only
         $23,000,000 or 93% of the targeted revenues, then only 50% of the 5,000
         Option Shares will become  purchasable with respect to that target. If,
         in contrast, the earnings for 1999 are $2,002,000 or 102% of the target
         earnings,  then 100% of the 5,000 Option Shares will become purchasable
         with  respect to that  target.  The result of this  scenario  is that a
         total of 7,500 Option Shares shall become  purchasable  with respect to
         1999 and 2,500 Option  Shares shall  become  exercisable  on January 7,
         2005 if the Optionee is  continuously in the Service of the Corporation
         during that time. If the Optionee is not continuously in the Service of
         the  Corporation  during  that time,  then 2,500  Option  Shares  shall
         expire.

         The  extent to which the  Corporation  has  achieved  the  revenue  and
         earning  targets for each of these three years and the number of Option
         Shares  that  become  purchasable  following  each such  year  shall be
         determined  by the Plan  Administrator  within ninety (90) day s of the
         end of the Corporations fiscal year based on the Corporation's  audited
         financial  statements for such fiscal year. For purposes of determining
         whether the revenue and earning targets have been achieved in any year,
         the Plan  Administrator  may, in its  discretion,  exclude or otherwise
         adjust annual revenue and earnings due to the occurrence of one or more
         extraordinary events during the fiscal year. Extraordinary events shall
         include the merger of the  Corporation  with another  corporation,  the
         Corporation's  acquisition of all or substantially  all assets or stock
         of  another  company,  the sale of all or  substantially  all assets or
         stock of the  Corporation  to a third party,  a change in the Company's
         fiscal year, and other extraordinary  transactions that are outside the
         ordinary course of business. In no event shall the Option Shares become
         purchasable  that  are  not  purchasable  at  the  time  of  Optionee's
         cessation of Service.

                  1.  Grant of  Option.  ZEVEX  International,  Inc,  a Delaware
corporation (the  "Corporation"),  hereby grants to the Optionee named above, as
of the Grant Date, an option to purchase up to the total number of Option Shares
specified  above.  This grant  includes the terms of the Stock  Option  Exercise
Notice and Purchase  Agreement  attached  hereto as Exhibit A, and is subject to
all of the terms and conditions of this Grant and the  Corporation's  1999 Stock
Option  Plan, a copy of which is attached  hereto as Exhibit B. All  capitalized
terms not defined  herein  have the  meaning set for the in the  Appendix to the
Plan.

                  2.       Option  Term.  The  option  term  shall be  measured
from  the  Grant  Date  and  shall accordingly  expire at the close of business
on the Expiration Date specified  above,  unless sooner  terminated in
accordance with paragraph 5 below.

                  3.  Limited  Transferability.  This  option  shall be  neither
transferable nor assignable, in whole or in part, by Optionee other than by will
or by the laws of descent and distribution following Optionee's death and may be
exercised, during Optionee's lifetime, only by Optionee. However, if this option
is  designated  a  Non-Statutory  Option  above,  then this option may also,  in
connection with Optionee's estate plan, be assigned in whole or in part during

all other items in this form relating to the grant document are the same as
 previously filed Exhibits 10.19#

all grants are the same for Messrs. Constantine, McNally and McStotts
<PAGE>
                            ASSET PURCHASE AGREEMENT




                                     BETWEEN

                                   ZEVEX, INC.



                                       AND

                                NESTLE USA, INC.




                                 March 29, 2000


<PAGE>






                            ASSET PURCHASE AGREEMENT

         This Asset Purchase Agreement ("Agreement") is entered into as of March
29, 2000, by and between  ZEVEX,  Inc., a Delaware  corporation  ("Buyer"),  and
Nestle USA,  Inc., a Delaware  corporation  ("Seller").  Buyer and Seller are at
times also referred to herein  individually as a "Party" and collectively as the
"Parties."

         This Agreement  contemplates a transaction in which Buyer will purchase
selected assets of the clinical delivery business of Seller in return for cash.

         Now,  therefore,  in  consideration  of the  premises  and  the  mutual
promises herein made, and in consideration of the  representations,  warranties,
and covenants herein contained, the Parties agree as follows.

         1.       Basic Transaction.

         (a)  Purchase  and Sale of  Assets.  On and  subject  to the  terms and
conditions of this Agreement,  Buyer agrees to purchase from Seller,  and Seller
agrees to sell,  transfer and convey to Buyer, for the  consideration  specified
below,  all of  Seller  's  right,  title  and  interest  in  and to the  assets
identified in  subparagraphs  (i) through (viii) below,  as such group of assets
may change  during the period from the date hereof until the Closing as a result
of Seller's conducting of the Business (as defined below) in the ordinary course
of business and consistent with the terms of this Agreement  (collectively,  the
"Acquired Assets"):

                  (i) all enteral feeding pumps owned by Seller, including those
         identified on the list designated as "Pump Inventory"  (electronic file
         number: NCN_pumpinventory.mdb), previously provided to Buyer by Seller,
         which lists the model and serial  number of each  enteral  feeding pump
         and its location as of December 31, 1999 (the "Pumps");

                   (ii) Seller's  inventory (if any) of  "Disposables"  (defined
         herein as enteral  feeding pump  administration  sets,  enteral feeding
         tubes, enteral irrigation kits and ancillary device products) as of the
         date  of the  Closing  (defined  in  Section  1(f)  below),  excluding,
         however,  Seller's  inventory of handi-crush  syringes and  handi-crush
         syringe kits (the "Disposables Inventory");

                  (iii) any custom tooling or molds owned by Seller and used in
         connection  with the  manufacture  of Disposables  (the "Tooling");

                  (iv) printed copies or, where available,  electronic copies of
         the following books and records:  Seller's customer list as of December
         31, 1999,  including customer name and address, of those customers (the
         "Pump Customers") with whom Seller has placed or provided a Pump(s) and
         to whom Seller sold Disposables  during calendar year 1999, as well as,
         with  respect  to such  Pump  Customers,  (1) the  following  documents
         previously  provided  to Buyer for the  periods of 1997-99  and January
         through February,  2000: "Summary of Delivery Adjustments (1999 only)",
         "Baxter Exports," "Delivery Total Sales Top 20 Distributors," "National
         Accounts with  Delivery  Products,"  "Delivery Top 20 Customers  Direct
         Business,"  and  "Delivery  Net  Sales as of  October  1999"  "Customer
         Complaints",  (2) Seller's  pricing lists for  Disposables  (electronic
         file number: NCN_Deliverypricing.mdb), (3) Seller information regarding
         Pump  tracking   information   (referenced   by  Pump  serial   number)
         (electronic  file number:  NCN_Pumpinventory.mdb),  (4) Pump forecasts,
         (5) Seller's "sell sheets" for the Disposables,  including  digital and
         film artwork therefor,  (6) Ultra Pak Support Studies, (7) training and
         operating manuals for Pumps, and (8) Seller information  regarding Pump
         service histories (referenced by Pump serial number);

                  (v)   all medical device reporting ("MDR") records associated
         with the Pumps or Disposables;

                  (vi)  all  rights  of  Seller  under  all  outstanding   "Pump
         Bilateral Agreements", defined herein as those contracts between Seller
         and its Pump Customers  covering Seller's agreement to provide the Pump
         Customer with a Pump(s) and the Pump Customer's  commitment to purchase
         Disposables from Seller;

                  (vii) any  drawings  and  specifications  used to  manufacture
         the  Disposables  in Seller's  possession  or readily available to
         Seller;

                  (viii) to the extent  assignable by Seller without the consent
         of  any  third  party,  any  manufacturer's  warranties  or  guarantees
         applicable to the Disposables Inventory and any and all rights to bring
         claims against such parties for defective Disposables Inventory.

                  Additionally,  Seller  shall (i)  arrange  for its  affiliate,
Nestle,  S.A.  ("Nestle  S.A.")  to  issue to Buyer  at the  Closing  hereof  an
irrevocable,  royalty free license,  in the form of the document attached hereto
as Exhibit A,  granting to Buyer the right and license to make,  use and sell in
the United States enteral adapter and tip protectors  embodying the invention of
U.S. Patent No. 5,267,983  granted  December 7, 1993 (the "Patent  License") and
(ii)  provide  to Buyer a copy of  Seller's  August 18,  1998  Notice Of Medical
Device  Correction to the Food and Drug  Administration  ("FDA") relating to the
Pumps, and correspondence to and from the FDA relating to said Notice.

         (b)      Retained  Assets.  Notwithstanding  the  foregoing,  Seller is
not selling,  transferring,  assigning or conveying to Buyer any assets other
than those specifically identified and described in Section 1(a) above.

         (c) Retention of Liabilities. Except as otherwise expressly provided in
this  Agreement,  any and all  liabilities  which  accrue or arise  prior to the
Closing  relating to the  Acquired  Assets  (including  without  limitation  any
liabilities or obligations  under the Pump Bilateral  Agreements which accrue or
arise prior to the Closing) and any  liabilities of any kind associated with any
"Products"  (defined herein as Pumps and Disposables)  placed, sold or leased by
Seller or any other  Seller  products or  services,  or any  agreements  made by
Seller related to the foregoing,  shall be retained by Seller and Buyer shall be
released  from same.  Any and all  liabilities  which  accrue or arise after the
Closing  relating to the  Acquired  Assets  (including  without  limitation  any
liabilities or obligations  under the Pump Bilateral  Agreements which accrue or
arise after the Closing) and any  liabilities  of any kind  associated  with any
Products  placed,  sold or  leased  by  Buyer or any  other  Buyer  products  or
services,  or any agreements  made by Buyer related to the  foregoing,  shall be
retained  by Buyer and  Seller  shall be  released  from  same.  Notwithstanding
anything contained herein to the contrary,  Buyer hereby acknowledges and agrees
that it shall  retain  and  shall  not be  released  from any  responsibilities,
warranties,  indemnity or other obligations given, imposed upon, made or assumed
by Buyer as the original manufacturer of Pumps, including without limitation the
responsibility  to repair any defective  Pumps and the  obligation to indemnify,
defend and hold Seller  harmless  from and against any injury or death to person
or damage to property  resulting from the use or operation of the Pumps,  all of
which  responsibilities,  warranties or obligations so given, imposed upon, made
or assumed  by Buyer  shall be  retained  by Buyer.  As part of its  obligations
hereunder,  Buyer  agrees  that,  from and after  the  Closing,  Buyer  shall be
responsible  for complying  with any and all regulatory  obligations  associated
with the  Products  including,  without  limitation,  the  retention  of all MDR
related records;  Product  complaint  handling;  filing of MDRs with the Federal
Food and Drug Administration  ("FDA");  requirements relating to Product repair;
filing of Product applications with the FDA; and FDA registration and listing.

         (d)       Purchase  Price.  Subject to the  provisions  of this
Agreement,  the purchase  price for the Acquired  Assets (the "Purchase Price")
shall be as follows:

                  (i)      Five Hundred  Thousand  Dollars  ($500,000.00)  paid
by wire transfer or other immediately  available funds upon Closing;  plus

                  (ii)     One Million Dollars  ($1,000,000) paid by wire
transfer or other  immediately  available funds on a date six months from
Closing;

                  (iii) an amount  equal to  Seller's  original  purchase  price
         (including  freight  paid as  F.O.B.  destination)  of the  Disposables
         Inventory  (as  determined  pursuant  to  Section  1(e))  paid  by wire
         transfer or other immediately available funds on a date six months from
         Closing; and

                  (iv) On a date which is twelve (12)  months from the  Closing,
         the lesser of $1,000,000 or the product of $1,000,000 multiplied by the
         percentage determined by dividing the "Sales Amount" (as defined below)
         by $9,000,000.  For purposes of the foregoing, the "Sales Amount" shall
         mean the total gross revenues under orders  actually  received by Buyer
         during the 12-month period  following  Closing for sales of Disposables
         to Pump Customers.

         (e) Inventory Procedure.  Promptly following the Closing,  Seller shall
take a physical  inventory  of the  Disposables  Inventory  in  accordance  with
procedures to be  established  by mutual  agreement of Buyer and Seller prior to
Closing. Buyer shall have the right to have representatives  present during such
inventory.  Within  sixty (60) days after  Closing,  Seller  shall  prepare  and
deliver  to  Buyer a  statement  (the  "Inventory  Statement"),  which  has been
reviewed  and reported on by Buyer's  independent  auditors in  accordance  with
procedures  to  be  established  by  Buyer  and  Seller,  without  exception  or
qualification  (except as to scope)  setting  forth the results of the  physical
inventory and the original  purchase price of the Disposables  Inventory.  For a
period of ninety  (90) days  following  Closing,  Buyer  shall have the right to
reject any item(s) in the  Disposables  Inventory  which is  defective or not in
merchantable  condition,  and Buyer shall not be  required to purchase  any such
rejected  items.  For  the  purposes  of this  Section  1 (e),  the  Disposables
Inventory  shall  include,  but Buyer  shall  not be  required  to pay for,  any
Disposables  Inventory  for which  there  exists more than a two (2) year supply
based on Seller's average use for the six (6) months prior to Closing.

         (f) The Closing.  The closing of the transactions  contemplated by this
Agreement (the "Closing")  shall take place at Seller's offices at Three Parkway
North, Suite 500, Deerfield,  IL 60015-0760,  on or before the date which is ten
(10)  business  days from the date the parties  execute this  Agreement,  as the
parties shall mutually determine, or such other date as the parties may mutually
determine (the "Closing").

         (g) Deliveries at the Closing. At the Closing, (i) Seller shall deliver
to Buyer,  against  receipt of the Purchase Price, a Bill of Sale and Assignment
in the form of the  document  attached as Exhibit B to this  Agreement,  Buyer's
list of its Pump  Customers,  the License  and the  documentation  described  in
Section 1 (a) (iv) (5), (6) and (7) (Buyer hereby  acknowledging that it has, as
of the date hereof, received from Seller the documentation identified in Section
1 (a) (iv) (1), (2),  (3), (4) and (8) ), 1 (a) (v) and 1 (a) (vii) above;  (ii)
Buyer shall deliver to Seller the Purchase Price and an Assumption  Agreement in
the form of the document attached as Exhibit C to this Agreement;  and (iii) the
parties shall execute and deliver any other  documents  necessary to give effect
to the transaction  contemplated  herein. All deliveries at the Closing shall be
considered to have taken place  simultaneously as a single  transaction,  and no
delivery  shall be  considered  to have  been  made  until  all  deliveries  are
completed.  With  respect to any of the  Acquired  Assets sold  hereunder  which
cannot be  physically  delivered  because  they are in the  possession  of third
parties,  including  specifically the Pumps,  Seller shall,  reasonably promptly
after the Closing, notify such third parties in possession that its right, title
and interest in and to the same have been vested in Buyer.

         (h) Allocation.  The parties agree to allocate the Purchase Price among
the Acquired  Assets for all purposes  (including  financial  accounting and tax
purposes) in accordance with the allocation schedule attached hereto as Schedule
1(h).

         2.  Representations  and  Warranties of Seller.  Seller  represents and
warrants to Buyer that the  statements  contained  in this Section 2 are correct
and complete as of the date of this  Agreement  and will be correct and complete
as of  the  Closing  (as  though  made  then  and as  though  the  Closing  were
substituted for the date of this Agreement throughout this Section 2).

         (a)      Organization of Seller.  Seller is a corporation  duly
organized,  validly  existing,  and in good standing under the laws of the
jurisdiction of its incorporation.

         (b)  Authorization of Transaction.  Seller has full power and authority
(including  full  corporate  power and  authority)  to execute and deliver  this
Agreement and to perform its obligations hereunder. The execution,  delivery and
performance by Seller of this Agreement and such other agreements have been duly
authorized by all necessary and appropriate  corporate action on the part of the
Seller.  This Agreement and any agreements to be executed at Closing constitutes
the valid and legally  binding  obligation of Seller,  enforceable in accordance
with its terms and conditions.

         (c) Noncontravention.  Except to the extent the following would have no
adverse effect on the Acquired Assets or their use by Buyer  following  Closing,
neither the execution and delivery of this Agreement nor the consummation of the
transactions  contemplated  hereby  will with or without the giving of notice or
the  passage  of time,  or both (i)  result  in a  violation  or  breach  of, or
constitute a default under, any term or provision of Seller's charter or bylaws,
or  of  any  indenture,  lease,  agreement,  instrument,   commitment  or  other
arrangement  to which Seller is a party or by which it is bound;  (ii) result in
the creation of any lien, pledge, charge,  security interest or encumbrance upon
the  Acquired  Assets  pursuant  to the  terms  of any  such  indenture,  lease,
agreement,  instrument  or commitment  or other  arrangement;  (iii) violate any
judgment,   order,   permit,   injunction,   decree  or  award  of  any   court,
administrative  agency or governmental body against,  or binding upon, Seller or
upon its property or business;  or (iv)  constitute a violation by Seller of any
statute, law, rule or regulation of any governmental or regulatory authority. To
the best of Seller's knowledge, Seller does not need to give any notice to, make
any filings with, or obtain any authorization,  consent or approval of any third
party or governmental  agency in order to transfer or assign the Acquired Assets
to Buyer or otherwise consummate the transactions contemplated by this Agreement

         (d)      Brokers' Fees.  Seller has no liability or obligation to pay
any fees or commissions to any broker,  finder, or agent with respect to the
transactions contemplated by this Agreement for which Buyer could become liable
 or obligated.

         (e) Title to Acquired Assets. As of the date hereof, Seller has, and on
the Closing will have and will convey to Buyer, good and marketable title to the
Acquired  Assets,  free and clear of any mortgage,  pledge,  lien,  encumbrance,
charge or other security interest, other than statutory liens arising from trade
payables and taxes not yet due and payable.

         (f)  Legal  Compliance.  Seller,  as the  distributor  of the Pumps and
Disposables,  is not in violation  of or in default  under any  applicable  laws
(including rules,  regulations,  codes, plans, injunctions,  judgments,  orders,
decrees,  rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) and no action, suit, proceeding, hearing,
investigation,  charge,  complaint,  claim,  demand, or notice has been filed or
commenced  against it  alleging  any  failure so to comply,  the effect of which
individually or in the aggregate could reasonably be expected to have a material
adverse effect on Buyer's  ownership or use of the Acquired Assets.  To the best
of Seller's knowledge,  Seller has complied, in all material respects,  with all
FDA  requirements and  notifications  with respect to the Pumps and Disposables,
including the August 18, 1998 Notice of Medical Device Correction to the FDA.

         (g)      Tooling.  To the  best of  Seller's  knowledge,  Schedule
2(g) is a true and  correct  list of the  Tooling  and its location.

         (h)  Inventory.  Seller has on hand or has ordered  and expects  timely
delivery of such quantities of Disposables  (other than those Disposable "sku's"
with erratic or small demand) that are reasonably required to timely fill orders
on hand which require delivery within ninety (90) days.

         (i)  Litigation.  Except  as  set  forth  in  Schedule  2 (i)  to  this
Agreement, there are no claims, actions, suits, hearings, investigations,  legal
or  administrative  arbitrations  or  other  proceedings  before  any  court  or
governmental  or regulatory  authority  pending  against  Seller or, to Seller's
knowledge,  threatened  against Seller,  and relating  primarily to the Acquired
Assets,  that could have a material  adverse  effect on the  Acquired  Assets or
their contemplated use by Buyer.

         (j)  Customers and  Suppliers.  Seller's  customer  list  referenced in
Section 1 (a) (iv)  above,  to be  delivered  to Buyer at  Closing,  is true and
accurate in all material respects.  Since June 30, 1999, Seller has not received
written  notice from any Pump Customer that it will stop or materially  decrease
the rate of business done with Seller, except for changes in the ordinary course
of business. The following documents (covering the periods 1997-1999 and January
and February,  2000)  previously  delivered to Buyer are, except with respect to
pricing  information  for the fourth  quarter of 1998,  true and accurate in all
material  respects:  "Summary  of Delivery  Adjustments  (1999  only)",  "Baxter
Exports,"  "Delivery Total Sales Top 20 Distributors,"  "National  Accounts with
Delivery  Products,"  "Delivery Top 20 Customers Direct Business," and "Delivery
Net Sales as of  October  1999",  Seller  information  regarding  Pump  tracking
information  (electronic  file Number:  NCN_Deliverypricing.mdb),  and "Customer
Complaints". Seller additionally represents that the "Seller's pricing lists for
Disposables  (electronic  file  number:   NCN_Deliverypricing.mdb)"   accurately
reflects,  in all  material  respects,  the gross sales  price  charged the Pump
Customer,  exclusive,  however, of those reductions  reflected on the Summary of
Delivery Adjustments (1999 only).

         (k) Intellectual Property. To the best of Seller's knowledge (which for
purposes  of this  subparagraph  (k)  shall be  deemed  to  refer to the  actual
knowledge  of Mr. Rock  Foster),  the Acquired  Assets do not  infringe  upon or
misappropriate any intellectual property rights of third parties. Seller has not
received any written complaint,  claim,  demand or notice alleging that Seller's
use of an Acquired Asset infringes a third party's intellectual property right.

         (l) Contracts.  To the best of Seller's  knowledge,  Schedule 2(l) is a
complete and correct list of the Pump Bilateral  Agreements.  Attached hereto as
Exhibit D is the form of Pump  Bilateral  Agreement used by Seller for each Pump
Customer (except for University Hospital Consortium),  except to the extent such
form specifically  provides for individualized terms and exhibits.  With respect
to each Bilateral Pump Agreement:  (A) the agreement is legal,  valid,  binding,
enforceable  and in full  force  and  effect;  and (B) to the  best of  Seller's
knowledge,  no party is in breach or default,  and no event has  occurred  which
with notice or lapse of time would  constitute  a breach or  defaults,  provided
however  that a Pump  Customer's  failure to order or  purchase  any  minimum or
requisite  volume of Products  referenced in the Pump Bilateral  Agreement shall
not, for purposes of this  representation  and  warranty,  be deemed a breach or
default of the Pump  Bilateral  Agreement by the Pump  Customer.  As of Closing,
Seller has delivered to Buyer a correct and complete copy of each Bilateral Pump
Agreement identified on Schedule 2(l).

         (m) Disclosure.  The representations  and warranties  contained in this
Section 2 do not  contain  any untrue  statement  of a material  fact or omit to
state  any  material  fact  necessary  in  order  to  make  the  statements  and
information contained in this Section 2 not misleading.

         (n) Limitations on Representatives and Warranties.  Except as expressly
set forth in this Agreement,  neither Seller nor any of its affiliates or agents
makes any representations or warranties,  express or implied, in connection with
the transactions contemplated by this Agreement. Without limiting the generality
of the foregoing and except as specifically set forth in this Agreement: (i) the
Acquired  Assets shall be  transferred  to Buyer  pursuant to this  Agreement in
their present condition,  "AS IS" and without any warranty,  express or implied;
(ii) no patent or latent  physical  condition  or defect in any of the  Acquired
Assets, whether or not now known or discovered shall affect the rights of either
party; and (iii) no representations, warranties or agreements are made as to the
compliance of any of the Acquired  Assets with any  applicable  federal,  state,
local or  foreign  laws,  rules or  regulations,  or as to the  merchantability,
fitness  for a  particular  purpose,  physical  condition,  state of  repair  or
operating capabilities of any of the Acquired Assets.

         3.  Representations  and  Warranties  of Buyer.  Buyer  represents  and
warrants to Seller that the  statements  contained in this Section 3 are correct
and complete as of the date of this  Agreement  and will be correct and complete
as of the Closing  Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3).

         (a)      Organization of Buyer. Buyer is a corporation duly organized,
validly existing,  and in good standing under the laws of the jurisdiction of
its incorporation.

         (b)  Authorization  of Transaction.  Buyer has full power and authority
(including  full  corporate  power and  authority)  to execute and deliver  this
Agreement and to perform its obligations hereunder. The execution,  delivery and
performance by Buyer of this Agreement and such other  agreements have been duly
authorized by all necessary and appropriate  corporate action on the part of the
Buyer.  This Agreement and any agreements to be executed at Closing  constitutes
the valid and legally  binding  obligation of Buyer,  enforceable  in accordance
with its terms and conditions

         (c)  Noncontravention.  Neither  the  execution  and  delivery  of this
Agreement nor the consummation of the transactions contemplated hereby will with
or without the giving of notice or the passage of time,  or both (i) result in a
violation or breach of, or constitute a default under,  any term or provision of
Buyer's charter or bylaws, or of any indenture,  lease,  agreement,  instrument,
commitment  or other  arrangement  to  which  Buyer is a party or by which it is
bound; (ii) violate any judgment, order, permit, injunction,  decree or award of
any court,  administrative agency or governmental body against, or binding upon,
Buyer or upon its property or business; or (iii) constitute a violation by Buyer
of any statute,  law,  rule or  regulation  of any  governmental  or  regulatory
authority.

         (d)      Brokers' Fees.  Buyer has no liability or obligation to pay
any fees or commissions to any broker,  finder,  or agent with respect to the
transactions contemplated by this Agreement for which Seller could become liable
or obligated.

         4.       Pre-Closing  Covenants.  The  Parties  agree as follows  with
respect to the period  between the  execution  of this Agreement and the
Closing.

         (a)  General.  Each  of the  Parties  will  exercise  its  commercially
reasonable  best  efforts to take all  action  and to do all  things  necessary,
proper,  or advisable in order to consummate and make effective the transactions
contemplated by this Agreement.

         (b) Efforts and Assurances.  Each party to this Agreement shall use its
commercially reasonable best efforts to cause the satisfaction of all conditions
to the consummation of this Agreement which are in the control of such party and
to cooperate as necessary in the  satisfaction  of all other  conditions  to the
consummation of this Agreement. Each party to this Agreement shall, from time to
time after the execution and consummation of this Agreement, execute and deliver
such instruments,  documents and assurances and take such further actions as the
other party may  reasonably  request to carry out the purpose and intent of this
Agreement.  To the extent that the transfer or assignment of any Acquired  Asset
shall  require  the consent of any other party in order to permit or effect such
transfer,  this  Agreement  shall not constitute a contract to transfer the same
unless and until such consent is obtained.

         (c)  Operation of Business.  The Acquired  Assets being sold under this
Agreement are part of Seller's  clinical  delivery  business  (the  "Business").
Seller  agrees that in  connection  with the  operation of its Business from the
date  hereof  until  the  earlier  of the  Closing  or the  termination  of this
Agreement,  except as  otherwise  consented  to or approved by Buyer in writing,
Seller shall , to use its  commercially  reasonable  best efforts to continue to
operate the Business in the  ordinary  course of business  consistent  with past
custom and practice,  except for taking such steps as may be necessary or proper
to carry out and consummate the transactions  contemplated by this Agreement.(d)
Notice of Certain Events.  Each party shall promptly notify the other of (A) any
fact or circumstance of which a party has actual  knowledge which would make any
representation  or  warranty  set  forth  herein  untrue or  inaccurate,  in any
material respect, as of the Closing or as of the date of this Agreement;  or (B)
any claim against the Acquired Assets.  Notwithstanding anything to the contrary
contained  herein,  if Buyer has actual  knowledge  that any  representation  or
warranty  is untrue or  inaccurate  as of the  Closing  and elects to close this
transaction  notwithstanding  such  untruth or  inaccuracy,  Buyer  shall not be
entitled  to be  indemnified  by or  recover  damages  from  Seller  due to such
representation and warranty failing to be true or accurate.

         (e)  Access  and Due  Diligence.  From  the date of  execution  of this
Agreement  until the Closing,  Seller shall permit Buyer,  its counsel and other
advisors reasonable access during normal business hours to the books, contracts,
records and  personnel  of Seller  (excluding  any records  relating to federal,
state  or  local  income  or  franchise  tax) to the  extent  that  they  relate
exclusively to the Business or the Acquired Assets, and shall furnish Buyer such
other  information  as  Buyer  may  from  time to  time  reasonably  request  in
connection with the Business or the Acquired Assets.  Buyer acknowledges that it
remains bound by the terms of the  confidentiality  agreement  dated December 2,
1999,  with respect to all  information  received by it from Seller prior to the
Closing.

         5.       Post-Closing Covenants.  The Parties agree as follows with
respect to the period following the Closing.

         (a) General.  In case at any time after the Closing any further  action
is necessary to carry out the purposes and intent of this Agreement, each of the
parties will take such further  action  (including the execution and delivery of
such  further  instruments  and  documents)  as the other party  reasonably  may
request.  Specifically,  if any Pump  Customer  asserts that its Pump  Bilateral
Agreement  was  not  properly  assigned  to  Buyer,  (i)  Seller  shall  provide
reasonable  assistance,  at Seller's  expense,  to convince the Pump Customer to
either  accept the  assignment  to Buyer of the Pump  Bilateral  Agreement or to
enter into a new Usage  Agreement  directly with Buyer,  or (ii) if such efforts
are unsuccessful,  Seller shall, in circumstances  where the Pump Customer fails
or refuses to purchase the minimum  quantity of  Disposables  required under the
Pump  Bilateral  Agreement,  assign  to  Buyer  Seller's  right to  enforce  the
provisions  of the Pump  Bilateral  Agreement  in order to permit  Buyer (at its
expense) to bring an action to recover the Pump(s) from such Pump Customer.

                  (b)  Transition  Services and  Post-Closing  Obligations.  (i)
         Seller shall,  reasonably  promptly after the Closing,  notify the Pump
         Customers  that its  Pump  Bilateral  Agreement  with  Seller  has been
         assigned  to Buyer and that  Seller  has sold to Buyer all of the Pumps
         placed by Seller with said Pump  Customer.  For a period of twelve (12)
         months  after the  Closing,  Seller  shall  exercise  its  commercially
         reasonable best efforts to assist Buyer in establishing  with each Pump
         Customer a new contract (each, a "Usage Agreement") covering use of the
         Pumps held by the Pump  Customer and the purchase by the Pump  Customer
         and the sale by Buyer of  Disposables,  each of which Usage  Agreements
         would,  by its express terms,  replace and supersede the Pump Bilateral
         Agreement assigned to and assumed by Buyer at the Closing. Such efforts
         will include Seller's sales representatives  recommending that the Pump
         Customers purchase Products from Buyer rather than Seller.  Buyer shall
         promptly  notify  Seller of each Pump  Customer  with whom it secures a
         Usage Agreement.  With respect to each Pump Customer, Buyer agrees that
         unless and until a Usage  Agreement is entered into between Buyer and a
         Pump Customer,  (1) Buyer shall perform all  obligations  regarding the
         placement,  sale and/or  delivery of Products to a Pump Customer  under
         the Pump Bilateral Agreement arising from and after the Closing and (2)
         in the event Buyer fails or refuses to perform  such  obligations  with
         respect to a Pump Customer, Seller, in addition to any other rights and
         remedies  available  to  Seller,  shall  have  the  right  (but not the
         obligation)  to place or sell, or arrange for the placement or sale of,
         Products  to such Pump  Customer  as  required by the terms of the Pump
         Bilateral Agreement.

                  (ii) In  consideration  of  Seller's  assisting  Buyer in its'
         efforts to secure from each Pump Customer a Usage Agreement as provided
         above, and in addition to the amounts paid to Seller under the terms of
         Section 1 (d)  above,  Buyer  shall pay  Seller a  one-time  fee of Ten
         Dollars ($10) per Pump for which a properly  completed  Usage Agreement
         is entered  into with Buyer  during  the  12-month  period set forth in
         Section 5(b)(i) above. Thus, for purposes of illustration, if Buyer and
         a Pump  Customer  with 100 Pumps sign a Usage  Agreement,  Seller shall
         receive $1,000. Buyer shall pay this fee within thirty (30) days at the
         end of each  calendar  quarter with respect to Pump  Customers who sign
         Usage Agreements during such quarter.

                  (iii) Seller shall, for a period of ninety (90) days following
         the Closing (or such shorter period as the parties may mutually agree),
         on  behalf  of  and as an  accommodation  to  Buyer:  take  orders  for
         Disposables from the Pump Customers;  place all such orders with Buyer;
         invoice,  on behalf  of  Buyer,  the Pump  Customers  for such  orders;
         exercise  its  commercially  reasonable  best  efforts to  collect  the
         invoiced  amount  from such Pump  Customers  and remit the  payments so
         received to Buyer.  Buyer agrees that Seller  shall not be  responsible
         for  any  failure  on the  part of a Pump  Customer(s)  to pay all or a
         portion of the full invoiced  amount.  In  consideration  for providing
         such services,  Buyer shall pay Seller a fee of one percent (1%) of the
         total "gross" sales amount of all orders for  Disposables  so processed
         by Seller and placed with Buyer. Buyer shall pay Seller said fee within
         thirty (30) days at the end of each calendar quarter. After such ninety
         (90) day period,  Buyer shall  undertake  all such tasks  directly  and
         Seller shall (except as otherwise  provided in Section 5 (b) (i) above)
         direct  to  Buyer  all Pump  Customers  seeking  to order  Disposables.
         Additionally,  Seller  shall  advise  any  party  which  is  not a Pump
         Customer but is seeking to purchase or acquire Products that Buyer is a
         supplier of Products.

                  (iv) Seller shall, at its expense, secure a recall termination
         letter or other written confirmation from the FDA that the recall which
         is the  subject  of the  August  18,  1998  Notice  Of  Medical  Device
         Correction referenced in Section 1 (a) above has been terminated by the
         FDA and be responsible for such further action (if any) required by the
         FDA to obtain the  termination  of the recall  which is the  subject of
         said August 18, 1998 Notice.

         (c)  Transfer  of  Possession  of the  Assets.  Except for Pumps in the
possession of the Pump Customers and any other  Acquired  Assets held by a third
party, all tangible forms of the Acquired Assets shall be available for physical
possession  by Buyer  immediately  upon Closing.  Such Acquired  Assets shall be
packaged  by  Seller  in a form  reasonably  necessary  for safe  and  insurable
shipment by common carrier. Seller shall ship such Acquired Assets to a location
designated by Buyer,  fully insured,  within seven (7) days of the Closing Date.
The parties  shall share equally the expense of such  shipping.  Transfer of the
Acquired  Assets (other than Pumps in the possession of the Pump Customers) held
by third parties shall be  determined  by Buyer and such third  parties.  Seller
shall, on or before the Closing,  send a letter (in a form reasonably acceptable
to Buyer) to Venusa, Ltd.  ("Venusa"),  the entity which is in possession of the
Tooling,  advising  Venusa that Seller has sold and  transferred  the Tooling to
Buyer.

         6.       Conditions to Obligation to Close.

         (a)  Conditions  to  Obligation  of Buyer.  The  obligation of Buyer to
consummate the transactions  contemplated by this Agreement is expressly subject
to the satisfaction, on or prior to the Closing, of all the following conditions
(compliance  with which or the  occurrence of which may be waived in whole or in
part by the Buyer in writing):

                  (i)      the  representations  and  warranties set forth in
         Section 2 above shall be true and correct in all material respects at
         and as of the Closing;

                  (ii) Seller shall have  performed and complied in all material
         respects with all of its covenants  hereunder  which are required to be
         performed or complied with by it prior to or on the Closing;

                  (iii) no  action,  suit,  or  proceeding  shall be  pending or
         threatened before any court or quasi-judicial or administrative  agency
         of any federal,  state,  local,  or foreign  jurisdiction or before any
         arbitrator wherein an unfavorable injunction,  judgment, order, decree,
         ruling,  or  charge  would  (A)  prevent  consummation  of  any  of the
         transactions  contemplated  by this  Agreement,  (B)  cause  any of the
         transactions  contemplated by this Agreement to be rescinded  following
         consummation,  or (C) have a  material  adverse  affect on the right of
         Buyer to own and use the Acquired Assets;

                  (iv) all  material  actions  required to be taken by Seller in
         connection with  consummation of the transactions  contemplated  hereby
         and all  certificates,  instruments,  and other  documents  required to
         effect  the  transactions   contemplated   hereby  will  be  reasonably
         satisfactory in form and substance to Buyer;

                  (v) Seller  shall have  received  all  material  consents  and
         approvals of third  parties to the  transactions  contemplated  by this
         Agreement  as may be  required  to be  received  by or on the  part  of
         Seller.

         (b)  Conditions to Obligation  of Seller.  The  obligation of Seller to
consummate the transactions  contemplated by this Agreement is expressly subject
to the satisfaction, on or prior to the Closing, of all the following conditions
(compliance  with which or the  occurrence of which may be waived in whole or in
part by the Seller in writing):

                  (i)      the  representations  and  warranties set forth in
         Section 3 above shall be true and correct in all material respects at
         and as of the Closing;

                  (ii) Buyer shall have  performed  and complied in all material
         respects with all of its covenants  hereunder  which are required to be
         performed or complied with by it prior to or on the Closing,  including
         without  limitation Buyer's obligation to pay Seller amounts due on the
         Closing under the terms of Section 1 (d) above;

                  (iii) no  action,  suit,  or  proceeding  shall be  pending or
         threatened before any court or quasi-judicial or administrative  agency
         of any federal,  state,  local,  or foreign  jurisdiction or before any
         arbitrator wherein an unfavorable injunction,  judgment, order, decree,
         ruling,  or  charge  would  (A)  prevent  consummation  of  any  of the
         transactions  contemplated  by this  Agreement  or (B) cause any of the
         transactions  contemplated by this Agreement to be rescinded  following
         consummation (and no such injunction,  judgment, order, decree, ruling,
         or charge shall be in effect);

                  (iv) all  material  actions  required  to be taken by Buyer in
         connection with  consummation of the transactions  contemplated  hereby
         and all  certificates,  instruments,  and other  documents  required to
         effect  the  transactions   contemplated   hereby  will  be  reasonably
         satisfactory in form and substance to Seller;

                  (v) Buyer  shall  have  received  all  material  consents  and
         approvals of third  parties to the  transactions  contemplated  by this
         Agreement as may be required to be received by or on the part of Buyer.

         7.       Remedies for Breaches of This Agreement.

         (a)   Survival  of   Representations   and   Warranties.   All  of  the
representations  and warranties of Buyer and Seller  contained in this Agreement
shall  survive the Closing  (even if the party to whom such  representation  and
warranty  was given had  reason  to know of any  misrepresentation  or breach of
warranty  at the time of  Closing)  and  continue in full force and effect for a
period of nine (9) months thereafter.

         (b) Seller's Indemnification.  Seller agrees to indemnify Buyer and its
affiliates and hold them harmless from and against any and all damages,  losses,
obligations, liabilities, actions, claims or expenses (including court costs and
reasonable  attorneys' fees associated  therewith) (the "Buyer's  Losses") which
arise or result  from or are  incident or related to (i) the  inaccuracy  of any
representation  or breach of any  warranty of Seller that  survives  the Closing
contained  in this  Agreement  (including  any  certificate,  agreement or other
instrument  delivered  by  or  on  behalf  of  Seller  in  connection  with  the
transactions contemplated by this Agreement);  (ii) any default by Seller in the
observance  or  performance  of any of its covenants or  obligations  under this
Agreement (including any certificate, agreement or other instrument delivered by
or on behalf of Seller in connection with the transactions  contemplated by this
Agreement);  (iii) any act or omission of Seller which  constitutes  a breach or
default under this  Agreement,  or (iv) any  liability  retained by Seller under
this  Agreement.  Subject  to  compliance  with this  Section  7,  Seller  shall
reimburse Buyer on demand for any Buyer's Losses at any time after the execution
of this Agreement.  Consummation  of the  transactions  contemplated  under this
Agreement shall not be deemed or construed to be a waiver of any right or remedy
of Buyer.

         (c) Buyer's  Indemnification.  Buyer agrees to indemnify Seller and its
affiliates and hold them harmless from and against any and all damages,  losses,
obligations,   liabilities,  claims  or  expenses  (including  court  costs  and
reasonable  attorneys' fees associated  therewith) (the "Seller's Losses") which
arise or result from or are incident to (i) the inaccuracy of any representation
or breach of any warranty of Buyer  contained in this  Agreement  (including any
certificate, agreement or other instrument delivered by or on behalf of Buyer in
connection  with the  transactions  contemplated  by this  Agreement);  (ii) any
default by Buyer in the  observance  or  performance  of any of its covenants or
obligations under this Agreement (including any certificate,  agreement or other
instrument   delivered  by  or  on  behalf  of  Buyer  in  connection  with  the
transactions contemplated by this Agreement); (iii) any act or omission of Buyer
which  constitutes  a  breach  or  default  under  this  Agreement;  or (iv) any
liability  retained by Buyer under this  Agreement.  Subject to compliance  with
this Section 7, Buyer shall  reimburse  Seller on demand for any Seller's Losses
at  any  time  after  the  execution  of  this  Agreement.  Consummation  of the
transactions  contemplated under this Agreement shall not be deemed or construed
to be a waiver of any right or remedy of Seller.

         (d)  Tender  of  Defense.   The  party   indemnified   hereunder   (the
"Indemnitee") shall promptly notify the indemnifying party (the "Indemnitor") of
the existence of any claim,  demand,  or other matter  involving  liabilities to
third parties to which the Indemnitor's  indemnification obligations would apply
and shall  give the  Indemnitor  20  calendar  days (or such  shorter  period as
required by the  contingencies  of such claim,  demand or other matter involving
liabilities  to third  parties)  in which to elect to defend the same at its own
expense  and with  counsel of its own  selection  (who shall be  approved by the
Indemnitee,  which  approval  shall not be  unreasonably  withheld or  delayed);
provided  that the  Indemnitee  shall at all times  also have the right to fully
participate  in the defense at its own expense.  If the  Indemnitor  assumes the
defense of an action,  (a) the  Indemnitee  shall be  entitled  to  meaningfully
participate therein, (b) no settlement or compromise thereof may be effected (i)
by the Indemnitor without the consent of the Indemnitee (which consent shall not
be unreasonably withheld or unreasonably delayed) unless (A) there is no finding
or  admission  of any  violation  of law or any  violation  of the rights of any
person by any  Indemnitee  and no adverse effect on any other claims that may be
made against any Indemnitee and (B) all relief  provided is paid or satisfied in
full by the  Indemnitor  or (ii) by the  Indemnitee  without  the consent of the
Indemnitor and (c) the Indemnitee  may  subsequently  assume the defense of such
action,  at the  Indemnitor's  expense,  if a court  of  competent  jurisdiction
determines that the indemnifying party is not vigorously  defending such action.
If the Indemnitor shall,  within such 20 calendar day (or shorter) period,  fail
to defend,  the  Indemnitee  shall have the right,  but not the  obligation,  to
undertake  the defense of, and to compromise  or settle  (exercising  reasonable
business judgement) the claim or other matter on behalf, for the account, and at
the risk and expense of the Indemnitor;  provided, however, the Indemnitee shall
not compromise or settle the claim or other matter  without the written  consent
of the Indemnitor,  such consent not to be unreasonably  withheld or delayed. If
the claim is one that cannot by its nature be defended solely by the Indemnitor,
the Indemnitee  shall make  available all  information  and assistance  that the
Indemnitor may reasonably  request;  provided that any associated expenses shall
be paid by the Indemnitor.

         (e) Indemnity Threshold.  No party shall be entitled to indemnification
under  this  Section 7 unless  and until the  aggregate  amount of valid  claims
against  the other  party  pursuant to the  provisions  of Section  7(b) or 7(c)
exceed Fifty Thousand Dollars ($50,000.00) (the "Indemnity  Threshold").  If the
Indemnity Threshold is exceeded,  the Indemnified Party shall be entitled to the
entire  amount of such claims from the other party,  including  the amount up to
the Indemnity Threshold as well as the amount exceeding the Indemnity Threshold.

         (f) Exclusive Remedy.  After the Closing,  the rights set forth in this
Section 7 shall be each party's sole and  exclusive  remedies  against the other
party  for  misrepresentations  or  breaches  of  covenants  contained  in  this
Agreement;  provided,  however, that nothing herein shall prevent any party from
demanding arbitration or bringing an action in accordance with the terms of this
Agreement based upon allegations of fraud or intentional breach of an obligation
of or with respect to either party in connection with this Agreement.

         8.       Termination.

         (a)      Termination of Agreement.  Certain of the parties may
                  terminate this Agreement as provided below:

                  (i) Buyer and Seller may  terminate  this  Agreement by mutual
                  written  consent at any time prior to the Closing;  (ii) Buyer
                  may  terminate  this  Agreement  by giving  written  notice to
                  Seller at any time prior to the Closing (A)

         in the event Seller has breached any material representation, warranty,
         or covenant contained in this Agreement in any material respect,  Buyer
         has  notified  Seller in  writing  of the  breach,  and the  breach has
         continued  without  cure for a period of 10 days  after  the  notice of
         breach or (B) if the Closing  shall not have occurred on or before June
         30, 2000,  by reason of the failure of any  condition  precedent  under
         Section 6(a) hereof  (unless the failure  results  primarily from Buyer
         itself breaching any representation, warranty, or covenant contained in
         this Agreement); and

                  (iii) Seller may terminate  this  Agreement by giving  written
         notice to Buyer at any time prior to the Closing (A) in the event Buyer
         has  breached  any  material  representation,   warranty,  or  covenant
         contained  in  this  Agreement  in any  material  respect,  Seller  has
         notified  Buyer in writing of the breach,  and the breach has continued
         without  cure for a period of 10 days after the notice of breach or (B)
         if the Closing  shall not have  occurred on or before June 30, 2000, by
         reason of the failure of any  condition  precedent  under  Section 6(b)
         hereof  (unless  the  failure  results  primarily  from  Seller  itself
         breaching any representation,  warranty,  or covenant contained in this
         Agreement).

         (b)  Effect of  Termination.  If any party  terminates  this  Agreement
pursuant  to Section  8(a)  above,  all rights and  obligations  of the  parties
hereunder shall terminate  without any liability of any party to the other party
(except for any liability of any party then in breach).

         9.       Miscellaneous.

         (a) Press Releases and Public  Announcements.  No party shall issue any
press release or make any public announcement  relating to the subject matter of
this Agreement without the prior written approval of the other party;  provided,
however, that any party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing party will use its best
efforts to advise the other party prior to making the disclosure).

         (b) Risk of Loss.  The risk of loss or damage by fire or other casualty
to the Acquired Assets (to the extent they exist in tangible form) shall be upon
Seller  until  Closing  for those  Acquired  Assets in the  possession  of third
parties,  and until delivery to a common carrier for shipping for those Acquired
Assets in the possession of Seller. In the event losses or damages to any of the
tangible  Acquired  Assets occur prior to the Closing  which,  in total,  exceed
$10,000  (based on the market value of such Acquired  Assets),  Buyer shall have
the option of: (i) taking  such  damaged  assets and  receiving  at Closing  all
insurance  proceeds to which  Sellers would be entitled as a result of such loss
or damage; or (ii) rejecting such damaged assets entirely and the Purchase Price
shall be equitably reduced to reflect the non-transference of same. In the event
such damages exceed $100,000, Buyer may at its election terminate this Agreement
pursuant to 8(a)(ii).

         (c) No Third-Party  Beneficiaries.  This Agreement shall not confer any
rights or remedies  upon any Person other than the Parties and their  respective
successors and permitted assigns.

         (d) Entire Agreement.  This Agreement (including the documents referred
to herein (but excluding the Confidentiality  Agreement, dated December 2, 1999,
between the Parties)  constitutes the entire  agreement  between the parties and
supersedes  any  prior  understandings,  agreements,  or  representations  by or
between the parties, written or oral, to the extent they have related in any way
to the subject matter hereof,  including the Letter of Interest,  dated February
17, 2000, between the parties.

         (e)      Succession.  This  Agreement  shall be binding  upon and inure
to the benefit of the parties  named  herein and their respective successors
and permitted assigns.

         (f)  Counterparts.  This  Agreement  may be  executed  in  one or  more
counterparts,  each of  which  shall  be  deemed  an  original  but all of which
together will constitute one and the same instrument.

         (g)      Headings.  The section  headings  contained in this Agreement
are inserted for convenience  only and shall not affect in any way the meaning
or interpretation of this Agreement.

         (h)  Notices.  All  notices,  requests,   demands,  claims,  and  other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication  hereunder shall be deemed duly given five (5) days after
it is sent by registered or certified mail,  return receipt  requested,  postage
prepaid, and addressed to the intended recipient as set forth below:

     If to Seller:                            Copy to:

     Nestle Clinical Nutrition                Nestle USA, Inc.
     Three Parkway North, #500                800 No. Brand Blvd.
     Deerfield, IL 60015                      Glendale, CA 91203
     Attn: General Manager                    Attn:  Legal Department
     Fax:  847 317 3186                       Fax:  818 549-5840

     If to Buyer:                             Copy to:

     ZEVEX, Inc.                              Jones, Waldo, Holbrook & McDonough
     4314 ZEVEX Park Lane                     1500 Wells Fargo Plaza
     Salt Lake City, UT 84123                 170 South Main
     Attention:President                      Salt Lake City, UT 84101-1644
     Fax: 801 264-1051                        Attention: Ronald S. Poelman, Esq.
                                              Fax:  801 328-0537

A party may send any notice,  request,  demand,  claim,  or other  communication
hereunder  to the  intended  recipient  at the address set forth above using any
other means (including personal delivery,  expedited courier, messenger service,
telecopy or telefax,  telex,  ordinary  mail, or electronic  mail),  but no such
notice,  request,  demand, claim, or other communication shall be deemed to have
been duly  given  unless  and until it  actually  is  received  by the  intended
recipient. Any party may change the address to which notices, requests, demands,
claims,  and other  communications  hereunder  are to be delivered by giving the
other party notice in the manner herein set forth.

         (i)      Governing  Law. This Agreement  shall be governed by and
construed in accordance  with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule.

         (j)  Amendments  and Waivers.  No  amendment  of any  provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller. No waiver by any party of any default, misrepresentation,  or breach
of warranty or covenant  hereunder,  whether intentional or not, shall be deemed
to extend to any prior or subsequent  default,  misrepresentation,  or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.

         (k)  Severability.  Any term or  provision  of this  Agreement  that is
invalid or unenforceable  in any situation in any jurisdiction  shall not affect
the validity or  enforceability  of the remaining terms and provisions hereof or
the validity or  enforceability  of the offending term or provision in any other
situation or in any other jurisdiction.

         (l)  Expenses.  Buyer and Seller  will bear its own costs and  expenses
(including  legal fees and expenses)  incurred in connection with this Agreement
and the transactions contemplated hereby.

         (m)  Construction.   The  parties  have  participated  jointly  in  the
negotiation  and  drafting  of this  Agreement.  In the  event an  ambiguity  or
question of intent or interpretation  arises,  this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise  favoring or  disfavoring  any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign  statute  or law  shall  be  deemed  also  to  refer  to all  rules  and
regulations promulgated thereunder,  unless the context requires otherwise.  The
word  "including"  shall  mean  including  without  limitation.  Nothing  in any
disclosure  schedule  shall be deemed  adequate to disclose  an  exception  to a
representation or warranty made herein unless the disclosure schedule identifies
the exception with reasonable  particularity and describes the relevant facts in
reasonable  detail.  Without limiting the generality of the foregoing,  the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a  representation  or warranty  made herein
(unless the  representation  or  warranty  has to do with the  existence  of the
document or other item itself).

         (n)      Incorporation  of Schedules.  The Schedules  identified in
this  Agreement are  incorporated  herein by reference and made a part hereof.

         (o) Specific  Performance.  Each of the parties acknowledges and agrees
that the  other  party  would be  damaged  irreparably  in the  event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached.  Accordingly,  each of the parties  agrees that
the other party shall be entitled to an  injunction  or  injunctions  to prevent
breaches of the  provisions of this Agreement and to enforce  specifically  this
Agreement and the terms and  provisions  hereof in any action  instituted in any
court of the United States or any state  thereof  having  jurisdiction  over the
parties and the matter.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the date first above written.

                           "Buyer"

                           ZEVEX, INC.


                           By: DEAN G. CONSTANTINE
                               -------------------

                           Its:CEO
                               -------

                           "Seller"

                           NESTLE USA, INC.


                           By: ROCK D. FOSTER
                               --------------

                           Its:VP GM NCN
                               ---------


<PAGE>


                                    EXHIBIT A

                           EXCLUSIVE LICENSE AGREEMENT

         This is an agreement  between  Nestle,  S.A., a  corporation  having an
address at Avenue Nestle 55, 1800 Vevey, Switzerland  (hereinafter  "LICENSOR"),
and ZEVEX,  Inc.,  a  corporation  of the State of  Delaware,  having a business
address  at 4314  Zevex Park  Lane,  Salt Lake  City,  Utah  84123  (hereinafter
"LICENSEE").

         Whereas,  LICENSOR is the owner by  assignment  of U.S.  Patent No.
5,267,983  entitled  ENTERAL  ADAPTER  AND TIP  PROTECTOR (hereinafter "the `983
patent"); and

         Whereas, LICENSEE is desirous of acquiring an exclusive license to the
`983 patent;

         For good  and  valuable  consideration,  receipt  of  which  is  hereby
acknowledged, except as is hereinafter provided in this paragraph, the LICENSOR,
by these presents,  does hereby grant unto the LICENSEE an exclusive  license to
make,  have  made,  use,  sell,  and offer to sell,  in the  United  States  any
apparatus  or method  which  falls  within  the scope of the  claims of the `983
patent.  Notwithstanding  the exclusive character of the license granted in this
Agreement,  the LICENSEE,  its  successors  and assigns shall take the aforesaid
license subject only to an outstanding non-exclusive, royalty-free license under
the  `983  patent  to  Baxter  International,  Inc.  of  Deerfield,  IL under an
agreement  executed  by  the  LICENSOR  prior  to the  effective  date  of  this
Agreement.


<PAGE>


         The LICENSEE, as exclusive licensee,  shall have the right to institute
and prosecute at its own expense, suits for infringement of the `983 patent, and
if required by law, to join the  LICENSOR as party  plaintiff  in any such suit.
All expenses in such suits,  including all costs and reasonable  attorney's fees
which may be incurred by the LICENSOR in connection with any such suit , will be
borne entirely by the LICENSEE. The LICENSEE shall be empowered in any such suit
to enjoin  infringement  and/or to collect for its use,  damages,  profits,  and
awards of whatever nature recoverable for such infringement. The LICENSEE shall,
subject to the prior written approval of the LICENSOR,  have the right to settle
any claim or suit for infringement of the `983 patent by granting the infringing
party a sublicense under the `983 patent.

         The LICENSOR  further  acknowledges  and agrees that the LICENSEE shall
not have any obligation to make, use, sell,  import,  offer for sale, or promote
any apparatus or method which falls within the scope of the `983 patent. Nothing
in this Agreement or in the relationship  between the parties shall be construed
to impose such an obligation on the LICENSEE.

         The LICENSOR hereby agrees and acknowledges  that the exclusive license
of rights and property set forth herein is and shall be irrevocable  and binding
upon the assigns, representatives and successors of the undersigned LICENSOR and
extend to the  successors,  assigns and nominees of the LICENSEE for the life of
the `983 patent, including any and all extensions.

         IN WITNESS WHEREOF,  each of the parties hereto has caused this License
Agreement to be signed by its duly authorized representative.

Zevex, Inc                                  Nestle, S.A.

By_______________________                   By____________________
Its ___________________________             Its_____________________
Date______________________                  Date___________________


<PAGE>
                                   Exhibit 21
                              List of Subsidiaries

1.       ZEVEX, Inc., a Delaware corporation
2.       JTech Medical Industries, Inc., a Utah corporation
3.       Aborn Electronics, Inc., a California corporation