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, 2003

                                       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:_X_

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2) Yes ___No_X_

         The aggregate market value of the registrant's common stock held by
nonaffiliates computed with reference to the closing price as quoted on the
NASDAQ Stock Market, as of the last business day of the registrant's most
recently completed second quarter, June 30, 2003, was approximately $10,883,085.
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 registrant's common stock as
of March 18, 2004 was 3,400,964

         Documents incorporated by reference: none


<PAGE>


                                TABLE OF CONTENTS


Part I

   Item 1  BUSINESS                                                        --  3
   Item 2  PROPERTIES                                                      -- 12
   Item 3  LEGAL PROCEEDINGS                                               -- 12
   Item 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS             -- 13


Part II
   Item 5  MARKET FOR REGISTRANT'S COMMON EQUITY AND

                 RELATED STOCKHOLDER MATTERS                               -- 13
   Item 6  SELECTED FINANCIAL DATA                                         -- 13

   Item 7  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                 CONDITION AND RESULTS OF OPERATIONS                       -- 14
   Item7AQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                 MARKET RISK                                               -- 35
   Item 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                     -- 36

   Item 9  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

                 ON ACCOUNTING AND FINANCIAL DISCLOSURE                    -- 36
   Item 9A CONTORLS AND PROCEDURES                                         -- 36


Part III

   Item 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT             -- 36
   Item 11  EXECUTIVE COMPENSATION                                         -- 39
   Item 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                   AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS          -- 42
   Item 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                  -- 44
   Item 14 PRINCIPAL ACCOUNTANT AND SERVICES                               -- 44


Part IV

   Item 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
                   ON FORM 8-K                                             -- 45
   Item 15(c)  INDEX TO EXHIBITS                                           -- 51

SIGNATURES                                                                 -- 46



<PAGE>


                                     PART I

ITEM 1.  BUSINESS

GENERAL

ZEVEX(R) International, Inc. ("ZEVEX") through our divisions and subsidiaries,
engages in the business of designing, manufacturing, and distributing medical
devices. Our Therapeutics division markets enteral nutrition delivery devices.
Until its sale on December 31, 2003, our Physical Evaluation division marketed
industry-leading physical evaluation testing systems. Our Applied Technology
division designs and manufactures advanced medical components and systems for
other medical technology companies.


During 2003, we evaluated our business opportunities and restructured our
operations to focus on our core market offerings of ambulatory enteral feeding
(our Therapeutics division) and contract manufacturing services (our Applied
Technology division). As part of this effort we established a lean manufacturing
philosophy including the transition from batch processing to continuous flow
production, realigned our operating segments to more accurately reflect our
current business, and sold the Physical Evaluation business in December 2003.


Our Therapeutics Division


Through the sale of enteral feeding pumps and related devices, we have
established a competitive position in the U.S. enteral nutrition delivery
market. This market includes feeding pumps, disposable sets and feeding tubes
that are used by patients who require direct gastrointestinal nutrition therapy
(also called enteral feeding). Enteral feeding is the means of providing liquid
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 disorders that prevent normal digestion. We call
this our Therapeutics division.


The Sale of Our Physical Evaluation Division


Until December 31, 2003, we competed in the Physical Evaluation market through
our sales of stand-alone and computerized products that measure isolated muscle
strength, joint ranges of motion and sensation. We called this our Physical
Evaluation division. Our products were internationally recognized in physical
medicine measurement markets as state-of-the-art for providing calibrated
hardware and Windows(R)-compatible software. The musculoskeletal evaluation,
functional capacity evaluation, upper extremity and hand testing, and pain
evaluation products were used for outcomes assessment during rehabilitation,
medical-legal evaluations for personal injury, and workers' compensation claims
and clinical documentation.

On December 31, 2003, we completed the sale of our Physical Evaluation business.
The transaction was accomplished by the sale of all the issued and outstanding
capital stock of JTech Medical Industries, Inc., ("JTech"), our wholly-owned
subsidiary. The transaction was effected by a Stock Purchase Agreement (the
"Stock Purchase Agreement") dated December 31, 2003 by and between ZEVEX and Mr.
Leonard C. Smith, a former employee, officer and director of ZEVEX. (See Item 7.
Management Discussion and Analysis of Financial Conditions and Results of
Operations). We sold the Physical Evaluation division in an effort to focus on
our core competencies.


Our Applied Technology Division

We also provide design and manufacturing services in a multi-billion dollar
market to worldwide medical device leaders who, in turn, sell our components and
systems under private labels or incorporate them into their products. We call
this our Applied Technology division. These OEM (Original Equipment
Manufacturer) products include ultrasonic sensors and surgical handpieces,
optoelectronic components, and electronic instruments. Our operation in Salt
Lake City is a world-class medical device manufacturer, meeting ISO 9001 and ISO
13485 certification requirements and uses a quality system developed to meet the
U. S. Food and Drug Administration's Good Manufacturing Practices.

<PAGE>


Our Platform for Future Growth


The last three years have been challenging for us due to the effects of the
downturn in the economy, increased pricing competition related to the stationary
pump and disposable set products of our Therapeutics division, and the unsteady
demand for our Physical Evaluation and Applied Technology divisions' sales.
However we believe that our refocusing on our core market offerings will foster
growth in the future. In each of the past three years, sales of our ambulatory
enteral feeding products have grown, and during the past year, overall sales of
our Therapeutics and Applied Technology businesses each have grown. The growth
from these two divisions offset the decline in revenue from our Physical
Evaluation business and stationary enteral feeding business in 2003, resulting
in total Company revenue growth of 1.5% over 2002.

During the past two years, we increased our sales and marketing expenses, and
increased research and development investment in order to bring to market new
products in all business segments.


We have reduced our debt by 64%, approximately $11 million since January 2001,
redefined our operating segments, reduced employee head count by 33%,
implemented lean manufacturing, and focused our Company on our core
competencies. Our operations are now based upon common or related technologies,
enhancing the development of innovative products, quality and service, and
providing efficient sharing of business resources.


Financial Information

For information regarding our financial condition and results of operations
please see Item 8 of the report entitled "Financial Statements and Supplementary
Data" and Notes to Consolidated Financial Statements included in that item. See
also the discussion of the financial performance of our segments in Note 13 to
the Consolidated Financial Statements


Our Contact and Additional  Information

We maintain our executive offices and principal facility at 4314 ZEVEX Park
Lane, Salt Lake City, Utah 84123. Our telephone number is (801) 264-1001. We
maintain an Internet site at http://www.zevex.com. We make available free of
charge through this website our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934 as soon as reasonably practicable after we electronically file such
material to the Securities and Exchange Commission. Our website and the
information contained therein or connected thereto shall not be deemed to be
incorporated into this Form 10-K.

<PAGE>

OUR PROPRIETARY PRODUCTS

         Therapeutic Products

We sell two major lines of enteral feeding pumps and a variety of related
disposable delivery sets and accessories. We call this our Therapeutics
division. Enteral feeding is a method of delivering nutrition to patients
through the gastrointestinal tract. Many enteral feeding patients require
continuous administration of nutritional solutions throughout the day, which
requires the patient to carry an enteral feeding pump.



We have successfully applied our 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. We believe that the EnteraLite(R) pump is the lightest,
most compact, and most mobile enteral feeding pump in the U.S. market,
possessing unprecedented safety and accuracy in enteral nutrition delivery. The
EnteraLite(R)'s unique features include the ability to operate in any
orientation, +/-5% accuracy and a 24-hour battery, the life of which is
one-third longer than the battery life of its closest competitor. The
EnteraLite(R) pump also carries a two-year warranty that is twice the industry
average.


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

The 1998 acquisition of Nutrition Medical's line of stationary pumps, delivery
sets, and feeding tubes, followed by the 2000 acquisition of the installed base
of Nestle USA stationary pumps, has expanded our line of enteral delivery
products. We now manufacture and distribute these less expensive stationary
enteral feeding pumps, which are intended for applications where patients are
not mobile. Complementing these pump models are a line of disposable delivery
sets sold by us for use with the stationary pumps. These sets include feeding
solution bags of various sizes, as well as "spike" sets for use with pre-filled
feeding solution containers.

         Physical Evaluation Products

Until its sale on December 31, 2003, our Physical Evaluation division marketed
precision instruments and software in the physical and industrial medicine
markets to improve the accuracy, efficiency and objectivity of musculoskeletal,
functional capacity, hand and upper extremity, pain, impairment, and outcomes
evaluations. We generally referred to these products as Physical Evaluation
products. The products test and evaluate patients, document effects of injury,
track improvements, and measure disabilities. These 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.


The Physical Evaluation product line included Commander(TM), Dualer(TM),
Tracker(TM), IsoTrack Pro(TM), JobSite(TM) Software, and Easy Docs Plus(TM)
Software products, and embodied a unique modular component concept. This allowed
clinician's easy entry into advanced evaluation systems, which are scalable as
their practices expand. The software automatically collected data and print
reports for clinical records, legal documentation and third-party reimbursement.


OUR APPLIED TECHNOLOGY CONTRACT DESIGN AND MANUFACTURING SERVICES

We provide design and manufacturing services to medical companies who sell our
components and systems under private labels or incorporate them into their
products. We call this our Applied Technology division. We provide these
services for both established and emerging technology companies, such as Alaris
Medical Systems, Inc., Advanced Medical Optics, Inc., various divisions of
Baxter Healthcare Corporation, Medtronic Corporation, SIMS Deltec, Inc., Edwards
Lifesciences and Terumo Corporation. We offer our customers over 17 years of
specialized engineering and manufacturing expertise.

Industry sources indicate a trend by medical device companies to outsource their
device manufacturing requirements. Many emerging companies do not have the
engineering, manufacturing, or regulatory expertise to quickly and efficiently
take 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
both designing and manufacturing such devices. By focusing our resources and
expertise in the design and manufacturing areas, we believe that we offer
customers the ability to outsource engineering and manufacturing needs on a
cost-effective basis, often allowing the customer to take 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.

<PAGE>


We use extensive engineering and regulatory expertise to deliver integrated
design and manufacturing solutions to our customers. We are registered with the
United States Food and Drug Administration ("FDA") as a medical device
manufacturer and have developed internal systems intended to maintain compliance
with the FDA's Good Manufacturing Practices ("GMP"). We also are certified by
the International Organization for Standardization ("ISO") to 9001 and ISO 13485
standards, which means that we have met internationally recognized quality
standards for the design, manufacture, and testing of products. We devote
significant management time and financial resources to GMP compliance and ISO
certification.


PRINCIPAL OEM PRODUCTS

A majority of our contract manufacturing business in our Applied Technology
division involves the following four general product categories:

         Ophthalmic Surgical Devices

We design and manufacture ultrasonic phacoemulsification handpieces and
handpiece drive circuits for the surgical removal of cataracts.
Phacoemulsification is a method of cataract extraction that 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.

         Ultrasonic Sensors

We design and manufacture a variety of non-invasive ultrasonic sensors for the
detection of air bubbles and the monitoring of liquid levels in critical medical
systems. Our air bubble detectors monitor intravenous fluid lines in drug
infusion pumps, hemodialysis machines, blood collection systems, and
cardiopulmonary bypass systems. Our liquid level detectors utilize ZEVEX'
patented dry acoustic coupling technology and are used to monitor critical
liquid levels in reservoirs employed in cardiopulmonary bypass systems.

         Optoelectronic Sensors and Custom Integrated Circuits


We design and manufacture a variety of optical emitters and detectors, custom
integrated circuit products, and semiconductor components used in medical
applications. Our product capabilities include custom emitter and detector
arrays, sensor interface circuits, application-specific integrated circuit
(ASIC) devices, and custom device packaging solid-state relays. Medical
applications for our products include diagnostic and therapeutic equipment, such
as blood analyzers and dialysis machines.


         Medical Systems


The ultimate level of product sophistication for our contract services involves
the design, engineering, and manufacturing of medical systems. During 2003, we
provided design and engineering services to Organ Recovery Systems, Inc. and
performed a follow-on manufacturing contract to manufacture a hypothermic
perfusion transporter for kidneys. We also manufactured several other medical
systems including one used for identifying genetic markers using optics, an
active air removal system that prevents air bubbles from being reinfused into
the patient during open heart surgery, and the Power Medical Interventions,
SurgASSIST(TM), which is a computer-mediated technology platform that provides a
unique level of intraluminal access, surgical precision, and patient safety,
with applications in numerous surgical stapling procedures throughout the
alimentary tract.

<PAGE>


REVENUE SOURCES

The following table sets forth the source of ZEVEX' total revenue during the
last three years, allocated between six product/service categories.

Revenue breakdown by product/service, by percentage
<TABLE>
<CAPTION>
<S>                                                                       <C>           <C>           <C>
Product                                                                   2003         2002         2001
-------                                                                   ----         ----         ----
Therapeutics                                                             48.0%         47.6%        43.5%
Ultrasonic and Optoelectronic Sensors, Custom IC's                       19.8%         16.5%        24.7%
Physical Evaluation*                                                     11.7%         14.3%        12.6%
Ophthalmic Surgical Devices                                              11.0%         11.1%        10.6%
Design and Engineering                                                    7.2%         7.1%         4.0%
Medical Systems                                                           2.3%         3.4%         4.6%
* The Physical Evaluation business was sold in December 2003

</TABLE>


CAPABILITIES FOR DESIGN, ENGINEERING AND MANUFACTURING

         Design and Engineering

We have extensive design and engineering capabilities that we use for our own
product development, as well as for servicing our contract-manufacturing
customers. Our engineers have broad experience in designing, engineering, and
testing an array of medical devices and systems, with particular expertise in
ultrasonic technology, and optoelectronic technology, and fluid delivery
systems.

Our manufacturing service customers generally rely on us 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 us with final drawings for products that they believe are
ready for manufacturing. Our engineers assist sales and marketing personnel in
evaluating requests for proposals and in developing proposed solutions, cost
estimates, and bids for each product. Our design and engineering services are
generally provided to customers on a time-and-materials fee basis, as part of a
plan to eventually manufacture the customer's product.

We have made significant investments in state-of-the-art equipment to support
our design and engineering staff, including product performance modeling
software, custom test stations, and three-dimensional computer aided design
("CAD") software. We have independently developed what we believe is the most
sophisticated modeling software for ultrasonic surgical device development. We
believe that our unique modeling and design capacities hasten product
development and improve the quality of the final device.

         Manufacturing

Our proprietary products are generally assembled and tested at our manufacturing
facility in Salt Lake City, Utah. Our enteral feeding disposable products are
sub-contracted to specialty manufacturers. Design, engineering, and
manufacturing services for other companies are provided from our Salt Lake City
facility.

Inventory management systems are used to manage inventory and control the
ordering process for more than 5,000 parts used in ZEVEX' and our customers'
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 and external specifications,
as well as the FDA's GMP and ISO 9001/ISO 13485 quality standards.

<PAGE>


We usually provide design and engineering 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. We warrant our products to be free from defects in materials and
workmanship for periods ranging from 90 days to the life of the product.

SUPPLIERS

We purchase our component parts and raw materials from a variety of approved
suppliers. We are not dependent on a single supplier for any item, and we
believe that we can acquire materials from various sources in adequate
quantities and on a timely basis.

SALES AND MARKETING

         Therapeutics

We have a network of direct territory managers who sell enteral pumps and
disposable delivery sets in the United States. These territory managers have
been selected for their experience within the markets in which we sell our
products, and they sell directly to home health care service providers,
hospitals, and nursing homes and medical product distributors. The direct
territory managers are regionally supported by specialists with clinical
credentials (registered dietitians or nurses), who we hire on an independent
contractor basis. We employ a North American sales manager and two area managers
to manage and deploy our sales resources effectively in these major markets.

In the United States customers generally purchase EnteraLite(R) ambulatory
enteral feeding pumps directly from us. In cases where a lease or rental is
preferred, arrangements are most often made through a third party that
specializes in medical equipment financing. Customers then purchase disposable
sets as needed. Customers typically purchase 20 - 30 disposable sets per month
for each pump that is placed in service.

Due to competition, lower-cost stationary pumps generally have been placed at no
up-front cost to the user, in return for set "usage" agreements, which typically
require minimum purchases of 15 disposable sets per pump per month, once the
pumps are placed in service. The cost of the pump is then amortized.

In North America, the distribution of the EnteraLite(R) ambulatory pump,
stationary pumps, delivery sets, and feeding tubes are serviced by our sales
support manager, inside sales specialists, and customer service department, in
addition to the outside sales force described above.


Nestle is our distributor for the EnteraLite(R) in Germany where it distributes
its clinical nutrition products. Medicina distributes the EnteraLite(R) in the
United Kingdom, and Baxter Healthcare distributes our entire enteral feeding
product line in Puerto Rico. During 2003, a version of our stationary pump was
manufactured under private label for distribution by another company in Europe.


         Physical Evaluation

Until it was sold in December 31, 2003 we marketed our Physical Evaluation
product line worldwide through a combination of direct sales representatives,
independent dealers, and manufacturers' representatives. These direct and
independent representatives and dealers were selected for their experience in
marketing to chiropractors, osteopaths, physical therapists, and occupational
therapists. The sales force was supported by regional sales managers who were
full-time employees of ZEVEX. We also sold the products via seminars, directed
mailings, catalogs, and telemarketing through our customer service personnel. We
marketed internationally through a distributor network.

<PAGE>


         Applied Technology Contract Design and Manufacturing Services

We generate new design and manufacturing projects using direct sales personnel
who are trained in our engineering expertise and manufacturing capabilities.
Project engineers also participate extensively in sales and marketing
activities. We promote our design and manufacturing capabilities at industry
trade shows, by advertising in leading industry publications, through our
website www.zevex.com, and by obtaining referrals from customers and other
persons who are familiar with ZEVEX' services.

COMPETITION

         Enteral Nutrition Delivery Products


Three major competitors exist in the U.S. market for enteral feeding pumps. Ross
Laboratories, a division of Abbott Laboratories, markets the Patrol(R) and
Quantum(R) stationary enteral feeding pumps, and the Embrace(R) ambulatory
enteral feeding pump. Frost & Sullivan marketing research report estimates that
Ross holds approximately 46% market share for enteral pumps and delivery sets in
both ambulatory and non-ambulatory enteral feeding applications. Kendall
Healthcare, a division of Tyco, offers the kangaroo(R) PET enteral feeding pump
for ambulatory applications, which has limited application because it can be
operated only in an upright position. Kendall also markets its Control(R) and
Entriflush(R) pumps for stationary applications. Frost & Sullivan marketing
research report estimates that Kendall Healthcare presently holds approximately
25% of the total market for enteral pumps and disposable sets in both ambulatory
and non-ambulatory applications. In addition to Ross Laboratories and Kendall
Healthcare, a third competitor, Novartis also competes in the U.S. market for
stationary enteral nutrition delivery pumps. Frost & Sullivan marketing research
report estimates that Novartis presently holds approximately 16% of the total
U.S. market for enteral pumps and disposable sets in both ambulatory and
non-ambulatory applications.


Well-established competitors such as Ross Laboratories, Kendall Healthcare, and
Novartis typically bundle products for the greatest advantage in
group-purchasing situations. Each of these competitors offers a range of product
offerings that exceeds that of ZEVEX. We believe the keys to our ability to
compete effectively in the enteral feeding market are the unique features of our
product offerings and the benefits to customers who utilize them. We expect to
build upon our reputation for innovation that was earned by our EnteraLite(R)
ambulatory enteral feeding pump for mobile enteral patients. We expect to
develop products that are complementary to our enteral nutrition delivery
product line, particularly those having features that can significantly improve
a patient's quality of life and can ensure safety and ease of enteral
administration.

         Physical Evaluation Products


Until we sold the Physical Evaluation division in December 2003, the primary
competitors in the physical evaluation market were a limited number of small
privately held companies. Most notable was Hanoun, Key Methods, Isernhagen,
Myologic, and ARCON. Generally, these companies concentrated on particular areas
such as musculoskeletal testing, functional capacity evaluation, or hand
testing. We believed that few competitors could serve the broad spectrum of the
medical profession like the JTech product line could, because their products
lack the full range of capabilities offered by JTech, and none offer a
completely modular product line as comprehensive as the JTech line. Competitive
factors in the musculoskeletal market include perceived quality, price, name
recognition, training capabilities, support, software operating system, and
systems integration potential.


         Contract Design and Manufacturing Services


Our primary competitors for design and manufacturing services include Benchmark
Electronics, Nova Biomedical, Plexus, Inc., Sanmina-SCI Corp., and Sparton
Electronics Corporation. These contract manufacturers operate in the medical
technology industry, and some have substantially greater financial and marketing
resources than we do. Competitive factors in medical device design and
manufacturing include technology strengths, quality, regulatory compliance,
engineering competence, cost of non-recurring engineering, price of the
manufactured product, experience, customer service, and the ability to meet
design and production schedules. We believe that our unique expertise in
ultrasound, optoelectronics, and fluid delivery systems will allow us to compete
effectively for contracts involving these technologies.

<PAGE>


PATENTS AND TRADEMARKS

As of December 31, 2003, we held eighteen U.S. patents and fourteen
international patents on devices developed by us, with fourteen additional U.S.
patents and twenty international patents pending. The loss of certain patents
that are key to our proprietary products could have a materially adverse effect
on our overall business operations. We also rely on trade secrets and
confidentiality agreements to protect the proprietary nature of our
technologies.


In addition, we own and have applied for numerous trademarks in the United
States and abroad. We believe that our trademarks are well recognized in the
various markets for our products. With the exception of the EnteraLite(R) and
LifeGuard(R) trademarks, which are registered for our enteral feeding products,
we believe that the loss of any trademark would not have a material adverse
effect on our overall business operations.


RESEARCH AND DEVELOPMENT FOR OUR PROPRIETARY PRODUCTS


Our research and development projects are primarily focused on new proprietary
products. As of December 31, 2003, we have twenty full-time engineers in
research and development, and had several other designers and engineers,
including independent contractors, contributing to research and development
projects. Our research and development staff performs engineering research and
development services for both ZEVEX as well as for customers of our Applied
Technology division on a fee for service basis. We invested $1,817,581 in 2003,
$1,289,609 in 2002, and $932,731 in 2001 for internal research and development
of new products. In 2003, research and development costs represented
approximately 7% of our annual revenue, compared to 5% in 2002 and 3% in 2001.
During 2003, we changed how certain expenses, primarily research and
development, were classified to more accurately reflect our current business.
Certain prior year amounts have been reclassified to conform to the current year
presentation.


MAJOR CUSTOMERS


Historically, large portions of our revenue were attributable to design and
manufacturing services for a small number of major customers. However, beginning
in 2000 and continuing through the 2003 fiscal year, revenue from our
proprietary product businesses contributed a greater proportion of total
revenue. Because revenue from our proprietary products now exceed those of
contract manufactured products, the relative percentage represented by a few
major customers has decreased. As a result, during 2003, 2002 and 2001, no
customer accounted for 10% or more of our revenue. In the future we expect that,
if our proprietary product revenue continues to grow, the percentage of total
revenue represented by a few customers will continue to decline, so that the
loss of a single customer would less likely have a materially adverse effect on
the financial condition or results of our operations in the future.


BACKLOG


At December 31, 2003, we had a backlog of approximately $4,860,597 on orders for
medical devices to be manufactured for other medical technology companies, as
compared to a backlog at December 31, 2002 and 2001, of $3,217,300 and
$4,633,005, respectively. We estimate that approximately 90% of this backlog
will be shipped before December 31, 2004. As of March 17, 2004, we had a backlog
of $5,169,915. For purposes of the above figures, backlog includes product not
yet shipped pursuant to purchase orders that have been received by us. This does
not include any backlog for our proprietary products, because we generally hold
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 customers may change
delivery schedules or cancel orders, our backlog as of any particular date may
not necessarily be a reliable indicator of future revenue.

<PAGE>


GOVERNMENTAL REGULATION

Our manufacturing facility, customers' medical devices, and our proprietary
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, as well as record-keeping requirements, and the reporting of
certain information regarding device safety. In addition, our facility is
subject to periodic inspection by the FDA for compliance with the FDA's GMP
requirements. To ensure compliance with GMP requirements, we expend significant
time, resources, and effort in the areas of training, production, and quality
assurance.

For certain medical devices manufactured by us, the customer may need to obtain
FDA clearance in the form of a premarket approval ("PMA") application. Such
applications require substantial pre-clinical and clinical testing to obtain FDA
clearance. 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, we are 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.
Our 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. We have received and maintain ISO 9001 and ISO 13845
certification, which allows us to CE Mark our own products and assist our
customers with obtaining the CE Mark for their products.

As part of a nationwide investigation into billing practices associated with
enteral nutrition delivery products, particularly in regard to billing practices
for pumps and disposable delivery sets, on July 2, 2001, the U.S. Office of
Inspector General (OIG), served a subpoena on the ZEVEX, Inc. subsidiary.
According to published reports, the investigation involved most manufacturers,
distributors and health care service providers in the United States enteral pump
industry and similar subpoenas were served on many of those parties. The
subpoena requested documents relating to our enteral pump customers, marketing
and billing practices. We responded to the subpoena. Since October of 2001 we
have not been contacted further by the OIG, although we understand the
investigation is proceeding and we intend to cooperate with the investigation if
contacted again. At this time we are uncertain as to any future impact this
investigation will have on our operations or financial position.

EMPLOYEES


As of March 11, 2004, we employed a total of 136 people in the following areas:
71 in Manufacturing, Testing, and Quality Assurance; 20 in Design and
Engineering; 18 in Administration; and 27 in Sales and Marketing. We have 124
employees located at our corporate headquarters and manufacturing facility in
Salt Lake City, Utah, and 12 employees at various locations throughout the
United States.


We consider our labor relations to be good, and none of our employees are
covered by a collective bargaining agreement. Currently, the local economy is
stable and the unemployment rate is moderate in the Salt Lake City metropolitan
area, which means that we face competition to attract and retain qualified
personnel. However, at the same time, the Salt Lake City metropolitan area has a
well-educated work force and is considered an attractive place to live.
Accordingly, we do not anticipate having difficulty in attracting and retaining
qualified personnel to meet our projected growth, although we believe that labor
costs will likely increase moderately.

<PAGE>


ENVIRONMENTAL COMPLIANCE COSTS

We believe that we are in compliance with all applicable environmental
regulations. We believe that our efforts to comply with federal, state, and
local provisions regarding the production and discharge of material into the
environment and the protection of the environment will not have a materially
adverse effect on our capital expenditures, earnings and our competitive
position.

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND SALES

During the 2003 fiscal year, we generated total revenue of $25,869,876, of which
$4,380,461 (17%) was considered foreign source revenue. During the 2002 fiscal
year, we had total revenue of $25,495,733, of which $3,663,730 (14%) was
considered foreign source revenue. During the 2001 fiscal year, we had total
revenue of $29,882,075, of which $2,207,648 (7%) was considered foreign source
revenue. We believe that the growth in revenue from foreign sources has been the
result of our efforts during the past few years to increase international sales
and distribution efforts.

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

ORGANIZATIONAL STRUCTURE

ZEVEX is a Delaware corporation organized in 1987. It serves primarily as a
holding company, conducting business operations through two wholly-owned
subsidiaries in 2003: JTech Medical Industries, a Utah corporation, and ZEVEX,
Inc., a Delaware corporation. Until December 31, 2003 JTech marketed our
Physical Evaluation product line, which was sold on that date. ZEVEX, Inc.
conducts all our Therapeutics and Applied Technology businesses.

On December 31, 2003, we completed the sale of the Physical Evaluation business.
The transaction was accomplished by sale of all the issued and outstanding
capital stock of JTech. The transaction was effected by a Stock Purchase
Agreement (the "Stock Purchase Agreement") dated December 31, 2003 by and
between us and Mr. Leonard C. Smith, a former employee, officer and director of
the ZEVEX.  (See Item 7. Management Discussion and Analysis)

ITEM 2.  PROPERTIES

Our executive offices, administrative offices, and manufacturing facility are
located in our 51,000 square foot, mixed-use building in Salt Lake City, Utah.
This building was constructed in 1997 to our 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. We currently utilize approximately 70% of the
building's available space and believe that the building will be adequate to
serve our needs through the end of the year 2004. We own approximately 3.47
vacant acres adjacent to our facility.

ITEM 3.  LEGAL PROCEEDINGS

We are not engaged in any material legal proceedings.

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

None.

<PAGE>

                                     PART II

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

ZEVEX' Common Stock is traded on the National Market system of The NASDAQ Stock
Market, under the symbol ZVXI. As of March 5, 2004, there were 168 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 ZEVEX' 2003 Annual Meeting, we estimate there are roughly
1,600 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. We have a negative covenant in our 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, 2002.

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

                        ------------------------------------------ ------------------------------------------
                                          2003                                       2002
                        ------------------------------------------ ------------------------------------------
                        --------------------- -------------------- --------------------- --------------------
                                High                  Low                  High                  Low
                        --------------------- -------------------- --------------------- --------------------
                        --------------------- -------------------- --------------------- --------------------
1st Quarter                     2.75                 1.82                  3.93                 2.61
                        --------------------- -------------------- --------------------- --------------------
                        --------------------- -------------------- --------------------- --------------------
2nd Quarter                     3.25                 2.13                  3.45                 2.65
                        --------------------- -------------------- --------------------- --------------------
                        --------------------- -------------------- --------------------- --------------------
3rd Quarter                     4.75                 2.86                  3.00                 2.00
                        --------------------- -------------------- --------------------- --------------------
                        --------------------- -------------------- --------------------- --------------------
4th Quarter                     4.25                 3.42                  2.25                 1.75
                        --------------------- -------------------- --------------------- --------------------
</TABLE>



ITEM 6.  SELECTED FINANCIAL DATA

SELECTED  FINANCIAL DATA - FIVE-YEAR
REVIEW

The following selected statement of operations data for the years ended December
31, 2003, 2002, and 2001, and the balance sheet data as of December 31, 2003 and
2002, 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, 2000 and 1999, and the balance sheet data as of
December 31, 2001, 2000, and 1999, are derived from the audited consolidated
financial statements of ZEVEX, which are not included herein, and are qualified
by reference to such financial statements and the notes thereto. The selected
consolidated financial data set forth below is also qualified in its entirety
by, and should be read in conjunction with the Consolidated Financial Statements
and Notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in Item 7 of this report.

<PAGE>
<TABLE>
<CAPTION>
<S>                                   <C>                                                                  <C>

                                      Fiscal Year Ended December 31
                                      --------------------------------------------------------------------------
                                                  2003         2002         2001        2000         1999
                                      --------------------------------------------------------------------------
Statement of Operations Data

Revenues                                       $25,869,876  $25,495,733  $29,882,075 $30,778,627  $23,026,208
Gross profit                                     8,323,795   11,119,989  12,052,298   10,848,772  10,551,998
Selling, general and administrative expenses     8,316,822    9,124,197  10,100,735    8,405,833   6,988,044
Research and development expenses                1,817,581    1,289,609     932,731      852,273     670,886
Asset and goodwill impairment                    1,566,967           --          --           --          --
Operating (loss) income                        (3,377,575)      706,183   1,018,832    1,590,666   2,893,068
Loss on sale of business                       (4,692,445)           --          --           --          --
Impairment loss on marketable securities                --           --   (917,628)           --          --
Other expenses                                     276,234      486,664     688,414      196,828      78,706
Provision (benefit) for  income taxes             (68,712)        5,216    (99,507)      669,698   1,187,989
Net income (loss)                              (8,277,542)      214,303   (487,703)      724,140   1,626,373
Net income (loss) per share basic                   (2.43)          .06       (.14)          .21         .48
Weighted average shares outstanding              3,400,964    3,414,846   3,431,639    3,425,254   3,413,023
Net income (loss) per share diluted                 (2.43)          .06       (.14)          .19         .47
Weighted average shares outstanding,

   assuming dilution                             3,400,964    3,418,278   3,431,639    3,748,032   3,431,566

                                                  2003         2002         2001        2000         1999
Balance Sheet Data
Total assets                                   $19,732,085  $28,798,236  $33,639,146 $38,687,962 $34,049,689
Total current liabilities                        4,688,891    5,679,446    5,918,660   9,967,768   5,782,319
Long-term debt (less current portion)            2,119,608    1,662,536    6,411,351   7,511,022   7,170,000
Stockholders' equity                            12,923,586   21,198,061   21,032,401  21,057,505  21,090,722
</TABLE>



Please refer to Item 7 of this report for a discussion of the main factors
causing the substantial changes in certain of the items set forth above,
particularly when comparing the year 2003 to earlier periods. Also refer to Item
7 of this report for a discussion of Factors that May Affect Future Results,
which describe material uncertainties that might cause the items set forth above
to not be indicative of our future financial condition or results of operations.

During 2003 the Company changed how certain expenses including research and
development, general and administrative, and selling and marketing costs were
classified. Certain prior year amounts for 2000 and 1999 have not been
reclassified to conform to the current year presentation.


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


Overview

Through our divisions and subsidiaries, we engage in the business of designing,
manufacturing and distributing medical devices. Our Therapeutics division
markets enteral nutrition delivery devices. Until its sale on December 31, 2003
our Physical Evaluation division marketed industry-leading physical evaluation
testing systems. Our Applied Technology division designs and manufactures
advanced medical components and systems for original equipment manufacturers
("OEM's"). Please refer to Note 13 to the Consolidated Financial Statements for
discussion of our business segments.

We entered the enteral nutrition delivery segment of the home health care market
in 1996 with the introduction of the EnteraLite(R) ambulatory enteral feeding
pump, which continues to gain acceptance due to its superior mobility and
state-of-the-art features. We believe that by improving the convenience of
nutrition delivery, the EnteraLite(R) and future products we can contribute to
better clinical outcomes and improved quality of life for enteral patients.
Domestic sales of our EnteraLite(R) product line grew by 8% in 2003 and 22% in
2002. Combining our international EnteraLite(R) revenue with domestic revenue,
the total product line growth was 20% in 2003 and 22% in 2002.

<PAGE>


At the times of the 1998 acquisition of the Nutrition Medical line of stationary
enteral feeding pumps and the 2000 acquisition of the Nestle USA, Inc. enteral
nutrition delivery business, we intended to aggressively expand into the
long-term care market for enteral feeding delivery products. After several years
of downward competitive pricing pressure in this market segment, our revenue has
decreased by 50%.

Until December 31, 2003, we competed in the Physical Evaluation market through
our sales of stand-alone and computerized products that measure isolated muscle
strength, joint ranges of motion and sensation. We acquired the Physical
Evaluation business in 1998. Revenue has not grown substantially during the last
several years, and in 2003, revenue decreased 17% compared to 2002. Meanwhile,
costs associated with this business segment have increased, including those
associated with selling and marketing and research and development.

Since 1987, we have been a contract manufacturer providing design and
manufacturing services to medical companies who sell our components and systems
under private label, primarily incorporating our core technologies of
ultrasound, fluid delivery and optoelectronics. The rapid growth of the
outsourced contract manufacturing services industry has slowed down over the
past two years as a result of the generally weak U.S. economy, and the impact of
overcapacity and increased competition in the medical systems product area.

Last year, in response to the changing marketplaces of our business segments, we
evaluated our business opportunities and refocused on our core market offerings
of ambulatory enteral feeding and our specialized core contract manufacturing
services. We established a lean manufacturing philosophy, including the
transition from batch processing to continuous flow production, developed a
business model with market development strategies designed to capitalize on
profitable business opportunities, and sold the Physical Evaluation business in
December.

On December 31, 2003, we completed the sale of our Physical Evaluation business.
The transaction was accomplished by the sale of all the issued and outstanding
capital stock of JTech. The transaction was effected by a Stock Purchase
Agreement dated December 31, 2003 by and between us and Mr. Leonard C. Smith, a
former employee, officer and director of ZEVEX. (See discussion below)


Results of Operations


As an aid to understanding our operating results, the following table sets
forth, for the periods indicated, the relative percentages that certain items in
the statement of operations bear to revenue.

Year Ended December 31 Statement of Operations Data -- Percentage of Revenue

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


                                             2003          2002          2001          2000           1999
                                       ------------- ------------- ------------- ------------- --------------
Revenue                                        100%          100%          100%          100%           100%
Gross profit                                    32%           44%           40%           35%            46%
Selling, general and administrative
  expenses                                      32%           36%           34%           27%            30%
Research and development expenses                7%            5%            3%            3%             3%
Asset and goodwill impairment                    6%           --%           --%           --%            --%
Operating income                              (13)%            3%            3%            5%            13%
Loss on sale of business                      (18)%           --%           --%           --%            --%
Impairment loss on securities                   --%           --%          (3)%           --%            --%
Other income/(expense)                         (1)%          (2)%          (2)%           --%           (1)%
Income (loss) before income taxes             (32)%            1%          (2)%            5%            12%
(Benefit) Provision for income taxes            --%           --%           --%            2%             5%
Net (loss) income                             (32)%            1%          (2)%            3%             7%
</TABLE>
<PAGE>


Fiscal Year 2003 Compared to Fiscal Year 2002


On December 31, 2003, we completed the sale of our Physical Evaluation business.
The transaction was accomplished by the sale of all the issued and outstanding
capital stock of JTech. The transaction was effected by a Stock Purchase
Agreement dated December 31, 2003 by and between us and Mr. Leonard C. Smith, a
former employee, officer and director of the Company, for a purchase price of
$1.2 million which was recorded as an "other receivable" at December 31, 2003.
Cash of $1,129,500 was received on January 15, 2003. JTech withheld $70,500 of
the purchase price until we satisfied certain obligations to JTech as set forth
in the Stock Purchase Agreement. Such obligations include the requirement to
deliver inventory, upon completion of production, and certain other equipment.
Deferred revenue of $324,000 was recorded related to these obligations.
Additionally, pursuant to the Stock Purchase Agreement, we may receive
additional payments from the purchaser based upon specifically identified JTech
product sales in 2004 and 2005. A loss on the sale of business in the amount of
$4,692,445 was recorded and is shown separately on the 2003 consolidated
statement of operations. Such loss consists of the write-off of goodwill and
acquisition costs as well as the write-off of certain other JTech assets
totaling approximately $242,000 and the accrual of legal costs associated with
the transaction.

During the fourth quarter of 2003, we evaluated our business opportunities and
modified our strategies to focus on our core market offerings of ambulatory
enteral feeding and contract manufacturing services. In conjunction with this
refocus of our business, on December 31, 2003, we completed the sale of JTech,
our Physical Evaluation business. At the time of the sale, goodwill associated
with JTech was stated at a net value of $5,199,419 on our balance sheet. Upon
completion of the sale, the goodwill and the related accumulated amortization
were removed from the balance sheet and the resulting loss is included in the
2003 consolidated statement of operations within the loss on sale of business.

Also in conjunction with this refocus, we re-evaluated as defined by SFAS No.
142 our reporting units and determined that the Therapeutics reporting unit,
which had consisted of both our stationary and ambulatory enteral product lines,
should be disaggregated such that the two product lines became separate
reporting units because of the different market and sales practices of the
stationary enteral product line and the change in focus. Therefore, in the
fourth quarter of 2003, due to declining sales and cash flows relating to the
stationary enteral product line, we determined that indicators of impairment
existed related to this reporting unit. Upon completion of impairment testing we
determined that the fair value of the stationary enteral reporting unit was less
than the carrying value including goodwill. As such a goodwill impairment loss
has been recognized in 2003 for this reporting unit in the amount of $841,352.
This loss is included in "Asset and goodwill impairment" on the 2003
consolidated statement of operations.

As noted above, we modified our future business strategies in the fourth quarter
of 2003. In conjunction with our business refocus, we also evaluated our
long-lived assets to determine if indicators of impairment existed. Based upon
our assessment of projected future cash flows related to our stationary enteral
product line, we determined that impairment of the fixed asset value for our
stationary enteral pumps existed. We recorded an impairment charge of $725,615,
as reflected in the 2003 consolidated statement of operations within "Asset and
goodwill impairment".

Revenue was $25,869,876 for the year ended December 31, 2003, compared to
$25,495,733 for the prior year, a 1% increase. The increase in revenue over 2002
is largely due to an 8% increase in domestic sales of EnteraLite(R) ambulatory
enteral nutrition delivery pump and disposable set products and an increase of
approximately $950,000 in international sales of our enteral pumps, within our
Therapeutics division. In addition, in our Applied Technology division revenue
from manufactured products and engineering services increased over 7%. This
revenue growth was partially offset by a 26% decline in orders for stationary
enteral nutrition delivery pump disposable sets and weaker demand for Physical
Evaluation products (now discontinued) that resulted in a decline in sales of
approximately 17%.

<PAGE>


The percentage of revenue generated from our proprietary products decreased when
compared to revenue from contract manufacturing. In 2003, 60% of our revenue was
derived from proprietary products marketed by us, in comparison to 62% in 2002.
Sales of our Therapeutics products accounted for approximately 48% of total
revenue for the year ended December 31, 2003, which is consistent with 2002.
Sales from our Physical Evaluation product line accounted for approximately 12%
of total revenue for the year ended December 31, 2003, compared to 14% for the
year ended December 31, 2002. Forty percent of our revenue during 2003 was
derived from products manufactured for and sold to our contract manufacturing
customers, compared to 38% in 2002. This shift in revenue sources from our
proprietary products to contract manufacturing customers in 2003 was primarily
related to the decrease in stationary pump disposable revenue and the Physical
Evaluation products revenue. During 2003 and 2002, no single customer accounted
for over 10% of our revenue.


Our gross profit as a percentage of sales was 32% in 2003, compared to 44% in
2002. We attribute the decrease in gross profit percentage from 2002 to 2003 to
the write-off of discontinued products and miscellaneous obsolete inventory in
our Therapeutics division, downward pricing pressure related to some of our
Therapeutics products, non-recurring manufacturing engineering costs associated
with establishing new production lines in Applied Technology division, and the
product mix delivered from our Applied Technology division during the years. We
expect that our gross profit will increase to approximately 40% of gross revenue
in 2004, when taking into consideration our anticipated product revenue mix and
the implementation of the lean manufacturing process.

Selling, general, and administrative expenses decreased during 2003 to
$8,316,822, 32% of sales, as compared to $9,124,197, 36% of sales in 2002.
Although we have reduced certain general and administrative costs, we continued
to invest in building our domestic sales forces for the Physical Evaluation and
Therapeutics divisions. Overall, sales and marketing expenses increased to
$4,547,178, for 2003, from $3,996,993 in 2002. We expect that selling, general,
and administrative expenses will decrease to approximately 30% of gross revenue
in 2004, when taking into consideration the sale of the Physical Evaluation
business on December 31, 2003.


We combine the resources of our full-time engineers with several independent
contractors, to perform research and development projects. We invested
$1,817,581 in 2003, $1,289,609 in 2002, and $932,731 in 2001 for research and
development of new products. In 2003, research and development costs represented
approximately 7% of our annual revenue, compared to 5% in 2002 and 3% in 2001.
We are continuing our efforts to develop and introduce new proprietary products
for our Therapeutics division and proprietary component technologies for our
Applied Technology division. We expect research and development costs to be
approximately 6% of revenue during 2004.

Depreciation and amortization expenses decreased to $1,582,120 in 2003
(excluding impairment) from $1,618,682 in 2002. As discussed above we recorded
an impairment charge of $1,566,967 in 2003. See Note 1 of the Financial
Statements under Goodwill, and Impairment of Long-Lived Assets for more
information on the effect of the impairment.


Goodwill held by us represents the excess of the purchase price over the fair
value of the tangible and other specifically identified intangible assets
obtained in acquisitions by ZEVEX. The current value of goodwill included in the
financial statements is $4,048,264 as of December 31, 2003.


We had an income tax benefit of $68,712 in 2003 compared to income tax expense
of $5,216 in 2002. The change from 2002 to 2003 is primarily due to the loss
before income taxes as described below. For 2003, our effective tax rate
differed from the statutory rate largely as a result of an increase in our
valuation allowance (see below), research and development tax credits, and
permanent asset basis differences. For 2002, our effective tax rate differed
from the statutory rate largely as a result of a reduction in our valuation
allowance (see below), research and development tax credits, and charitable
contribution deductions.

<PAGE>

At December 31, 2003, we had net current deferred tax assets of $0. Realization
of our gross deferred tax assets is dependent on our ability to generate taxable
income in the year the assets are realized. Under FAS 109 Accounting for Income
Taxes, guidance has been issued relating to cumulative losses in recent years.
Under this guidance, when there is a cumulative pretax loss for financial
reporting for the current and two preceding years and a company does not have
objective planning strategies designed to realize its deferred tax assets, no
deferred tax asset should be recognized. In following this guidance management
has established a full valuation allowance for all deferred tax assets. ZEVEX,
through the sale of the Physical Evaluation business in 2003, generated a
pre-tax capital loss carryover of approximately $5,090,000 for federal and
$4,693,000 for state purposes. In addition, in 2003, we had a pre-tax net
operating loss carryforward in the amount of $1,609,000. Other net deferred tax
assets at December 31, 2003 before the valuation allowance totaled $762,000. We
evaluate the realizability of the deferred tax assets and assess the need for
valuation allowances annually.

During 2003 we had an operating loss of $3,377,575, compared to operating income
of $706,183, 3% of revenue in 2002. We had a net loss of $8,277,542, compared to
net income of $214,303, 1% of revenue in 2002. The net loss during 2003, as
compared to the net income in 2002, is due to a number of factors, including,
(i) loss on the sale of our Physical Evaluation business in the amount of
$4,692,445 (ii) the one-time impairment expense on fixed assets and goodwill
relating to the stationary enteral pumps and disposable business of $1,566,967,
(iii) lower gross profit achieved in 2003 as our gross margin decreased from 44%
in 2002 to 32% in 2003, (iv) increased selling and marketing expenses, and (v)
increased research and development costs.


Our annual and quarterly operating results are affected by acceptance in the
markets for our proprietary and contract manufactured products, including the
volume and timing of customer orders, which vary due to (i) variation in demand
for the customers' products or services as a result of, among other things,
product life cycles, competitive conditions, and general economic conditions,
(ii) the customers' attempt to balance their inventory, (iii) the customers'
need to adapt to changing regulatory conditions and requirements, and (iv)
changes in the customers' preferences or strategies. Technical difficulties and
delays in the design and manufacturing processes may also affect such results.
The foregoing factors may cause fluctuations in revenue and variations in
product mix, which could in turn cause fluctuations in our gross margin.

 Fiscal Year 2002 Compared to Fiscal Year 2001

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


Revenue was $25,495,733 for the year ended December 31, 2002, compared to
$29,882,075 for the prior year, a 15% decrease. The decrease in revenue was
largely due to (i) the delay and decrease of several orders for
contract-manufactured products, including those related to a customer which had
reorganized its corporate structure through a spin-out from its parent, a
customer which had been reducing inventory levels and safety stock, and a
customer which delayed orders due to an issue not involving us, (ii) an overall
decline in orders for stationary enteral nutrition delivery pump disposable
sets, (iii) difficulty in maintaining a steady flow of contract manufacturing
products upon completion of certain projects, and (iv) weaker demand for
Physical Evaluation products, as clinicians were hesitant to make capital
equipment purchases during a period of economic uncertainty.

We did experience, however, a number of developments that positively impacted
revenue in 2002. During the second half of 2002 scheduled shipments of surgical
handpieces and ultrasonic sensors increased compared to the first six months of
2002. Through the last three quarters of 2002, we continued our engineering on a
time-and-materials development program for a mobile organ perfusion system.
Further, during the fourth quarter of 2002 we experienced an increase in orders
for private label enteral feeding pumps from a European customer. During 2002,
revenue from the stationary enteral nutrition delivery pump disposable sets
appeared to have stabilized, achieving sales of approximately $1 million in each
quarter. Revenue of our Physical Evaluation products were greatest during the
fourth quarter of 2002, when we achieved sales of $1 million.

<PAGE>

The percentage of revenue generated from the marketing of our proprietary
products increased when compared to revenue from contract manufacturing. In
2002, 62% of our revenue was derived from products marketed by us, in comparison
to 56% in 2001. Sales of our Therapeutics products accounted for approximately
48% of total revenue for the year ended December 31, 2002, compared to 43% for
the year ended December 31, 2001. Sales from our Physical Evaluation product
line accounted for approximately 14% of total revenue for the year ended
December 31, 2002, compared to 13% for the year ended December 31, 2001.
Thirty-eight percent of our revenue during 2002 was derived from products
manufactured for and sold to our contract manufacturing customers, compared to
44% in 2001. This shift in revenue sources from our contract manufacturing
customers to proprietary products over the last three years has the benefit of
decreasing the percentage of our revenue generated by a small number of major
customers. During 2002 and 2001, no single customer accounted for over 10% of
our revenue.

Our gross profit as a percentage of sales was 44% in 2002, compared to 40% in
2001. We attributed the increase in gross profit percentage from 2001 to 2002 to
improvements in manufacturing and distribution efficiencies and the change in
product mix delivered during the year.


Selling, general, and administrative expenses decreased during 2002 to
$9,124,197, 36% of sales, as compared to $10,100,735, 34% of sales in 2002.
Although we decreased certain general and administrative costs, we invested in
building our domestic sales forces for the Physical Evaluation and Therapeutics
divisions. General and administrative expenses decreased in 2002, as 2001
included additional legal and professional costs incurred due to a record number
of patent applications, and our response to the Office of the Inspector
General's nationwide investigation into billing practices in the enteral device
market. Also, expenses related to goodwill amortization were eliminated in 2002
with the adoption of SFAS No. 142 as of January 1, 2002. See Note 1 of the
Financial Statements for more information on the effect of this accounting
change.

We combined the resources of our full-time engineers with several independent
contractors, to perform research and development projects during 2002 and 2001.
We invested $1,289,609 in 2002, and $932,731 in 2001for research and development
of new products. In 2002, research and development costs represented
approximately 5% of our annual revenue, compared to 3% in 2001.


Depreciation and amortization expenses decreased to $1,618,682 in 2002, from
$2,086,379 in 2001. The decrease is due to the elimination of goodwill
amortization, as of January 1, 2002, with the adoption of SFAS No. 142. See Note
1 of the Financial Statements for more information on the effect of this
accounting change.

Goodwill held by us in 2002 represented the excess of the purchase price over
the fair value of the tangible and other specifically identified intangible
assets obtained in acquisitions by ZEVEX. The value of goodwill included in the
2002 financial statements was $10,089,035, and represented approximately 35% of
total assets.


We had income tax expense of $5,216 in 2002, compared to an income tax benefit
of $99,507 for 2001. The change from 2001 to 2002 was primarily due to increased
income before taxes as described above. For 2002, our effective tax rate
differed from the statutory rate largely as a result of a reduction in our
valuation allowance (see below), research and development tax credits, and
charitable contribution deductions. For 2001, our effective tax rate differed
from the statutory rate largely as a result of nondeductible goodwill
amortization.


At December 31, 2002, we had net current deferred tax assets of approximately
$349,000 and net non-current deferred tax liabilities of approximately $258,000.
ZEVEX, through our sale of the Aborn corporate shell in 2001, generated a
capital loss carryover of approximately $5,000,000. In 2001, a valuation
allowance of $1,865,000 was established. In 2002, $50,000 of the carryover was
utilized and the valuation allowance was reduced. Because we had not determined
that it is more likely than not that the remaining carryover would be realized
prior to its expiration, a valuation allowance was established for the remaining
amount. During 2002, we made a charitable contribution of certain patent rights
to an institution of higher education with a fair market value of $5,048,000.
During 2002 a tax benefit of $11,944, as determined based upon applicable
federal rates, was recognized for the charitable contribution. For income tax
purposes, charitable contributions are only recognizable if a company has
taxable income. A valuation allowance of approximately $1,870,000 was provided
for the contribution carryover of $5,013,000 which was generated from the patent
donation because we did not consider it to be more likely than not that this
carryover would be utilized. We evaluate the realizability of the deferred tax
assets and assess the need for valuation allowances annually.

<PAGE>

Operating income decreased to $706,183, 3% of revenue in 2002 compared to
$1,018,832, 3% of revenue in 2001. We had net income of $214,303, 1% of gross
revenue in 2002, compared to a net loss of $487,703, (2)% of revenue in 2001.
The increase in net income during 2002, as compared to 2001, was due to a number
of factors, including, (i) the one-time impairment loss on marketable securities
in the amount of $917,628 in the third quarter of 2001, (ii) higher gross profit
achieved in 2002, (iii) a reduction in interest expense from $1,059,593 to
$543,340, due to decreased debt and lower interest rates in 2002, (iv)
nonamortization of goodwill under SFAS No. 142, which was adopted as of January
1, 2002, and (v) the tax benefit derived from a capital loss, which, for state
tax purposes, was treated as a net operating loss carryback for income tax
purposes and resulted in a refund recognized in 2002. However, the impact of
these changes was reduced by lower revenue during 2002.


Liquidity and Capital Resources

Our primary sources of liquidity have consisted of cash flow from operations,
borrowings under our revolving line of credit, and the other financial
arrangements described below. In some prior years, we also increased working
capital through the issuance of stock and may do so in the future.

Cash flow provided from operating activities for 2003 was $2,309,913, compared
to cash flow provided in 2002 of $4,074,874. In 2003, cash flow provided by
operating activities was primarily associated with the reduction of accounts
receivable due to better collection procedures and reduction in inventories as
we continued to stream-line our purchasing process and implemented lean
manufacturing processes. Cash flow used in investing activities during 2003 was
$704,835 and relates primarily to the purchase of equipment used for
manufacturing and additional capitalized patent expenses.

Cash flow provided from operating activities for 2002 was $4,074,874. In 2002,
cash provided by operating activities was also primarily associated with the
reduction of accounts receivable due to better collection procedures and
reduction in inventories as we recognized the benefit of our manufacturing
resource planning software. Cash flow used in investing activities during 2002
was $225,648 and relates primarily to the purchase of equipment used for
manufacturing and offset largely as a result of the sale of securities held by
us.

Our working capital at December 31, 2003, was $5,865,388, compared to $6,102,500
at December 31, 2002. Our decrease in working capital of $237,112 in 2003 was
primarily due to the reduction of accounts receivable and inventories offset by
an increase in the net other receivables related to the sale of the Physical
Evaluation division and payment of current debt outstanding at December 31,
2002. The portion of working capital represented by cash and short-term
investments at such dates was $668,089, and $0 respectively. The ratio of
current assets to current liabilities increased to 2.25 to 1 at December 31,
2003 from 2.07 to 1 at December 31, 2002.

On December 31, 1998, we committed to pay up to $1,850,000 in cash and issued
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. We completed the cash payment and issued the
debentures in 1999. Amounts due under the convertible debentures were to be paid
by January 6, 2002. On December 31, 1999, we committed to pay $950,000 in cash
and issue convertible debentures in the aggregate amount of $950,000, due March
31, 2003, to Vijay Lumba and Harry Parmar as payment of the earn-out portion of
the purchase price related to the acquisition of all issued and outstanding
stock of Aborn. We completed the cash payment and issued the debentures in 2000.
On December 31, 2001, we paid $556,030 in cash to the debenture holders and
negotiated an extension of time, until January 6, 2003, to pay the remaining
balance on the original debenture of $793,970, with all other terms remaining
unchanged. We paid $788,970 in cash to the debenture holders on January 6, 2003,
with the remaining balance of $950,000 paid on March 30, 2003.

<PAGE>

On December 31, 1998, we committed to pay up to of $3,100,000 in cash and issued
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. We completed the cash
payment and issued the debentures in 1999. Amounts due under the convertible
debentures were to be paid by January 6, 2002. On December 31, 1999, we
committed to pay $147,188 in cash and convertible debentures in the aggregate
amount of $147,188 due March 31, 2002, to Leonard Smith, Tracy Livingston, and
David Bernardi as payment of the earn-out portion of the purchase price related
to the acquisition of all issued and outstanding stock of JTech. We completed
the cash payment and issued the debentures in 2000. On December 31, 2001 we paid
$968,000 in cash to the debenture holders and negotiated an extension of time,
through January 6, 2003, to pay the remaining balance on the original debenture
of $2,032,000, with all other terms remaining unchanged. We made a principal
payment during 2002 of $2,179,188 in full payment of the debentures.

On December 31, 2003, we had a $6,000,000 open line of credit arrangement with a
financial institution. The line was reduced to $3,000,000 in March 2004 and
matures on May 29, 2004. We do not anticipate the need for the line of credit to
exceed $3 million in the near future and expect that we will be able to renew
our line of credit in May 2004. The line of credit is collateralized by accounts
receivable and inventories, and bears interest at the financial institution's
prime rate. We owed $1,810,970 on the line of credit at December 31, 2003 and $0
at December 31, 2002. As of March 26, 2003 we had paid off our line of credit.
In the fourth quarter of 2003, we failed to meet certain financial covenants of
our line credit. We received a waiver for such covenants, and these covenants
were modified for the first three quarters of 2004, beginning with the quarter
ending March 31, 2004.

On March 15, 2001, we entered into a Secured Financing Agreement with a bank in
the amount of $1,500,000. The agreement is secured by our enteral feeding pumps,
which were purchased from Nestle and are now manufactured by us. The proceeds
from the agreement were used to reduce our line of credit balance. The agreement
had a 36-month term, due on February 15, 2004, and bore interest at an annual
rate of 8.24%. We paid off the financing agreement in March 2003, primarily
using cash flow from operations and proceeds from our line of credit in the
amount of $589,998.


On April 18, 2001, the Company entered into a Term Loan Agreement with a bank
for the amount of $1,000,000. The agreement is secured by the Company's
manufacturing facility. The proceeds from the Promissory Note were used to
reduce the balance on the Company's line of credit. The note was due on May 15,
2003. The Term Loan Agreement was renegotiated effective May 15, 2003, is now
due May 15, 2008, and is being amortized over a thirteen-year term, at an
interest rate of 5.4%. The outstanding balance at December 31, 2003, was
$870,038, of which $50,430 is classified as current.

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 May 30, 2008. The bonds bear interest at an adjustable rate based on
the weekly tax-exempt floater rate, as determined by the remarketing agent.
During 2003, the interest paid monthly ranged from 1.07% to 1.58% (APR), with
and average rate for 2003 of 1.3%. The bonds mature on October 1, 2016.
Principal reductions occur in the amount of $100,000 per year. The outstanding
balance was $1,400,000 at December 31, 2003, of which $100,000 is classified as
current.

<PAGE>
<TABLE>
<CAPTION>
<S>                 <C>                                                                                  <C>

The following is a summary of our long-term liabilities:

                                                     Payment Due by Period
                    -----------------------------------------------------------------------------------------
                                                More than   More than   More than   More than
   Contractual                     Less than     1- year     2- year     3- year     4- year     More than
    Obligation         Total        1 -year                                                       5- year
------------------- ------------- ------------- ----------- ----------- ----------- ----------- -------------
------------------- ------------- ------------- ----------- ----------- ----------- ----------- -------------

Line of Credit      $  1,810,970    $ 1,810,970  $    -      $    -     $     -     $    -       $    -

Industrial
 Development
  Bond                 1,400,000       100,000     100,000     100,000     100,000     100,000       900,000
Other
  Long-term              870,038        50,430      53,243      56,219      59,358     650,788             -
Capital Leases           122,950       122,950           -           -           -           -             -
                    ------------- ------------- ----------- ----------- ----------- ----------- -------------
                    ------------- ------------- ----------- ----------- ----------- ----------- -------------
Total                 $4,203,958   $ 2,084,350    $153,243    $156,219    $159,358    $750,788      $900,000
                    ============= ============= =========== =========== =========== =========== =============
</TABLE>


Purchases of leasehold improvements to our facilities, self-manufactured enteral
feeding pumps, new engineering, production, testing equipment, and tooling
totaled $610,685 in 2003, as compared to $399,565 in 2002, and $1,233,843 in
2001. The amount invested during 2001 was primarily attributed to
self-manufactured enteral feeding pumps.


Our expected principal capital requirements are working capital and investments
in capital expenditures. We believe our sources of liquidity are sufficient for
operations during the coming twelve months with our projected cash flows from
operations and, if necessary, the availability of funds under our revolving line
of credit.


Off-Balance Sheet Items

We have no off-balance sheet items.

Other

As part of a nationwide investigation into billing practices associated with
enteral nutrition delivery products, particularly in regard to billing practices
for pumps and disposable delivery sets, on July 2, 2001, the U.S. Office of
Inspector General (OIG), served a subpoena on the ZEVEX, Inc. subsidiary.
According to published reports, the investigation involved most manufacturers,
distributors and health care service providers in the United States enteral pump
industry and similar subpoenas were served on many of those parties. The
subpoena requested documents relating to our enteral pump customers, marketing
and billing practices. We responded to the subpoena. Since October of 2001 we
have not been contacted further by the OIG, although we understand the
investigation is proceeding and we intend to cooperate with the investigation
when contacted again. At this time we are uncertain as to any future impact this
investigation will have on our operations or financial position.

Inflation and Changing Prices

We have not been, and in the near term are not expected to be, materially
affected by inflation or changing prices.

Critical Accounting Policies and Estimates

In response to the SEC's Release numbers 33-8040 "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies" and 33-8056, "Commission
Statement about Management's Discussion and Analysis of Financial Condition and
Results of Operations," we have identified the following critical accounting
policies that affect the more significant judgments and estimates used in the
preparation of the consolidated financial statements. The preparation of the
consolidated financial statements in conformity with accounting principles
generally accepted in the United States requires us to make estimates and
judgments that affect our reported amounts of assets and liabilities, revenues
and expenses, and related disclosures. Our significant accounting policies are
included in Note 1 to the Consolidated Financial Statements.

<PAGE>

We evaluate our estimates and judgments on an on-going basis. We base our
estimates on historical experience and on assumptions that we believe to be
reasonable under the circumstances. Our experience and assumptions form the
basis for our judgments about the carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results may vary from what
we anticipate and different assumptions or estimates about the future could
change our reported results. We believe the following accounting policies are
the most critical to us, in that they are material to the portrayal of our
financial statements and they require our most difficult, subjective, or complex
judgments in the preparation of our consolidated financial statements:

Allowance for Doubtful Accounts


As a general policy, collateral is not required for accounts receivable;
however, we periodically monitor the need for an allowance for doubtful accounts
based upon expected collections of accounts receivable, historical bad debt
rates, and specific identification of uncollectible accounts. Based on these
factors, we record an allowance to provide for accounts that we believe may not
be ultimately collectable. Additionally, customers' financial condition and
credit worthiness are regularly evaluated. Historically losses on collections
have not been material. As of December 31, 2003, we have recorded an allowance
for bad debts of $185,000, approximately 4.6% of accounts receivable.


Product and Inventory Obsolescence


Rapid change and technological innovation characterize the marketplace for
medical products. As a result, we and our customers are subject to the risk of
product and inventory obsolescence, whether from prolonged development,
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. Accordingly, we write down
inventory that we believe is in excess or obsolete. Inventories are stated at
the lower of cost or market; cost is determined using the first-in, first-out
method. As of December 31, 2003, we have reduced inventory by the amount of
$254,000, which is approximately 6% of gross inventories.


Sales Returns and Warranty


We record a provision for estimated sales returns and allowances and warranty
reserve on products we have sold. These estimates are based on historical sales
returns and warranty expenses and other known factors. If the historical data we
use to calculate these estimates does not properly reflect future returns and
warranty expenses, revenue could be overstated or understated and expenses could
be understated or overstated. We have recorded a sales return and warranty
expense allowance in the amount of $85,000 as of December 31, 2003.


Revenue Recognition

We recognize revenue from products sold directly to end customers when
persuasive evidence of an arrangement exists, the price is fixed and
determinable, shipment is made and title has passed, and collectibility is
reasonably assured. If such criteria are not met, revenue is deferred.

<PAGE>

Contracts to perform engineering design and product development services are
generally performed on a time and materials basis. Revenue generally is
recognized as milestones are achieved.

We account for revenue from software transactions pursuant to SOP No. 97-2,
Software Revenue Recognition, as amended by SOP No. 98-4 and SOP No. 98-9. SOP
No. 97-2 requires that revenue recognized from software arrangements be
allocated to each element of the arrangement based on the relative fair values
of the elements, such as software products, upgrades, enhancements,
post-contract customer support, installation, or training. Under SOP No. 97-2,
the determination of fair value is based on objective evidence, which is
specific to the vendor. If such evidence of fair value for each element of the
arrangement does not exist, all revenue from the arrangement is deferred until
such time that evidence of fair value does exist or until all elements of the
arrangement are delivered. As of December 31, 2003 we sold our Physical
Evaluation business and no longer sell software or related services.


Impairment

We have made acquisitions in the past that included a significant amount of
fixed assets, goodwill, and other intangible assets. The cost of the acquired
companies was allocated first to identifiable assets based, on estimated fair
values. Intangible assets consist of goodwill, contracts, patents, and licenses.

Effective in 2002, goodwill is no longer amortized but is subject to an annual
(or, under certain circumstances, more frequent) impairment test, based on its
estimated fair value. Other intangible assets will generally continue to be
amortized over their useful lives and also will be subject to an impairment test
based on estimated fair value. Estimated fair value is typically less than
values based on undiscounted operating earnings because fair value estimates
include a discount factor in valuing future cash flows. There are many
assumptions and estimates underlying the determination of an impairment loss.
Another estimate using different, but still reasonable, assumptions could
produce a significantly different result. Therefore, impairment losses could be
recorded in the future.

Currently, we assess the impairment of fixed assets and identifiable intangibles
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. Factors we consider important that could trigger an
impairment review include the following:

o A significant underperformance relative to expected historical or projected
  future operating results;

o A significant change in the manner of how we use the acquired asset or the
  strategy for our overall business;

o A significant negative industry or economic trend.

When we determine that one or more of the above indicators of impairment exist,
we evaluate the carrying amounts of the affected assets. The evaluation, which
involves significant management judgment, is based on various analyses including
cash flow and profitability projections. To the extent such projections indicate
that future undiscounted cash flows are not sufficient to recover the carrying
amounts of the related long-lived assets, the carrying amount of the underlying
assets will be reduced, with the reduction charged to expense, so that the
carrying amount is equal to fair value, primarily determined based on future
discounted cash flows, using a discount rate determined by management to be
commensurate with the risk inherent in our current business model.


In accordance with SFAS No. 142 goodwill and indefinite-lived intangible assets
must be reviewed annually (or more frequently under certain conditions) for
impairment in accordance with this Statement. This impairment test uses a fair
value approach, rather than the undiscounted cash flows approach previously
required. We are annually required to complete Step 1 (determining and comparing
the fair value of our reporting units to their carrying values) of the
impairment test. Step 2 is required to be completed if Step 1 indicates that the
carrying value of the reporting unit exceeds the fair value, involves the
calculation of the implied fair value of goodwill. We completed Step 1 of the
impairment assessment for each reporting unit at its annual impairment testing
date. At that time, based upon our valuation procedures, we determined that the
fair value of the reporting units exceeded their carrying values. As such, we
were not required to complete Step 2 of the impairment test and no impairment
loss was recognized at that time.

<PAGE>

During the fourth quarter of 2003, we evaluated our business opportunities and
modified our strategies to focus on our core market offerings of ambulatory
enteral feeding and contract manufacturing services. In conjunction with this
refocus, we re-evaluated our reporting units and determined that the
Therapeutics reporting unit, which had consisted of both our stationary and
ambulatory enteral product lines, should be disaggregated such that the two
product lines became separate reporting units because of the different market
and sales practices of the stationary enteral product line. In the fourth
quarter of 2003, due to declining revenue and cash flows relating to the
stationary enteral product line, we determined that indicators of impairment
existed related to this reporting unit and again completed Step 1 of the
impairment test. Upon completion of Step 1, we determined that the fair value of
the stationary enteral reporting unit was less than the carrying value including
goodwill. As such we completed Step 2 of the impairment assessment and a
goodwill impairment loss has been recognized in 2003 for this reporting unit in
the amount of $841,352. This loss is included in "Asset and goodwill impairment"
on the consolidated statement of operations.


Due to the significant changes to our overall business strategies, we also
performed an analysis in the fourth quarter of 2003 to determine if any
indicators of impairment existed related to the Applied Technology reporting
unit. We determined that our impairment test performed as part of our annual
impairment analysis continued to be appropriate and no impairment loss was
required.


In the fourth quarter of 2003 we also evaluated our long-lived assets to
determine if indicators of impairment existed. Based upon our assessment of cash
flows related to our stationary enteral product line, we determined that
impairment of the fixed asset value for our stationary enteral pumps existed. We
recorded an impairment charge of $725,615, as reflected in the 2003 consolidated
statement of operations within "Asset and goodwill impairment".


Net intangible assets and goodwill amounted to approximately $4.4 million as of
December 31, 2003. Net fixed assets amounted to approximately $4.8 million as of
December 31, 2003.

Income Taxes

Income taxes are recorded 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. A valuation allowance is recorded to reduce
our deferred tax asset to an amount that is more likely than not to be realized,
as determined based on our analyses of projected taxable income, including tax
strategies available to generate future taxable income. Our analyses of future
taxable income are subject to a wide range of variables, many of which involve
our estimates, and therefore our deferred tax asset may not be ultimately
realized. As of December 31, 2003 a full valuation has been recorded for all
deferred tax assets.

New Accounting Pronouncements

In June 2002, SFAS No. 146, Accounting for Costs Associated with Exit or
Disposal Activities was issued. This statement provides guidance on the
recognition and measurement of liabilities associated with disposal activities
and is effective for us on January 1, 2003. We adopted SFAS No. 146 effective
January 1, 2003. As expected, the adoption of SFAS No. 146 did not have a
material impact on the consolidated financial position or consolidated results
of operations of ZEVEX.

<PAGE>

In November of 2002, the EITF reached a consensus on Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables. This issue addresses certain aspects of
accounting for arrangements whereby a vendor performs multiple
revenue-generating activities. This issue addresses how to determine whether an
arrangement involving multiple deliverables contains more than one unit of
accounting and how the related revenue should be measured and allocated to the
separate units of accounting. This issue is effective for revenue arrangements
entered into for fiscal periods beginning after June 15, 2003. We adopted EITF
No. 00-21 in the third quarter which began on July 1, 2003. The adoption of this
statement did not have a material impact on the consolidated financial position
or consolidated results of operations of ZEVEX.

Quarterly Financial Data

The following table sets forth a summary of our quarterly income statement data
for the fiscal years ended December 31, 2003 and 2002.
<TABLE>
<CAPTION>
<S>               <C>                                                                                    <C>

Summary of Quarterly Data
                   12/03       9/03        6/03       3/03       12/02        9/02       6/02        3/02
                 ----------- ---------- ----------- ---------- ----------- ----------- ---------- -----------
                 ----------- ---------- ----------- ---------- ----------- ----------- ---------- -----------

Revenue          $6,266,142  $6,125,757 $6,829,793  $6,648,184 $7,070,368  $6,525,270  $5,804,441 $6,095,654
Gross profit        912,463  1,939,764   2,691,617  2,779,951   3,254,364   2,698,272  2,535,134   2,632,219
Impairment loss
                  1,566,967         --          --         --          --          --         --          --
Loss on sale
of business       4,692,445         --          --         --          --          --         --          --
Net (loss)
income           (8,019,543) (407,328)    (28,107)    177,436      30,887      56,256      4,784     122,376
EPS basic            (2.36)      (.12)       (.01)        .05         .01         .02        .00         .04
EPS diluted          (2.36)      (.12)       (.01)        .05         .01         .02        .00         .04

</TABLE>

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 2003 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 future financial results. From time to time, we also provide
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. When used in this report or our other
publicly-released materials, the words such as "plans," "expects," "will,"
"estimates," "believes," "projects," "anticipates" and similar expressions,
together with other discussion of future trends or results, are intended to
identify forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities Exchange
Act of 1934, as amended. In all cases, a broad variety of risks and
uncertainties, 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 our current views, no
forward-looking statement can be guaranteed. Actual future results may vary
materially.

We undertake no obligation to update any forward-looking statements, but
investors are advised to consult any further disclosures by us in our subsequent
filings pursuant to the Securities Exchange Act of 1934, as amended.
Furthermore, in accordance with the Private Securities Litigation Reform Act of
1995, we provide the following cautionary statements, identifying factors that
could cause our 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 our business and considered in evaluating our prospects for future growth.
The occurrence of one or more of the following risks or uncertainties could have
a material adverse effect on our business, results of operations, and financial
condition.

<PAGE>

         Risk Factors Relating to Our OEM Customers

Our success in contract manufacturing depends largely on the success of our
customers and their need for our manufacturing services and on the devices
designed and manufactured by us 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 us. In addition, we sell 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 us would be more substantial than that
presented by the decline in sales to a single customer for such type of device.
Additionally, we believe that our design and manufacturing customers and their
devices (and ours indirectly) are generally subject to the following risks:


         Competitive Environment. The medical device industry is 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 our 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 customers, which may adversely affect those
         customers' ability to purchase and pay for their products manufactured
         by us. The competitors and potential competitors of our customers may
         succeed in developing or marketing technologies and products that will
         be preferred in the marketplace over the devices manufactured by us for
         our customers or that would render our customers' technology and
         products obsolete or noncompetitive.


         Emerging Technology Companies. A number of our customers are emerging
         medical technology companies that have competitors and potential
         competitors with substantially greater capital resources, research and
         development staff and facilities, and substantially greater experience
         in developing new products, obtaining regulatory approvals, and
         manufacturing and marketing medical products. Approximately three
         customers, representing 8% of our revenues in fiscal year 2003, were,
         in our 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. As a
         result, these customers may experience a significant drop in product
         revenues, which may hamper their ability to continue as our customer or
         even pay for services and products that we have already delivered.

         Customer Regulatory Compliance. The FDA regulates many of the devices
         manufactured by us under the FDC Act, which requires certain clearances
         from the FDA before new medical products can be marketed. There can be
         no assurance that our 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 our customers delaying or canceling orders to us. 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.

<PAGE>

         Sales of our 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, our 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 our customers will obtain all required clearances or
         approvals for exported products on a timely basis, if at all.

         Medical devices manufactured by us and marketed by our 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. Our
         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 our customers to comply with regulatory
         requirements. There can be no assurance that we or a customer of ours
         will not be required to incur significant costs to comply with laws and
         regulations in the future, or that such customer or we will be able to
         comply with such laws and regulations.

         Uncertain Market Acceptance of Products. There can be no assurance that
         the products that we design and manufacture for our customers will gain
         any significant market acceptance, even if required regulatory
         approvals are obtained. Some of our 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. Our 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 products. As a
         result, ZEVEX and our customers are subject to the risk of product and
         inventory obsolescence, whether from prolonged development, 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. Some of our 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 may prevent such commercial introduction altogether.

         Uncertainty of Third-Party Reimbursement. Sales of many of the medical
         devices that are manufactured by us will 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, 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 our
         customers to achieve market acceptance of their products. Without
         adequate support from third-party payers, the market for the products
         of our customers may be limited.
<PAGE>

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

We believe that acceptance in the marketplace for out-sourcing of design and
manufacturing of advanced medical products for medical technology companies
varies from year to year and is still uncertain. Many of our potential customers
have internal design and manufacturing facilities. Our engineering and
manufacturing activities require that customers provide us 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, we could suffer a substantial reduction
in the size of one or more of our current target markets, which could have a
materially adverse effect on our business, results of operations, and financial
condition.

         Competition in Out-Sourcing Manufacturing

We face competition from design firms and other manufacturers that operate in
the medical device industry. Many competitors have substantially greater
financial and other resources than we do. Also, manufacturers focusing in other
industries may decide to enter into the industries served by us. Competition
from any of the foregoing sources could place pressure on us to accept lower
margins on our contracts or lose existing or potential business. To remain
competitive, we 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 and the value that we provide. There can be no assurance that we
will be able to compete favorably with respect to these factors.

         Dependence on Major Customers

No assurances can be given that our customers will continue to do business with
us or that the volume of their orders for our contract manufactured devices and
proprietary products will increase or remain constant. The loss of several
customers, or a significant reduction in the volume of their orders to us, could
have a material adverse impact on our operations. In addition, if one or more of
these customers were to seek and obtain price discounts from us for our contract
manufactured devices or proprietary products, the resulting lower gross margins
on those devices and products could have a materially adverse effect on our
overall results of operations. If any customer with whom we do a substantial
amount of business were to encounter financial distress, the customer's
lateness, unwillingness, or inability to pay its obligations to us could result
in a materially adverse effect on our results of operations and financial
condition.

         Early Termination of Agreements

Our agreements with major manufacturing customers generally permit the
termination of the agreements before their expiration 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 us (so-called force majeure events), cause the
failure or delay of performance.

Our pump usage agreements, under which enteral feeding pumps are placed with
users in exchange for a commitment by the user to buy disposable products from
us, 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.

<PAGE>

         Risk Factors in Marketing Our Proprietary Products

In producing and marketing our own proprietary devices, we face many of the same
risks that our contract manufacturing customers face. As discussed above with
respect to our customers, such risks include:

The medical products industry is highly competitive. A significant number of our
competitors have substantially greater capital resources, research and
development staffs, 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 our products or rendering our 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,
we will be required to make ongoing investment in research and development with
respect to our existing and future products.

We are subject to substantial risks involved in developing and marketing medical
products that are regulated by the FDA and comparable foreign agencies. There
can be no assurance that we 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 us. Changes in existing laws and regulations or policies could adversely
affect our ability to comply with regulatory requirements.

There can be no assurance that our 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 us 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 our products.

         Regulatory Compliance for Manufacturing Facilities

We expend 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 ZEVEX'
manufacturing operations will be found to comply with GMP regulations, ISO
standards, or other applicable legal requirements or that we will not be
required to incur substantial costs to maintain our compliance with existing or
future manufacturing regulations, standards, or other requirements. Our 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 ZEVEX 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 us may be halted or otherwise restricted.

         Product Development

Our success will depend to a significant extent upon our ability to enhance and
expand our current offering of proprietary products and to develop and introduce
additional innovative products that gain market acceptance. While we maintain
research and development programs and have established various Technical
Advisory Boards to assist us, there is no assurance that we will be successful
in selecting, developing, manufacturing, and marketing new products or enhancing
our existing products on a timely or cost-effective basis. Moreover, we may
encounter technical problems in connection with our efforts to develop or
introduce new products or product enhancements. Some of the devices currently
being developed by us (as well as devices of some of our 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.

<PAGE>

         Design and Manufacturing Process Risks

While we have substantial experience in designing and manufacturing devices, we
may still experience technical difficulties and delays with the design and
manufacturing of our or our customers' products. Such difficulties could cause
significant delays in our production of products. In some instances, payment by
a manufacturing customer is dependent on our 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 us 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

We currently have a limited domestic direct sales force consisting of seventeen
full-time employees, complemented by a network of clinical support personnel. We
anticipate that we will need to increase our marketing and sales capability
significantly to more fully penetrate our target markets, particularly as
additional proprietary devices become commercially available. There can be no
assurance that we will be able to compete effectively in attracting and
retaining qualified sales personnel or independent manufacturer's
representatives as needed or that such persons will be successful in marketing
or selling our services and products.

         Product Recalls

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

         Risk of Product Liability

The manufacture and sale of products, especially medical products, entails an
inherent risk of product liability. We maintain product liability insurance with
limits of $1 million per occurrence and $2 million in the aggregate and an
umbrella policy with a $5 million limit. There can be no assurance that such
insurance is adequate to cover potential claims or that we 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 significant in the medical
products area where product failure may result in loss of life or injury to
persons. Additionally, we generally provide a design defect warranty and in some
instances indemnification to customers for failure to conform to design
specifications and against defects in materials and workmanship, which could
subject us to a claim under such warranties or indemnification.

         Dependence Upon Management

ZEVEX is substantially dependent upon our key managerial, technical and
engineering personnel, particularly our two executive officers, David McNally,
President and Chief Executive Officer, and Phillip McStotts, Chief Financial
Officer and Secretary/Treasurer. ZEVEX 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 we will attract and retain such personnel. The
loss of our key personnel could have a material adverse effect on our business,
results of operations, and financial condition. None of our key personnel have
employment agreements with ZEVEX.

We carry key-man life insurance on the lives of our Chief Executive Officer and
Chief Financial Officer in the amount of $2,000,000 each. No assurances can be
given that such insurance would provide adequate compensation to ZEVEX in the
event of the death of either key employee.

<PAGE>

         Patent Protection

As of December 31, 2003, we held eighteen U.S. patents and fourteen
international patents on devices developed by us, with fourteen additional U.S.
patents and twenty international patents pending. Such patents disclose certain
aspects of our technologies and there can be no assurance that others will not
design around the patent and develop similar technology. We believe that our
devices and other proprietary rights do not infringe on 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, 2004, 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, beneficially own or have voting control over approximately
20% 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

We rely on third-party suppliers for many of the component parts used in
manufacturing our own products and those of our customers. Although component
parts are generally available from multiple suppliers, certain component parts
may require long lead times, and we may have to delay the manufacture of 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, we
could experience additional delays in obtaining component parts if the supplier
has not met our vendor qualifications. Component shortages for a particular
device may adversely affect our ability either to meet the production plans for
our own devices or to satisfy customer orders for that device. Such shortages
and extensions of production schedules may delay the recognition of revenue by
us and may in some cases constitute a breach of a customer contract. If
shortages of component parts continue or if additional shortages should occur,
we 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, our customers sometimes require us to enter into
non-competition agreements that prevent us from manufacturing instruments or
components for our customers' competitors in certain fields of use. 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 we enter into a non-competition agreement, we may be adversely
affected if our customer's product is not successful and we must forgo an
opportunity to manufacture a successful product for such customer's competitor.
Any conflicts among our customers could prevent or deter us from obtaining
contracts to manufacture successful products.

<PAGE>

        Future Capital Requirements

We believe that our existing capital resources and amounts available under our
existing bank line of credit, will satisfy our anticipated capital needs for the
next year (depending primarily on our growth rate and our results of
operations). The commercialization of proprietary products, which is an element
of our growth strategy, would require increased investment in working capital
and could therefore shorten this period. Thereafter, we may be required to raise
additional capital or increase our 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 us. Also, any additional
equity financing would result in additional dilution to our shareholders.

         Reliance on Efficiency of Distribution and Third Parties

We believe our financial performance is dependent in part on our ability to
provide prompt, accurate, and complete services to our customers on a timely and
competitive basis. Accordingly, delays in distribution in our day-to-day
operations or material increases in the costs of procuring and delivering
products could have an adverse effect on our results of operations. Any failure
of either our computer operating system or our telephone system could adversely
affect our ability to receive and process customers' 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 us to receive necessary components or other materials or to ship our
products also could impair our ability to deliver products on a timely and
cost-effective basis.

         Volatility of Revenue and Product Mix

Our annual and quarterly operating results are affected by volume and timing of
customer orders, which vary due to (i) variation in demand for the customers'
products or services as a result of, among other things, product life cycles,
competitive conditions, and general economic conditions, (ii) the customers'
attempt to balance their inventory, (iii) the customers' need to adapt to
changing regulatory conditions and requirements, and (iv) changes in the
customers' preference or strategies. 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 our gross margin.

Under the terms of our contracts with many of our contract manufacturing
customers, the customers have broad discretion to control the volume and timing
of product deliveries. Further, the contracts with our customers typically have
no minimum purchase requirements. As a result, production may be reduced or
discontinued at any time. Therefore, it is difficult for us 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 our annual and quarterly results of operations include inexperience in
manufacturing a particular product, inventory shortages or obsolescence,
increasing labor costs or shortages, low gross margins on particular projects,
an increase in lower-margin product revenue as a percentage of total revenues,
price competition, and regulatory requirements. Because our business
organization and our related cost structure anticipate supporting a certain
minimum level of revenues, our limited ability to adjust the short-term cost
structure would compound the adverse effect of any significant revenue
reduction.

         Uncertain Protection of Intellectual Property

To maintain the secrecy of some of our proprietary information, we rely on a
combination of trade secret laws and internal security procedures. We typically
require our 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 we rely to protect
our intellectual property and confidential and proprietary information will
provide us 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 we
consider proprietary. In addition, proprietary information regarding us could be
disclosed in a manner against which we have no meaningful remedy. Disputes
regarding our intellectual property could force us 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 us from
manufacturing and selling certain of our products.

<PAGE>

         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. ZEVEX' Common Stock is listed on the NASDAQ Stock Market. 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 us or
our competitors, developments concerning our proprietary rights, or the public
concern as to the safety of our devices may have a material adverse impact on
our business and on the market price of our Common Stock, particularly as we
expand our 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 us and our competitors, quarterly fluctuations in
our operating results, and general economic conditions and conditions in the
medical device 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 device 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 by us may include 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 our
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 our 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 ZEVEX and may maintain the
incumbency of our 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 ZEVEX Common Stock. Pursuant to our Certificate of Incorporation, the
Board of Directors is authorized to fix the rights, preferences, privileges, and
restrictions, including voting rights, of unissued shares of ZEVEX Preferred
Stock and to issue such stock without any further vote or action by our
stockholders. The rights of the holders of ZEVEX 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, our Certificate and Bylaws provide for a
staggered board whereby only two to three 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 the 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 or any Director
of ZEVEX or pursuant to a resolution adopted by a majority of the Board of
Directors.

<PAGE>

ZEVEX 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

Our 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, or other restrictive
government actions such as capital regulations. We are also exposed to foreign
currency exchange rate risk inherent in our foreign sales commitments and
anticipated foreign sales because the prices charged for our products are
denominated in U.S. dollars. Consequently, our foreign sales commitments and
anticipated sales could be adversely affected by an appreciation of the U.S.
dollar relative to other currencies.

ITEM 7A.           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


We are exposed to market risk in the form of fluctuations in interest rates and
their potential impact upon our line of credit, currently with a balance of
$1,810,970 and our industrial development bond of $1,400,000. Principal payments
of $100,000 are made annually on the industrial development bond, with the
balance due October 1, 2016. The variable rate on the line of credit is the
prime bank lending rate, and the variable rate on the industrial development
bond is based on a weekly tax-exempt floater rate. The line of credit matures
annually in May. At December 31, 2003, the above debt represented 91.7% of our
total short-term funded debt and 61.3% of our total long-term funded debt
compared with 2.9% short-term funded debt and 84.2% long-term funded debt at
December 31, 2002. For illustrative purposes only, the impact of market risk is
estimated using a hypothetical increase in interest rates of one percentage
point for both our variable rate debt and cash. Based on hypothetical
assumption, we would have incurred an additional $35,000 in interest expense and
received $4,000 in additional interest income for the year ended December 31,
2003, and an additional $19,000 in interest expense and received $9,000 in
additional interest income for the year ended December 31, 2002.


We are also exposed to market risk in the form of fluctuations in interest rates
and their potential impact on our fixed rate debt, which includes our term loan
agreement, with a balance of $870,038 as of December 31, 2003, which is due on
May 15, 2008 and is being amortized over a thirteen-year term at an interest
rate of 5.4%.

Additionally, we held marketable equity securities with a fair value of $88,000
at December 31, 2003, consisting of stock of a public company in the small-cap
market. We realized an "other-than-temporary" loss on available-for-sale
marketable securities in the third quarter ending September 30, 2001 and the
year ended December 31, 2001 of $917,628. Gross unrealized gains on marketable
equity securities were $3,067 for the year ended December 31, 2003. We did not
hold any marketable securities at December 31, 2002. Gross unrealized gains on
marketable equity securities were $32,180 for the year ended December 31, 2001.

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


ZEVEX' financial statements as of December 31, 2003 and 2002 and for each of the
three years in the period ended December 31, 2003, are included beginning at
page 53, immediately following Item 15.


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

We have no changes in or disagreements with our independent auditors with regard
to accounting or financial disclosures.

ITEM 9A   CONTROLS AND PROCEDURES

As of December 31, 2003, our management, including our CEO and CFO, evaluated
the effectiveness of our "disclosure controls and procedures" (the controls and
other procedures for recording, processing, summarizing and reporting on a
timely basis the information required to be disclosed in the periodic reports
that we file with the U.S. Securities and Exchange Commission). Based on that
evaluation, and subject to the limitations noted below, our management concluded
that our disclosure controls and procedures are effective to ensure that
material information about us and our subsidiaries is made known to management
by others in our company on a timely basis for preparation of our periodic
reports. While we believe our disclosure controls and procedures are effective,
we note that controls and procedures, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
controls and procedures are met. There are inherent limitations, including the
possibility that judgments in decision-making can be faulty, that breakdowns can
occur because of simple error or mistake, or that a person may circumvent the
controls. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

There have been no significant changes in our internal control over financial
reporting during the fourth quarter of 2003 or in other factors that could
significantly affect those controls.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the name, age, and principal position of each
director and executive officer, as well as the expiration of each director's
term of office.
<TABLE>
<CAPTION>
<S>                                                                                                    <C>

---------------------------- ------ --------------------------------------------------------- -------------
                                                                                               Expiration
Name                         Age    Position                                                    of Term
---------------------------- ------ --------------------------------------------------------- -------------
---------------------------- ------ --------------------------------------------------------- -------------

David J. McNally              42    Chief Executive Officer, President, and Chairman              2006

Phillip L. McStotts           46    Chief Financial Officer, Secretary/Treasurer, and             2005
                                    Director

Bradly A. Oldroyd             46    Director                                                      2006

David B. Kaysen               53    Director                                                      2005

Dan Robertson                 56    Director                                                      2005

John T. Lemley                60    Director                                                      2004

Richard L. Shanaman           68    Director                                                      2004

---------------------------- ------ --------------------------------------------------------- -------------
</TABLE>
<PAGE>

Our executive officers serve at the discretion of the Board of Directors. None
of the executive officers has an employment agreement with us. Certain
biographical information with respect to each of the officers and directors is
set forth below. David J. McNally is one of our founders and has served as our
Chief Executive Officer and Chairman since September 2000. Prior to September
2000, Mr. McNally served as our Executive Vice President and as a director since
our inception in 1986. He also serves as CEO and director of our wholly-owned
subsidiary, ZEVEX Inc. Mr. McNally was an Ernst & Young Entrepreneur of the Year
Finalist in 1998, and again in 1999. Prior to joining us, he was employed by EDO
Corporation in Salt Lake City, Utah as a marketing manager from 1985 to 1987.
From 1984 to 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 1983 to 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 an Executive
Master of Business Administration Degree from the University of Utah in June
1992.

Phillip L. McStotts is one of our founders and has served as our CFO, Secretary,
and Treasurer, and as a director since our inception. He also serves as a
director of our wholly-owned subsidiary, as CFO, Secretary and Treasurer of
ZEVEX Inc. Mr. McStotts was an Ernst & Young Entrepreneur of the Year Finalist
in 1998, and again in 1999. Mr. McStotts was a practicing CPA running his own
professional corporation, Phillip L. McStotts, CPA P.C., from 1986 to 1992.
Prior to starting his own firm, Mr. McStotts was employed from 1985 to 1986 as
an accountant with the Salt Lake City firm of Chachas & Associates, where he was
a 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.

Bradly A. Oldroyd has been a director 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 Food 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.

David B. Kaysen has been a director since November 2000. Mr. Kaysen has served
since December 2002 as President, Chief Executive Officer, and Director of
Diametrics Medical, Inc. a publicly traded (OTCBB: DMED.OB) manufacturer and
marketer of critical care blood analysis systems that provide continuous
diagnostic results at the point-of-care. From 1992 to 2002, Mr. Kaysen served as
Chief Executive Officer, President, and director of Rehabilicare Inc., since
renamed Compex Technologies, Inc. a publicly traded (NASDAQ: CMPX) manufacturer
and marketer of electromedical rehabilitation and pain management products for
clinician, home and industrial use. From 1989 to 1992, Mr. Kaysen served as
Executive Vice President for Emeritus, a company that developed and marketed
clinical assessment software for the nursing home industry. Mr. Kaysen also
served as President and CEO of Surgidyne, Inc., which markets specialty medical
and surgical products, from 1988 to 1989. From 1986 to 1988, Mr. Kaysen was Vice
President of Marketing for Red Line/XVIIIB Medimart, a medical product
distributor. Mr. Kaysen also served in various general management positions with
American Hospital Supply Corporation from 1974 to 1986. Mr. Kaysen currently
serves as a director on the Board of American Telecare, Inc., a privately held
company that markets home telemedicine products and Medical CV, Inc. a publicly
traded (OTCBB: MDCVU) manufacturer and marketer of mechanical heart valves. Mr.
Kaysen graduated with a Bachelor of Science Degree in Business Administration
from the University of Minnesota in 1972.

Dan Robertson, has been a director since April 2002. Mr. Robertson is a Managing
Director of Insurance Offices of America, where he has been responsible for
managing reinsurance relationships and risk sharing programs since 2001. From
1997 to 2001, Mr. Robertson was Senior Vice President of Protegrity Services
Inc., where he developed comprehensive insurance products and underwriting
programs with national carriers and reinsurers. From 1992 to 1997, Mr. Robertson
was President of Berkley Risk Managers, a full service risk management company
within the W.R. Berkley Group. Prior to 1992, Mr. Robertson was Field Operations
Vice-President in charge of CIGNA Corporation's network of workers compensation
claim-management centers. Mr. Robertson graduated with a Bachelor of Science
Degree in Psychology from Arizona State University in 1970.

<PAGE>

John T. Lemley has been a director since February 2003. From 1999 to 2001 Mr.
Lemley served as Executive Vice President and Chief Financial Officer of emWare
Inc. a privately held supplier in the emerging market for device-networking
solutions. From 1995 to 1999, Mr. Lemley served as Vice President and Chief
Financial Officer of Evans & Sutherland Computer Corporation, a leading supplier
of 3-D graphic technology for aerospace defense, simulation applications, and
high performance NT workstation markets. From 1994 to 1995, Mr. Lemley served as
Sr. Vice President and Chief Financial Officer of Megahertz Holding Corporation,
a publicly traded manufacturer of data and fax modems for portable computer that
was acquired by U.S. Robotics, Inc. in 1995. From 1990 to 1994, Mr. Lemley
served as Vice President, Corporate Controller and Acting Chief Financial
Officer for Medtronic, Inc. (NYSE: MDT) the world's leading producer of medical
devices. From 1973 to 1990, Mr. Lemley served in various Corporate Controller
positions for Hewlett Packard Company. Mr. Lemley graduated with a Bachelor of
Science Degree in Civil Engineering from the University of California, Berkley
in 1965, and an MBA in Finance from the University of Oregon in 1967.

Richard L. Shanaman, has been a director since February 2003. Mr. Shanaman is
retired. From 1987 to 2003, Mr. Shanaman served as a Director of Lombard
Investments, a San Francisco, California-based Private Equity fund with $1.2
billion under management. Mr. Shanaman is highly regarded in business circles
throughout the Western United States as the founder of the first venture capital
fund in Utah, Utah Ventures, where he served as both General and Limited
Partner. From 1978 to 1983 Mr. Shanaman served as Vice-Chair, Chief Financial
Officer and Treasurer of American Stores, a NYSE company, prior to its merger
with Albertsons. Mr. Shanaman also currently serves as a director of TruVision,
a privately held company that markets vision care services through health plans
nationwide and Western Electronics, a tier II contract manufacturer. Mr.
Shanaman graduated with a Bachelor of Science Degree in Economics from Dartmouth
College in 1958, and a Degree in Credit and Finance Management from Stanford
University in 1969.

SECTION 16(a) BENEFICIAL REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors, executive officers, and 10% shareholders to file with the Securities
and Exchange Commission and with Nasdaq 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 us and written representations that no other
reports were required, we believe that during 2003 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.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has three committees,  the Audit Committee,  Nominating
Committee,  and the Compensation  Committee.  The Audit Committee is composed of
John T. Lemley,  Richard L. Shanaman,  and David B. Kaysen.  The Nominating
Committee is composed of David B. Kaysen,  Bradly A. Oldroyd,  Dan Robertson,
John T. Lemley, and Richard L. Shanaman.  The Compensation  Committee is
composed of David B. Kaysen,  Bradly A. Oldroyd,  and Dan Robertson.  The Audit
Committee is authorized to review proposals of ZEVEX' auditors  regarding
annual  audits,  recommend  the  engagement  or  discharge of ZEVEX'  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 disprove 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 Nominating Committee reviews and recommends candidates  to
fill  vacancies or additions to the Board of Directors.  The  Compensation
Committee  establishes  remuneration  of the executive officers and directors of
ZEVEX and oversees the administration of ZEVEX' stock option plan.

<PAGE>

AUDIT COMMITTEE FINANCIAL EXPERT


The Board of Directors has determined that both John T. Lemley and Richard L.
Shanaman qualify as an "Audit Committee Financial Expert" as defined by Item
401(h) of Regulation S-K of the Securities Exchange Act of 1934, as amended and
that each member of the Audit Committee is independent within the meaning under
Nasdaq Stock Market rules.


CODE OF ETHICS


On March 6, 2003, the board of directors adopted a Code of Ethics for its
officers and directors ("Code of Ethics for Officers and Directors"). On March
6, 2003, we also adopted a Code of Ethics for our non-officer employees ("Code
of Ethics for Non-officer Employees"). The Code of Ethics for Officers and
Directors Code of Ethics for Non-officer Employees meets the requirements of the
SEC. A copy of this Code of Ethics can be found on our web site at
www.zevex.com. We will also post any amendment to or waiver from the Code of
Ethics for Officers and Directors on that site.


ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the compensation we paid to each of our executive
officers during the three-year period ended December 31, 2003.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S>        <C>                                                                                           <C>
                                                                             Long Term Compensation
                       Annual Compensation                                 Awards          Payouts
              ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
           (a)               (b)      (c)       (d)        (e)        (f)        (g)         (h)       (i)
                                                                     Other    Restricted Securities    All
Name and                                                 Annual      Stock    Underlying    LTIP      Other
Principal Position          Year    Salary     Bonus      Comp.     Awards     Options     Payouts    Comp.
------------------          ----    ------     -----      -----     ------     -------     -------    -----
David J. McNally            2003   $203,639   $0        0          0          20,000      0          $6,000(*)
Chief Executive Officer     2002   $194,543   $0        0          0          40,000      0          $4,161(*)
President, Chairman         2001   $185,500   $7,500    0          0          0           0          $5,250(*)



Leonard C. Smith            2003   $186,553   $0        0          0          20,000      0          $6,000(*)
Sr. Vice President          2002   $181,931   $20,000   0          0          40,000      0          $6,000(*)
                            2001   $175,000   $0        0          0          0           0          $5,250(*)

Phillip L. McStotts         2003   $177,184   $0        0          0          20,000      0          $6,000(*)
Chief Financial Officer     2002   $172,030   $15,000   0          0          40,000      0          $4,161(*)
Secretary/Treasurer         2001   $165,000   $0        0          0          0           0          $5,250(*)

</TABLE>

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

Mr. Smith resigned as an officer of the Company Rate effective December 31, 2003
(See Item 13. Certain Relationships and Related Price Transactions)

<PAGE>

The following table sets forth certain information relating to options granted
in 2003 to named executive officers to purchase shares of our common stock under
the ZEVEX Stock Option Plan.

OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
<S>                     <C>                                                                             <C>
                                Individual Grants
                                       Percent Of
                         Number Of       Total
                         Securities     Options/
                         Underlying       SARs
                          Options/     Granted To
                            SARs       Employees     Exercise Or
                          Granted      In Fiscal     Base Price    Expiration
         Name               (#)           Year         ($/Sh)         Date         5% ($)        10% ($)
         (a)                (b)           (c)            (d)           (e)          (f)            (g)
----------------------- ------------- ------------- -------------- ------------ ------------- ---------------
----------------------- ------------- ------------- -------------- ------------ ------------- ---------------
David J. McNally           20,000        19.51%         $1.90       1/3/2010      $15,470        $36,051
Phillip L. McStotts        20,000        19.51%         $1.90       1/3/2010      $15,470        $36,051
Leonard C. Smith           20,000        19.51%         $1.90       1/3/2010      $15,470        $36,051

</TABLE>

Effective January 3, 2003, the Compensation Committee approved the grant of
Common Stock purchase options for 20,000 shares each to Messrs. McNally,
McStotts, and Smith. The options vest over a period of four years. The options
are exercisable at $1.90 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, 2003, 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>
                                                                                 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
David J. McNally
Chief Executive Officer          0           0          46,250/83,750            $8,300/$66,500

Leonard C. Smith
Sr. Vice President               0           0          80,000/60,000            $8,300/$66,500

Phillip L. McStotts
Secretary/Treasurer              0           0          46,250/83,750            $8,300/$66,500
</TABLE>
<PAGE>


Of the unexercised options listed above for each of Messrs. McNally and
McStotts, 30,000 were granted effective on January 1, 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, effective on January 5, 1999
and expired on January 4, 2004. The exercise price on such options is $4.875. Of
the unexercised options listed above for each of Messrs. McNally, Smith and
McStotts, 40,000 were granted effective on November 27, 2000 and expire on
November 27, 2007. The exercise price on such options is $4.75. Of the
unexercised options listed above for each of Messrs. McNally, Smith and
McStotts, 40,000 were granted effective on January 17, 2002 and expire on
January 17, 2009. The exercise price on such options is $3.15. Of the
unexercised options listed above for each of Messrs. McNally, Smith and
McStotts, 20,000 were granted effective on January 3, 2003 and expire on January
3, 2010. The exercise price on such options is $1.90. 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 December 31, 2003, which
was $3.98.

Mr. Smith resigned as an officer of the Company effective December 31, 2003 (See
Item 13. Certain Relationships and Related Transactions). Mr. Smith has 90 days
from that date to exercise his vested , unexpired options.


COMPENSATION OF DIRECTORS

We pay each director who is not an employee of ZEVEX or its subsidiaries a
director's fee of $2,000 per quarter and a committee member fee of $1,000 per
year for each committee on which the director serves. Each director is also
granted 10,000 stock options upon first being elected to the board, with 25%
vesting on an annual basis over four years, in addition to being granted 2,500
stock options annually, which vest one year after issue, while a member of the
Board of Directors. Although we 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 for attending
meetings of directors or shareholders.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee of our Board are David B. Kaysen,
Bradly A. Oldroyd, and Dan Robertson. No member of our Board's Compensation
Committee is or was formerly an officer or an employee of ZEVEX. No interlocking
relationship exists between our Board and its Compensation Committee and the
board of directors or compensation committee of any other company, nor has such
interlocking relationship existed in the past.


TERMINATION OF EMPLOYMENT AND CHANGE-OF- CONTROL ARRANGEMENTS

Messrs.  McNally and McStotts, have entered into Executive Severance Package
         Agreements with ZEVEX that provide for certain benefits to be paid to
         the executive under circumstances following a change-in-control. In the
         event that ZEVEX experiences a "change-in-control" (as defined by the
         Executive Severance Package Agreement) and the executive is terminated
         without "cause", or if he is "constructively terminated" within
         eighteen months following a change-in-control, or a relocation of
         executive's principal office of more than 50 miles is required, the
         executive will receive the following benefits:

(a)      Mr. McNally: (i) a severance payment equal to 24 months of his current
         salary and annual bonus; (ii) the full acceleration of the vesting of
         his options; (iii) in the event that the severance triggers a
         non-deductible excise tax under Section 280G of the Internal Revenue
         Code, the severance shall be reduced to a level that will not trigger
         the excise tax; and (iv) one-third of the severance is future
         compensation for a non-compete obligation.

<PAGE>

(b)      Mr. McStotts: (i) a severance payment equal to 18 months of his current
         salary and annual bonus; (ii) the full acceleration of the vesting of
         his options; (iii) in the event that the severance triggers a
         non-deductible excise tax under Section 280G of the Internal Revenue
         Code, the severance shall be reduced to a level that will not trigger
         the excise tax; and (iv) one-third of the severance is future
         compensation for a non-compete obligation.

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, 2004, 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 3,400,964 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                                       Shares Owned            Of Class(1)
 ----------------                           ------------            -----------

David J. McNally(2)                            303,448                 8.8%

E*Capital Corporation(3)                       275,530                 8.1%

Phillip L. McStotts. (4)                       210,650                 6.1%

Bradly A. Oldroyd(5)                            20,500                    *

David B. Kaysen(6)                              12,500                    *

John T. Lemley(7)                               12,500                    *

Dan M. Robertson(8)                              7,500                    *

Richard L. Shanaman(9)                           4,500                    *

All Officers and Directors
As a Group (2) (4) (5) (6) (7) (8) (9)         571,598                 16.0%

*Less than 1%

(1) For purposes of the table, "beneficial ownership" includes stock that a
shareholder has the right to acquire pursuant to options or rights of conversion
within 60 days of March 15, 2004. The percentage ownership for each shareholder
is calculated assuming that all the stock that could be so acquired by that
shareholder within 60 days, by option exercise or otherwise, has in fact been
acquired and that no other shareholder has exercised a similar right to acquire
additional shares. Except as indicated otherwise below, the shareholder named in
the table has 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) Chief Executive Officer, President and Chairman. Includes 240,198 shares of
Common Stock held directly, 61,250 shares of Common Stock issuable upon exercise
of options held by Mr. McNally that are currently exercisable or will become
exercisable within 60 days, and 2,000 shares held by Mr. McNally as custodian
for his child. Excludes 68,750 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.

<PAGE>

(3) This information is based on Schedule 13G filed February 10, 2003, with the
SEC by E*Capital Corporation, a California Corporation, and certain of its
affiliates. Includes 133,500 of such shares of Common Stock held by E*Capital
Corporation, 62,300 shares of Common Stock held by Edward W. Wedbush, and 19,700
shares of Common Stock held by Wedbush Morgan Securities, Inc. Edward W. Wedbush
is the Chairman of E*Capital Corporation and owns a majority of the outstanding
shares of E*Capital Corporation. Edward W. Wedbush is the President and Chief
Executive Officer of Wedbush Morgan Securities, Inc. E*Capital Corporation owns
a majority of the outstanding shares of Wedbush Morgan Securities, Inc.
Accordingly, Edward W. Wedbush may be deemed the beneficial owner of the ZEVEX
Common Stock owned by E*Capital Corporation. However, beneficial ownership of
the ZEVEX Common Stock is disclaimed by Edward W. Wedbush.

(4) Chief Financial Officer, Secretary, Treasurer, and director. Includes
149,400 shares of Common Stock held directly and 61,250 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 68,750 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.

(5) Director. Includes 20,500 shares of Common Stock issuable upon exercise of
options held by Mr. Oldroyd that are currently exercisable or will become
exercisable within 60 days.

(6) Director. Includes 12,500 shares of Common Stock issuable upon exercise of
options held by Mr. Kaysen that are currently exercisable or will become
exercisable within 60 days. Excludes 2,500 shares of Common Stock issuable upon
exercise of options held by Mr. Kaysen that are not currently exercisable and
will not become exercisable within 60 days.

(7) Director. Includes 10,000 shares of Common Stock held directly and 2,500
shares of Common Stock issuable upon exercise of options held by Mr. Lemley 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.
Lemley that are not currently exercisable and will not become exercisable within
60 days.


(8) Director. Includes 7,500 shares of Common Stock issuable upon exercise of
options held by Mr. Robertson that are currently exercisable or will become
exercisable within 60 days. Excludes 5,000 shares of Common Stock issuable upon
exercise of options held by Mr. Robertson that are not currently exercisable and
will not become exercisable within 60 days.


(9) Director. Includes 2,000 shares of Common Stock held directly and 2,500
shares of Common Stock issuable upon exercise of options held by Mr. Shanaman
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. Shanaman that are not currently exercisable and will not become exercisable
within 60 days.
<PAGE>


Equity Compensation Plan Information

The following table lists information as of December 31, 2003 for equity
compensation plans approved and not approved by security holders.

<TABLE>
<CAPTION>
<S>                           <C>                         <C>                       <C>                  <C>
                                    Equity Compensation Plan Information
                                                                                     Number of securities
                                                                                    remaining available for
                              Number of securities to       Weighted-average         future issuance under
                              be issued upon exercise       exercise price of         equity compensation
                              of outstanding options,     outstanding options,         plans (excluding
       Plan category            warrants and rights        warrants and rights      securities reflected in
                                                                                          column (a))
                                        (a)                        (b)                        (c)
----------------------------- ------------------------- -------------------------- --------------------------
 Equity compensation plans
approved by security holders          692,950                     $3.86                     431,569

 Equity compensation plans
  not approved by security
          holders                           0                        0                            0
                                    -----------                  -------                 -----------
             Total                    692,950                     $3.86                     431,569
                                      =======                     =====                     =======
</TABLE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


On December 31, 2003, we completed the sale of our Physical  Evaluation
business.  The transaction was accomplished by the sale of all the issued and
outstanding  capital  stock of JTech Medical  Industries,  Inc.,  ("JTech"),  a
wholly owned  subsidiary of ZEVEX.  The transaction was effected by a Stock
Purchase  Agreement (the "Stock Purchase  Agreement")  dated  December 31,  2003
by and between the Company and Mr. Leonard C. Smith, a former employee, officer
and director of ZEVEX.  (See Item 7. Management Discussion and Analysis)

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES


During 2003 and 2002, Ernst & Young LLP examined the accounts of ZEVEX and its
subsidiaries and also provided other audit services to us in connection with
Securities and Exchange Commission filings. A summary of these fees is set forth
in the following table.

Fees Paid to Independent Auditors

Service provided                                 2003                   2002
----------------                                 ----                   ----
Audit Fees                                     $111,000               $95,000
Audit-Related Fees                                    0                16,000(1)
Tax Fees                                              0                 2,335
All Other Fees                                        0                     0

(1) Fees are related to the audit of employee benefit plans.

In accordance with our Audit Committee Charter, the Audit Committee approves in
advance any and all audit services, including audit engagement fees and terms,
and non-audit services provided to us by our independent auditors (subject to
the de minimus exception for non-audit services contained in Section
10A(i)(1)(B) of the Securities Exchange Act of 1934, as amended), all as
required by applicable law or listing standards. The independent auditors and
our management are required to periodically report to the Audit Committee the
extent of services provided by the independent auditors and the fees associated
with these services.

In the Charter of the Audit Committee, as amended March 6, 2003, the Audit
Committee has the sole authority to approve the audit and non-audit services of
the auditors. The non-audit services that were provided by the auditors in 2002
were not approved by the Audit Committee. For 2003 and future periods, however,
the Audit Committee has and will approve all audit and non-audit services by the
auditors.

<PAGE>

                                     PART IV

ITEM 15   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 balance sheets of ZEVEX International, Inc. as of
December 31, 2003 and 2002, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 2003, 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)     Reports on Form 8-K

         Item(s)  Reported                                      Date Filed
         -----------------                                      ----------
         Item 2. Acquisition and Disposition of Assets          January 15, 2004


<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, 2004                                  By: /s/ DAVID J. MCNALLY
                                                          ----------------------
                                                        David J. McNally
                                                        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 indicated.

                                POWER OF ATTORNEY

Know all men by these presents, that each person whose signature appears below
constitutes and appoints each of David J. McNally 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>
  Signature                                 Title                                            Date


/s/ DAVID J. MCNALLY                Chairman of the Board of Directors,                 March 29, 2004
---------------------------
David J. McNally                    Chief Executive Officer,

                                    (Principal Executive Officer)



/s/ PHILLIP L. McSTOTTS             Director, Chief Financial Officer,                  March 29, 2004
-----------------------
Phillip L. McStotts                 Secretary, and Treasurer (Principal

                                    Financial and Accounting Officer)


/s/ BRADLY A. OLDROYD               Director                                            March 29, 2004
---------------------
Bradly A. Oldroyd


/s/ DAVID B. KAYSEN                 Director                                            March 29, 2004
-------------------
David B. Kaysen



/s/ DAN M. ROBERTSON                Director                                            March 29, 2004
--------------------
Dan M. Robertson


/s/ RICHARD L. SHANAMAN             Director                                            March 29, 2004
-----------------------
Richard L. Shanaman


/s/ JOHN T. LEMLEY                  Director                                            March 29, 2004
------------------
John T. Lemley
</TABLE>

<PAGE>

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

                                INDEX TO EXHIBITS
                                  (Item 15(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).
10.3              Stock  Purchase  Agreement  between  Blosch & Holmes,  LLC and ZEVEX  International,  Inc.,  dated  December 1,
                  1996, including one amendment dated September 30, 1997 (1).
10.5#             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).
10.13             Stock Purchase Agreement, dated December 31, 1998, between ZEVEX International, Inc., and Vijay Lumba (5).
10.15             Convertible Debenture, dated January 6, 1999, issued to Vijay Lumba (6).
10.19#            ZEVEX International, Inc., 1999 Stock Option Plan and Form of Stock Option Grant (6).
10.20#            Form of Stock Option Grant to Messrs. McNally and McStotts (7)
10.22             Convertible Debenture, dated March 30, 2000, issued to Vijay Lumba. (8)
10.25             Amendment to Revolving Line of Credit Agreement between Bank One and ZEVEX International, Inc., dated June 29,
                  2001. (9)
10.26             Amendment to Convertible Debenture, dated December 20, 2001, issued to Vijay
                  Lumba. (9)
10.27#            Executive Severance Package Agreement for Mr. McNally (10)
10.28#            Executive Severance Package Agreement for Mr. McStotts (10)
10.30             Stock Purchase Agreement dated December 31, 1998, between ZEVEX International, Inc., and Leonard C. Smith (11).
21                List of Subsidiaries.
31.01             Certification of the Registrant's Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of
                  2002.
31.02             Certification of Registrant's Chief Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of
                  2002.
32.01             Certification of Registrant's Chief Executive Officer, as required by Section 906 of the Sarbanes-Oxley Act of
                  2002.
32.02             Certification of Registrant's Chief Financial Officer, as required by Section 906 of the Sarbanes-Oxley Act of
                  2002.

(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 ZEVEX' 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 ZEVEX' amended Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996 (File No. 033-19583).

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


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

(7)      Incorporated by reference to ZEVEX' Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 001-12965).

(8)      Incorporated by reference to ZEVEX' Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 001-12965).

(9)      Incorporated by reference to ZEVEX' Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 001-12965).

(10)     Incorporated by reference to ZEVEX' Annual Report on Form 10-K for the year ended December 31, 2002 (File No. 001-12965).

(11)     Incorporated by reference to ZEVEX' Current Report on Form 8-K filed  January 15, 2004 (File No. 001-12965).

# Identifies a "management contract or compensatory plan or arrangement".
</TABLE>



<PAGE>

                                                                   Exhibit 31.01
                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER,
          AS REQUIRED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.


I, David J. McNally, certify that:

1. I have reviewed this annual report on Form 10-K of ZEVEX International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I, are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

         a) Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         registrant, including its consolidated subsidiaries, is made known to
         us by others within those entities, particularly during the period in
         which this report is being prepared;

         b) Evaluated the effectiveness of the registrant's disclosure controls
         and procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the end
         of the period covered by this report based on such evaluation; and

         c) Disclosed in this report any change in the registrant's internal
         control over financial reporting that occurred during the registrant's
         most recent fiscal quarter (the registrant's fourth fiscal quarter in
         the case of an annual report) that has materially affected, or is
         reasonably likely to materially affect, the registrant's internal
         control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):

         a) All significant deficiencies and material weaknesses in the design
         or operation of internal controls over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

         b) Any fraud, whether or not material, that involves management or
         other employees who have a significant role in the registrant's
         internal control over financial reporting.


Dated:  March 29, 2004
                                     By   /s/ David J. McNally
                                       --------------------------
                                       David J. McNally, CEO
                                      (Chief Executive Officer)

<PAGE>

                                                                   Exhibit 31.02
                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER,
          AS REQUIRED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.


I, Phillip L. McStotts, certify that:

1. I have reviewed this annual report on Form 10-K of ZEVEX International, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I, are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

         a) Designed such disclosure controls and procedures, or caused such
         disclosure controls and procedures to be designed under our
         supervision, to ensure that material information relating to the
         registrant, including its consolidated subsidiaries, is made known to
         us by others within those entities, particularly during the period in
         which this report is being prepared;

         b) Evaluated the effectiveness of the registrant's disclosure controls
         and procedures and presented in this report our conclusions about the
         effectiveness of the disclosure controls and procedures, as of the end
         of the period covered by this report based on such evaluation; and

         c) Disclosed in this report any change in the registrant's internal
         control over financial reporting that occurred during the registrant's
         most recent fiscal quarter (the registrant's fourth fiscal quarter in
         the case of an annual report) that has materially affected, or is
         reasonably likely to materially affect, the registrant's internal
         control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):

         a) All significant deficiencies and material weaknesses in the design
         or operation of internal controls over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

         b) Any fraud, whether or not material, that involves management or
         other employees who have a significant role in the registrant's
         internal control over financial reporting.


Dated:  March 29, 2004
                                     By   /s/ Phillip L. McStotts
                                       -----------------------------
                                       Phillip L. McStotts, CFO
                                       (Chief Financial Officer)


<PAGE>



                                                                   EXHIBIT 32.01

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER,
          AS REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.

I, David J. McNally, hereby certify pursuant to 18 U.S.C. Section 1350 adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:


         (i) The accompanying annual report on Form 10-K for the fiscal year
ended December 31, 2003, fully complies with the requirements of Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

         (ii) The information contained in such report fairly presents, in all
material respects, the financial condition and results of operations of ZEVEX
International, Inc.

Dated:  March 29, 2004

                                     By   /s/ David J. McNally
                                       David J. McNally, CEO
                                      (Chief Executive Officer)




<PAGE>



                                                                   EXHIBIT 32.02

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER,
          AS REQUIRED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002.

I, Phillip L. McStotts, hereby certify pursuant to 18 U.S.C. Section 1350
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:


         (i) The accompanying annual report on Form 10-K for the fiscal year
ended December 31, 2003, fully complies with the requirements of Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

         (ii) The information contained in such report fairly presents, in all
material respects, the financial condition and results of operations of ZEVEX
International, Inc.

Dated:  March 29, 2004

                                     By   /s/ Phillip L. McStotts
                                       Phillip L. McStotts, CFO
                                      (Chief Financial Officer)



<PAGE>


CONSOLIDATED FINANCIAL STATEMENTS
ZEVEX International, Inc.
Years Ended December 31, 2003, 2002 and 2001
with Report of Independent Auditors


<PAGE>


                            ZEVEX International, Inc.

                        Consolidated Financial Statements

              For the years ended December 31, 2003, 2002 and 2001




                                    Contents


Report of Independent Auditors................................................55


Audited Consolidated Financial Statements


Consolidated Balance Sheets ..................................................56
Consolidated Statements of Operations ........................................57
Consolidated Statements of Stockholders' Equity ..............................58
Consolidated Statements of Cash Flows ........................................59
Notes to Consolidated Financial Statements ...................................60


<PAGE>

                         Report of Independent Auditors

Board of Directors and Stockholders
ZEVEX International, Inc.

We have audited the accompanying consolidated balance sheets of ZEVEX
International, Inc. as of December 31, 2003 and 2002 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2003. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of ZEVEX
International, Inc. at December 31, 2003 and 2002, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2003, in conformity with accounting principles generally
accepted in the United States.



Salt Lake City, Utah                           /s/ Ernst & Young LLP
February 27, 2004, except for
the first paragraph of Note 8 as
to which the date is March 10, 2004
<PAGE>

                            ZEVEX INTERNATIONAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S>                                                         <C>             <C>            <C>         <C>


                                                                         Year Ended December 31
                                                                 2003            2002           2001
                                                             --------------  -------------  --------------
                                                             --------------  -------------  --------------
Cash flows from operating activities
Net (loss) income                                             $ (8,277,542)     $ 214,303       $(487,703)
Adjustments to reconcile net (loss) income to net cash
   provided by operating activities
     Depreciation and amortization                               1,582,120      1,618,682       2,086,379
     Asset and goodwill impairment                               1,566,967              -               -
     Loss on sale of business                                    4,692,445              -               -
     Provision for bad debts                                       (24,963)       (64,620)       (143,060)
     Deferred income taxes                                          90,313        213,343        (125,707)
     Realized gain on marketable securities                              -        (38,078)       (241,434)
     Other-than-temporary loss on available-for-sale
        marketable securities                                            -              -         917,628
     Changes in operating assets and liabilities, net of
        acquisitions:
        Designated cash for sinking fund payment
           on industrial development bond                           (1,492)          (709)         (3,006)
        Accounts receivable                                        461,668      1,290,413       1,895,571
        Inventories                                              2,234,289        923,986       1,380,855
        Prepaid expenses and other assets                          100,628       (143,969)        (46,939)
        Bank overdraft                                             (42,957)        42,957               -
        Accounts payable                                           (31,613)      (139,116)       (501,297)
        Accrued and other liabilities                              (95,694)        22,698          (6,197)
        Deferred revenue                                           214,770              -               -
        Income taxes receivable/payable                           (159,026)      134,984          (98,516)

Net cash provided by operating activities                        2,309,913      4,074,874       4,626,574

Cash flows from investing activities
Purchase of property and equipment                                (610,685)      (399,565)       (200,094)
Additions of patents and trademarks                                (94,150)       (51,880)        (27,110)
Redemption of available-for-sale marketable securities                  -         225,797       1,003,135

Net cash (used in) provided by investing activities               (704,835)      (225,648)        775,931

Cash flows from financing activities
Proceeds from capital lease and long-term debt                           -              -       2,500,000
Principal payments on capital lease and long-term debt            (908,989)      (694,568)       (516,072)
Payments on business and product line acquisition debt          (1,738,970)    (2,340,668)     (2,301,828)
Payment on industrial development bond                            (100,000)      (100,000)       (100,000)
Net (payments on) proceeds from bank line of credit              1,810,970     (1,713,610)     (4,223,385)
Purchase of treasury stock                                               -        (28,466)        (60,956)
Proceeds from exercise of stock options                                 -              -             665

Net cash used in financing activities                             (936,989)    (4,877,312)     (4,701,576)

Net increase (decrease) in cash and cash equivalents               668,089     (1,028,086)        700,929

Cash and cash equivalents at beginning of period                        -       1,028,086         327,157

Cash and cash equivalents at end of period                       $ 668,089            $ -     $ 1,028,086
</TABLE>

<PAGE>



                            ZEVEX INTERNATIONAL, INC.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S>                                   <C>                      <C>                           <C>          <C>                    <C>

                                                                                                          Unrealized
                                                                                                            (Loss)
                                                                                            Retained       Gain on
                                                              Additional                    Earnings/     Available-
                                      Common Stock            Paid-in         Treasury    (Accumulated      for-sale
                                     Shares     Amount        Capital          Stock        Deficit)      Securities        Total
                                     ---------------------   ------------    ---------   -------------  -------------  -------------
                                     ---------------------   ------------    ---------   -------------  -------------  -------------
Balances at January 1, 2001          3,440,064  $ 3,440      $ 16,289,787    $       -    $ 5,266,991    $ (502,713)   $ 21,057,505
Comprehensive income:
Net loss                                    --       --               --            --       (487,703)           --        (487,703)
Other comprehensive income,
net of tax:
    Unrealized gain on
    available-for-sale
    securities, net of
    reclassification adjustments            --       --               --            --             --       522,890         522,890
                                                                                                                        ------------

Total comprehensive income                                                                                                   35,187

Exercise of stock options for cash         133       --              665            --             --            --             665
Purchase of 25,000 shares of
treasury stock, at cost                     --       --               --       (60,956)            --            --         (60,956)
                                     ---------------------   ------------    ---------- -------------    ------------  -------------
                                     ---------------------  -------------    ---------- ---------------  ------------  -------------
Balances at December 31, 2001         3,440,197    3,440       16,290,452      (60,956)     4,779,288        20,177      21,032,401
Comprehensive income:
Net income                                   --       --               --           --        214,303            --         214,303
Other comprehensive loss, net of tax:
Change in unrealized gain on
   available-for-sale securities             --       --               --           --             --       (20,177)        (20,177)
                                                                                                                       -------------

Total comprehensive income                                                                                                  194,126

Purchase of 14,233 shares of
treasury stock, at cost                      --       --               --      (28,466)            --            --         (28,466)
                                    ---------------------   ------------    ----------- ---------------   ------------ -------------
                                    ---------------------   ------------    ----------- ---------------   ------------ -------------
Balances at December 31, 2002          3,440,197    3,440     16,290,452       (89,422)     4,993,591            --      21,198,061
Comprehensive loss:
Net loss                                      --       --             --            --     (8,277,542)           --      (8,277,542)
Other comprehensive income,
net of tax:
  Change in unrealized gain on
  available-for-sale securities               --       --             --            --             --         3,067           3,067
                                                                                                                       -------------

Total comprehensive loss                                                                                                 (8,274,475)
                                    ---------------------   --------------    ----------- ---------------   ---------- -------------
                                    ---------------------   --------------    ----------- ---------------   ---------- -------------
Balances at December 31, 2003         3,440,197  $ 3,440     $16,290,452      $ (89,422)   $(3,283,951)     $ 3,067     $12,923,586
                                    =====================   ==============    =========== ===============   ========== =============
</TABLE>
<PAGE>

                                        ZEVEX INTERNATIONAL, INC.
                                  CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S>                                                   <C>            <C>                <C>           <C>


                                                                     Year Ended December 31
                                                            2003              2002              2001
                                                     -----------------------------------------------------
                                                     -----------------------------------------------------
Revenue:
     Product sales                                     $   24,015,057      $ 23,683,355     $ 28,678,3175
     Engineering services                                   1,854,819         1,812,378         1,203,758
     Total revenue                                         25,869,876        25,495,733        29,882,075

     Cost of sales                                         17,546,081        14,375,744        17,829,777
Gross profit                                                8,323,795        11,119,989        12,052,298

Operating expenses:
     General and administrative                             3,769,644         5,127,274         5,625,315
     Selling and marketing                                  4,547,178         3,996,923         3,941,906
     Research and development                               1,817,581         1,289,609           932,731
     Asset and goodwill impairment                          1,566,967                 -                 -
     Goodwill amortization                                         -                 -           533,514
Total operating expenses                                   11,701,370        10,413,806        11,033,466

Operating (loss) income                                    (3,377,575)          706,183         1,018,832

Other income (expense):
     Interest and other income                                  8,406            56,676           371,179
     Interest expense                                        (284,640)         (543,340)       (1,059,593)
     Loss on sale of business                              (4,692,445)                -                 -
     Other-than-temporary impairment loss
      on available for sale marketable securities                  -                 -           (917,628)
(Loss) income before income taxes                          (8,346,254)          219,519          (587,210)

Benefit (provision) for income taxes                          68,712             (5,216)          99,507

Net (loss) income                                        $ (8,277,542)       $ 214,303         $ (487,703)


Basis net (loss) income per share                             $ (2.43)          $ 0.06            $ (0.14)

Weighted average shares outstanding                         3,400,964        3,414,846          3,431,639

Diluted net (loss) income per share                           $ (2.43)          $ 0.06            $ (0.14)

Diluted weighted average shares outstanding                 3,400,964        3,418,278          3,431,639
</TABLE>
<PAGE>

                                                      ZEVEX INTERNATIONAL, INC.
                                                     CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S>                                                                                 <C>                          <C>           <C>

                                                                                          December 31,            December 31,
                                     ASSETS                                                   2003                    2002
                                                                                     ---------------------------------------------

Current assets
     Cash and cash equivalents                                                              $ 668,089                  $ -
     Designated cash for sinking fund payment on industrial
        development bond                                                                       95,277               93,785
     Accounts receivable, net of allowance for doubtful
        accounts of $185,000 in 2003 and $200,000 in 2002                                   3,830,341            4,522,785
     Other receivable                                                                       1,200,000                    -
     Inventories                                                                            4,114,567            6,348,856
     Marketable securities                                                                     88,000                    -
     Deferred income taxes                                                                          -              348,506
     Income taxes receivable                                                                  442,548              283,522
     Prepaid expenses and other current assets                                                115,457              184,492
     Total current assets                                                                  10,554,279           11,781,946

     Property and equipment, net                                                            4,799,120            6,498,957
     Patents, trademarks and other intangibles, net                                           330,277              364,640
     Goodwill, net                                                                          4,048,264           10,089,035
     Other assets                                                                                 145               63,658
     Total assets                                                                        $ 19,732,085         $ 28,798,236

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
     Accounts payable                                                                     $ 1,540,700          $ 1,572,313
     Bank overdraft                                                                                 -               42,957
     Other accrued liabilities                                                                525,071              560,765
     Deferred revenue                                                                         538,770               25,000
     Bank line of credit                                                                    1,810,970                    -
     Current portion of industrial development bond                                           100,000              100,000
     Payable related to product line acquisition and
        convertible debt                                                                            -            1,738,970
     Current portion of other long-term debt                                                   50,430            1,461,640
     Current portion of capital leases                                                        122,950              177,801
     Total current liabilities                                                              4,688,891            5,679,446

     Deferred income taxes                                                                          -              258,193
     Industrial development bond                                                            1,300,000            1,400,000
     Other long-term debt                                                                     819,608              139,586
     Capital lease obligations                                                                      -              122,950

Stockholders' equity
     Common stock; $.001 par value, 10,000,000
        authorized shares, 3,440,197 issued and 3,400,964
        outstanding at December 31, 2003 and 2002                                               3,440                3,440
     Additional paid in capital                                                            16,290,452           16,290,452
     Unrealized gain on marketable securities                                                   3,067                    -
     Treasury stock, 39,233 shares (at cost) at
        December 31, 2003 and 2002                                                            (89,422)             (89,422)
     Accumulated (deficit) retained earnings                                               (3,283,951)           4,993,591
     Total stockholders' equity                                                            12,923,586           21,198,061
     Total liabilities and stockholders' equity                                          $ 19,732,085         $ 28,798,236
</TABLE>
<PAGE>


                            ZEVEX INTERNATIONAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Organization and Business and 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 in Delaware. In December 1998, the Company
acquired an additional product line and completed the acquisition of two
additional subsidiaries. Additionally, the Company acquired a product line from
Nestle USA, Inc. in April of 2000 (see Note 2).

The Company, through its divisions and subsidiaries, engages in the business of
designing, manufacturing and distributing medical devices. Our Therapeutics
division markets enteral nutrition delivery devices. Until December 31, 2003
when it was sold, our Physical Evaluation division marketed industry-leading
physical evaluation testing systems. Our Applied Technology division designs and
manufactures advanced medical components and systems for medical technology
companies.

On December 31, 2003, the Company completed the sale of its Physical Evaluation
business. The transaction was accomplished by sale of all the issued and
outstanding capital stock of JTech Medical Industries, Inc., ("JTech"), a wholly
owned subsidiary of the Company. The transaction was effected by a Stock
Purchase Agreement (the "Stock Purchase Agreement") dated December 31, 2003 by
and between the Company and Mr. Leonard Smith, a former employee, officer and
director of the Company (see Note 2).

Principles of Consolidation

The consolidated financial statements for 2003 and 2002 include the accounts of
ZEVEX International, Inc. (the Company) and its wholly owned operating
subsidiaries: ZEVEX, Inc. and JTech. As discussed above and in Note 2, JTech was
sold effective December 31, 2003. All significant intercompany balances and
transactions have been eliminated in consolidation.

In 2001, the consolidated statements of operations included the accounts of the
Company's wholly owned operating subsidiary, Aborn Electronics. Inc. ("Aborn").
During December 2001, the corporate shell of Aborn was sold to a related party
for $100,000. A gain was recorded for this amount and is included in
interest/other income on the consolidated statement of operations.

Use of Estimates

The preparation of financial statements in conformity with accounting policies
generally accepted in the United States 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 and such
differences could be material.

Reclassifications

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

<PAGE>


1. Description of Organization and Business and Summary of Significant
Accounting Policies (continued)

Revenue Recognition

The Company recognizes revenue from products sold directly to end customers when
persuasive evidence of an arrangement exists, the price is fixed and
determinable, shipment is made and title has passed, and collectibility is
reasonably assured. If such criteria are not met, revenue is deferred. Shipping
and handling costs are expensed as incurred and are included in selling and
marketing.

Contracts to perform engineering design and product development services are
generally performed on a time and materials basis. Revenue generally is
recognized as milestones are achieved; costs are expensed as incurred.

The Company accounts for revenue from software transactions pursuant to SOP No.
97-2, Software Revenue Recognition, as amended by SOP No. 98-4 and SOP No. 98-9.
SOP No. 97-2 requires that revenue recognized from software arrangements be
allocated to each element of the arrangement based on the relative fair values
of the elements, such as software products, upgrades, enhancements,
post-contract customer support, installation, or training. Under SOP No. 97-2,
the determination of fair value is based on objective evidence, which is
specific to the vendor. If such evidence of fair value for each element of the
arrangement does not exist, all revenue from the arrangement is deferred until
such time that evidence of fair value does exist or until all elements of the
arrangement are delivered. As of December 31, 2003 the Company sold its Physical
Evaluation business and no longer sell software and related services.

Cash and Cash Equivalents

The Company considers all certificates of deposit and highly liquid debt
instruments with an insignificant interest rate risk and an original maturity of
three months or less when purchased to be cash equivalents.

Concentrations of Credit Risk

The Company's financial instruments consist primarily of cash and 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. 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. During 2003, 2002,
and 2001, no single customer accounted for over 10% of revenue. Approximately
17% of product sales are to foreign customers in 2003, 14% in 2002, and 7% in
2001.

As a general policy, collateral is not required for accounts receivable;
however, the Company periodically monitors the need for and records an allowance
for doubtful accounts based upon expected collections of accounts receivable,
historical bad debt rates, and specific identification of uncollectible
accounts. Additionally, customers' financial condition and creditworthiness are
regularly evaluated. Historically losses on collection 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. The Company reviews inventory for indicators
that its inventory exceeds the market value of its inventory and writes down
inventory as deemed necessary. As of December 31, 2003 and 2002, the Company had
recorded a reduction to inventory of approximately $254,000.

<PAGE>

1. Description of Organization and Business and Summary of Significant
Accounting Policies (continued)

Sales Returns and Warranty

The Company records a provision for estimated sales returns and allowances and
warranty reserve on products it has sold. These estimates are based on
historical sales returns and warranty expenses and other known factors. The
Company has recorded a sales return and warranty expense allowance in the amount
of $85,000 as of December 31, 2003.

Marketable Securities

As of December 31, 2003, the Company's marketable securities consisted of equity
securities classified as available-for-sale. Such securities are carried at
their fair value based upon their quoted market prices at December 31, 2003. The
Company did not have any marketable securities classified as available-for-sale
at December 31, 2002.

Unrealized gains and losses on available-for-sale securities are reported, net
of tax, in a separate component of stockholders' equity.

Realized gains and losses and declines in value, judged to be
other-than-temporary on available-for-sale securities are included in other
income (expense). 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 other income.

In accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities, and Staff Accounting Bulletin No. 59, Accounting for Noncurrent
Marketable Equity Securities, in 2001, the Company recorded an
other-than-temporary impairment loss on its available-for-sale securities of
$917,628 ($575,353 net of taxes), which is reflected as a component of net loss
for the year ended December 31, 2001. This write-down represented the amount of
the unrealized loss as of the date of the write-down on the Company's
available-for-sale marketable securities that had previously been recorded in
equity as part of other comprehensive income.

As of December 31, 2003, the Company had unrealized holding gains of $3,067 (see
Note 4). As of December 31, 2002, the Company did not have any unrealized
holding gains or losses.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. If the
Company determines that an impairment of its property and equipment exists, such
property and equipment is written down to its fair value. Depreciation is
provided over expected useful lives of three to twenty-five years using the
straight-line method.

Major replacements and refurbishment costs, which extend the useful lives of
equipment, are capitalized and depreciated over the remaining useful life.
Normal maintenance and repairs are expensed as incurred.

<PAGE>


1. Description of Organization and Business and Summary of Significant
Accounting Policies (continued)

Patents, Trademarks, and Other Intangibles

The costs of acquired and internally developed patents, trademarks, and other
intangibles are amortized over the lesser of fifteen years or the estimated
useful life of the intangible asset on a straight-line basis. At December 31,
2003 and 2002, accumulated amortization related to patents, trademarks, and
other intangibles was $118,392 and $128,627, respectively. The Company
periodically reviews the recoverability of its intangible assets and where
impairment in value has occurred, such intangibles are written down to net
realizable value. During December 2003, the Company completed the sale of its
Physical Evaluation business. Upon completion of the sale, certain remaining
JTech intangible assets and the related accumulated amortization were
written-off. The resulting loss of approximately $92,500 is included in the
consolidated statement of operations within the loss on sale of business.

Goodwill

Goodwill is recorded at the lower of cost or its net realizable value and was,
prior to the adoption of SFAS No. 142, Goodwill and Other Intangible Assets,
being amortized on a straight-line basis over 15 to 23 years. The adoption of
SFAS No. 142 reduced the Company's amortization expense by approximately
$533,000 annually for the years ended December 31, 2003 and 2002, due to the
elimination of the amortization of goodwill. Amortization expense for goodwill
for the year ended December 31, 2001 was $533,514. Adjusted net income and net
income per common share for the year ended December 31, 2001 compared to the
actual results for the year ended December 31, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
<S>                                                      <C>              <C>               <C>           <C>
                                                                           For Year Ended
                                                                             December 31
                                                              2003              2002              2001
                                                         ---------------- ----------------- -----------------
                                                         ---------------- ----------------- -----------------
Reported net (loss) income                                 $ (8,277,542)         $ 214,303       $ (487,703)
Goodwill amortization                                                --                 --           533,514
                                                           -------------         ---------         ---------
Adjusted net (loss) income                                 $ (8,277,542)         $ 214,303         $  45,811
                                                           =============         =========         =========

Basic net (loss) income per share reported                 $      (2.43)         $     .06         $   (.14)
Goodwill amortization                                                --                --                .16
Adjusted                                                   $      (2.43)         $     .06         $     .02
                                                              ==========           =======          ========

Diluted net (loss) income per share reported               $      (2.43)         $     .06         $   (.14)
Goodwill amortization                                                --                 --               .16
Adjusted                                                   $      (2.43)         $     .06         $     .02
                                                              ==========           =======          ========
</TABLE>

As of December 31, 2003, the Company's gross goodwill balance was $4,568,577
with accumulated amortization of $520,313. As of December 31, 2002, the
Company's gross goodwill balance was $11,537,878 with accumulated amortization
of $1,448,843.

<PAGE>

1. Description of Organization and Business and Summary of Significant
Accounting Policies (continued)

Goodwill (continued)

In accordance with SFAS No. 142 goodwill and indefinite-lived intangible assets
must be reviewed annually (or more frequently under certain conditions) for
impairment in accordance with this Statement. This impairment test uses a fair
value approach, rather than the undiscounted cash flows approach previously
required. The Company is annually required to complete Step 1 (determining and
comparing the fair value of the Company's reporting units to their carrying
values) of the impairment test. Step 2 is required to be completed if Step 1
indicates that the carrying value of the reporting unit exceeds the fair value,
involves the calculation of the implied fair value of goodwill. The Company
completed Step 1 of the impairment assessment for each reporting unit at its
annual impairment testing date. At that time, based upon the Company's valuation
procedures, the Company determined that the fair value of the reporting units
exceeded their carrying values. As such, the Company was not required to
complete Step 2 of the impairment test and no impairment loss was recognized at
that time.

During the fourth quarter of 2003, the Company evaluated its business
opportunities and modified its strategies to focus on its core market offerings
of ambulatory enteral feeding and contract manufacturing services. In
conjunction with this refocus of the Company's business, on December 31, 2003,
the Company completed the sale of JTech, its Physical Evaluation business (see
Note 2). At the time of the sale, goodwill associated with JTech was stated at a
net book value of $5,199,419 on the Company's balance sheet. Upon completion of
the sale, the goodwill and the related accumulated amortization were removed
from the balance sheet and the resulting loss is included in the 2003
consolidated statement of operations within the "Loss on sale of business".

The Company also re-evaluated its reporting units and determined that the
Therapeutics reporting unit, which had consisted of both the Company's
stationary and ambulatory enteral product lines, should be disaggregated such
that the two product lines became separate reporting units for purposes of SFAS
No. 142. The Company made this determination because of the different market and
sales practices of the stationary enteral product line as well as the change in
the Company's focus as described above. Therefore, in the fourth quarter of
2003, due to declining sales and cash flows relating to this stationary enteral
product line, the Company determined that indicators of impairment existed
related to this reporting unit and again completed Step 1 of the impairment
test. Upon completion of Step 1, the Company determined that the fair value of
the stationary enteral reporting unit was less than the carrying value including
goodwill. As such the Company completed Step 2 of the impairment assessment and
a goodwill impairment loss of $841,352 was recorded in 2003 for this reporting
unit. This loss is included in "Asset and goodwill impairment" in the 2003
consolidated statement of operations.

Due to the significant changes to the Company's overall business strategies, the
Company performed an analysis in the fourth quarter of 2003 to determine if any
indicators of impairment existed related to the Applied Technology reporting
unit. As a result of the analysis no impairment was deemed to exist so no
impairment loss was recorded.

Impairment of Long-Lived Assets

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 are 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
intangible assets other than goodwill, to determine if events or circumstances
warrant revised estimates of useful lives.

<PAGE>

1. Description of Organization and Business and Summary of Significant
Accounting Policies (continued)

Impairment of Long-Lived Assets (continued)

As noted above, the Company modified its future business strategies in the
fourth quarter of 2003. In conjunction with its business refocus, the Company
evaluated its long-lived assets to determine if indicators of impairment
existed. Based upon an assessment of projected future cash flows related to its
stationary enteral product line, the Company determined that impairment of the
fixed asset value for its stationary enteral pumps existed. The Company recorded
an impairment charge of $725,615, as reflected in the 2003 consolidated
statement of operations within "Asset and goodwill impairment".

Income Taxes

The Company provides for income taxes based on the liability method, which
requires recognition of deferred tax assets and liabilities based on the
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. A valuation allowance has been
established to reduce deferred tax assets to the amount that the Company
believes will be more likely than not to be realized. (see Note 7)

Stock Options

The Company has elected to follow the intrinsic value method under Accounting
Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees,
and related Interpretations (FIN No. 44) in accounting for its employee stock
options rather than adopting the alternative fair value accounting provided for
under SFAS No. 123, Accounting for Stock-Based Compensation. During 2003, 2002,
and 2001, no stock-based compensation expense was recognized by the Company.

In December of 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation and Disclosure. SFAS No. 148 amends SFAS No. 123 to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock based employee compensation and the effect of the method
used on reported results.

Had compensation expense for options under the Company's two stock-based
compensation plans been determined based on the fair value of the option at the
grant dates for awards under those plans consistent with SFAS 123, the Company's
net income (loss) and earnings (loss) per share would have been adjusted to the
pro forma amounts for the years ended December 31, as indicated below:
<TABLE>
<CAPTION>
<S>                                                            <C>              <C>         <C> <C>        <C>

                                                                   2003             2002            2001
                                                              ---------------- ---------------- --------------
Net (loss) income as reported                                  $   (8,277,542)  $      214,303    $ (487,703)
   Less: Stock  compensation  expense  determined under fair
     value method, net of related tax effects                         334,800          249,613       507,303
                                                              ---------------- ---------------- --------------
                                                              ---------------- ---------------- --------------
Pro forma net loss                                             $   (8,612,342)  $      (35,310)   $ (995,006)
                                                              ================ ================ ==============
                                                              ================ ================ ==============
 Earnings per share:
   Basic - as reported                                         $         (2.43) $         0.06    $    (0.14)
   Basic - pro forma                                           $         (2.53) $        (0.01)   $    (0.29)
   Diluted - as reported                                       $         (2.43) $         0.06    $    (0.14)
   Diluted - pro forma                                         $         (2.53) $        (0.01)   $    (0.29)

</TABLE>
<PAGE>

1. Description of Organization and Business and Summary of Significant
Accounting Policies (continued)

Stock Options (continued)

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 2003, 2002, and 2001, respectively, for options where the stock
price equals the exercise price: risk-free interest rate of 3.0%, 3.4%, and
3.8%; dividend yield of 0%; volatility factors of the expected market price of
the Company's common stock of .77, .53, and .85; and a weighted-average expected
life of the option of 3.5, 3.5, and 2.9 years. The estimated weighted-average
fair values of options granted in the years ended December 31, 2003, 2002, and
2001 were $1.28, $1.28, and $1.84, respectively. The following are 2002
weighted-average assumptions for options where the stock price is less than the
exercise price (no such options were granted in 2003 or 2001): risk-free
interest rate of 2.3%; dividend yield of 0%; volatility factors of the expected
market price of the Company's common stock of .53, and a weighted-average
expected life of the option of 3.5 years. The estimated weighted-average fair
values of options where the stock price is less than the exercise price was
$0.70.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that 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.

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

Capitalized Software Development Costs for Internal Use

In accordance with the provisions of Statement of Position (SOP) No. 98-1,
Accounting for the Costs of Software Developed or Obtained for Internal Use, the
Company capitalizes internal and external costs to develop or obtain internal
use software during the application development stage. Costs incurred during the
preliminary project stage are expensed as incurred, as are training and
maintenance costs. Amortization is computed using the straight-line method over
the estimated useful life of the assets, which has been determined to be three
to five years.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expenses were $158,168,
$128,616, and $233,418, respectively, for the years ended December 31, 2003,
2002, and 2001.

Research and Development Costs

Research and Development costs are expensed as incurred.

<PAGE>


1. Description of Organization and Business and Summary of Significant
Accounting Policies (continued)

New Accounting Pronouncements

In June 2002,  SFAS No. 146,  Accounting for Costs  Associated  with Exit or
Disposal  Activities was issued.  This statement  provides guidance on the
recognition and  measurement of liabilities  associated  with disposal
activities and is effective for the Company on January 1, 2003.  The Company
adopted SFAS No. 146 effective  January 1, 2003. As expected,  the adoption of
SFAS No. 146 did not have a material impact on the consolidated financial
position or consolidated results of operations of the Company.

In November of 2002, the EITF reached a consensus on Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables. This issue addresses certain aspects of
accounting for arrangements whereby a vendor performs multiple
revenue-generating activities. This issue addresses how to determine whether an
arrangement involving multiple deliverables contains more than one unit of
accounting and how the related revenue should be measured and allocated to the
separate units of accounting. This issue is effective for revenue arrangements
entered into for fiscal periods beginning after June 15, 2003. The Company
adopted EITF No. 00-21 in the third quarter which began on July 1, 2003. The
adoption of this statement did not have a material impact on the consolidated
financial position or consolidated results of operations of the Company.

Net Income (Loss) Per Common Share

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

Diluted net income (loss) 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 (loss), as presented on the consolidated statements of operations,
represents the numerator used in calculating basic and diluted net income (loss)
per common share. The following table sets forth the computation of the shares
used in determining basic and diluted net income (loss) per common share for the
years ended December 31:
<TABLE>
<CAPTION>
<S>                                                          <C>             <C>              <C>       <C>
(in thousands)                                                    2003            2002           2001
                                                             --------------- --------------- --------------
Denominator for basic net income (loss) per common
   share - weighted-average shares                                3,401           3,415           3,432
Dilutive securities: options, convertible debentures,
   and warrants                                                       -               3               -
                                                             --------------- --------------- --------------
Denominator for diluted net income (loss) per common
   share - adjusted weighted-average shares                       3,401           3,418           3,432
                                                             =============== =============== ==============
</TABLE>

Options, convertible debentures, and warrants to purchase approximately 693,000,
776,000, and 1,197,000 shares of common stock were outstanding at December 31,
2003, 2002, and 2001, respectively, but were not included in the computation of
diluted earnings per share because they were anti-dilutive.
<PAGE>


1. Description of Organization and Business and Summary of Significant
Accounting Policies (continued)

Supplemental Cash Flow Information
<TABLE>
<CAPTION>
<S>                                                      <C>                                           <C>

Supplemental disclosures of cash flow information are as follows:

                                                                      Year Ended December 31
                                                               2003            2002           2001
                                                          -----------------------------------------------
 Cash paid during the year for:
    Interest                                               $     323,802  $     520,951   $   1,151,226
    Income taxes                                                       -              -         150,500

 Schedule of non-cash investing and financing activities:
    Equipment internally manufactured                                  -              -       1,033,749
    Unrealized gain (loss) on available-for-sale
      marketable securities                                        3,067        (32,180)         32,180
    Purchase price adjustments related to earn-out
      provisions for acquisitions                                      -        (65,722)              -
    Acquisition of available-for-sale marketable
      securities for accounts receivable                         (80,933)             -               -
</TABLE>


2. Acquisitions and Dispositions

On April 6, 2000, the Company acquired the enteral nutrition delivery device
business of Nestle USA, Inc. ("Nestle") in an asset purchase. The purchase price
included an earn-out of $1,000,000 based upon achievement of certain operating
goals. Such goals were met and, through December 31, 2001 approximately $778,000
had been paid. In 2002 after negotiation with Nestle, the Company paid
approximately $156,000 in final settlement of the earn-out. The difference of
$66,000 was recorded as an adjustment to goodwill in 2002.

On December 31, 2003, the Company completed the sale of its Physical Evaluation
business. The transaction was accomplished through the sale of all the issued
and outstanding capital stock of JTech previously a wholly owned subsidiary of
the Company. The transaction was effected by a Stock Purchase Agreement dated
December 31, 2003 by and between the Company and Mr. Leonard C. Smith, a former
employee, officer and director of the Company, for a purchase price of $1.2
million which was recorded as an "other receivable" at December 31, 2003. Cash
of $1,129,500 was received on January 15, 2003, with the remainder to be paid
when the Company satisfies certain obligations to JTech as set forth in the
Stock Purchase Agreement. Such obligations include the requirement to deliver
inventory, upon completion of production, and certain other equipment. Deferred
revenue of $324,000 was recorded related to these obligations. Additionally,
pursuant to the Stock Purchase Agreement, the Company may receive additional
payments from the purchaser based upon specifically identified JTech product
sales in 2004 and 2005. A loss on the sale of this business in the amount of
$4,692,445 was recorded and is shown separately on the 2003 consolidated
statement of operations. Such loss consists of the write-off of goodwill and
other intangibles as discussed in Note 1 as well as the write-off of certain
other JTech related assets totaling approximately $242,000 and the accrual of
legal costs associated with this transaction.

<PAGE>
<TABLE>
<CAPTION>
<S>                                                           <C>                                  <C>

3. Inventories

Inventories consist of the following at December 31:
                                                                      2003               2002
                                                               ---------------------------------------

Materials                                                            $2,144,926         $3,028,782
Work-in-progress                                                        504,921          1,087,474
Finished goods, including completed subassemblies                     1,464,720          2,232,600
                                                               ---------------------------------------
                                                                     $4,114,567         $6,348,856
                                                               =======================================

4. Marketable Securities

The following is a summary of marketable securities at December 31, 2003:

                                                                     Gross Unrealized
                                                                                        Estimated Fair
Available-for-Sale                                       Cost             Gains             Value
                                                    ---------------- ----------------- -----------------
Equity securities                                      $     84,933       $    3,067      $     88,000

The Company did not hold any marketable securities at December 31, 2002.

As discussed in Note 1 above, an other-than-temporary impairment loss of
$917,628 on available-for-sale marketable securities was recognized during 2001.

5. Property and Equipment

Property and equipment consist of the following at December 31:
                                                                     2003                2002
                                                               ------------------ -------------------

Machinery and equipment                                         $    1,062,515     $    1,238,357
Stationary enteral feeding pumps                                     4,233,699          4,233,699
Furniture and fixtures                                               1,766,903          1,668,961
Software                                                               627,661            627,661
Tooling costs                                                        1,646,269          1,257,967
Building                                                             2,893,934          2,872,373
Land                                                                 1,084,415          1,084,415
                                                               ------------------ -------------------
                                                                    13,315,396         12,983,433
Less accumulated depreciation and amortization                      (8,516,276)        (6,484,476)
                                                               ------------------ -------------------
                                                                $    4,799,120     $    6,498,957
                                                               ================== ===================
</TABLE>

Stationary enteral feeding pumps represent acquired and self-constructed pumps
that are placed with businesses and other users (at little or no cost to the
users) under arrangements in which the pump users have an obligation to buy
disposable products from the Company while they are using the pumps. To the
extent that the users discontinue purchase of the disposables, the pumps are
generally returned to the Company. As discussed in Note 1 an impairment charge
of $725,615 was recorded in 2003 related to stationary enteral feeding pumps.
This is included in the Therapeutics segment in Note 13.

Depreciation and amortization expense (including software amortization expense)
for property and equipment for the years ended December 31, 2003, 2002, and 2001
amounted to $1,546,110, $1,588,696, and $1,524,816, respectively.

<PAGE>
<TABLE>
<CAPTION>
<S>                                                         <C>              <C>                           <C>

6. Accrued Liabilities

Accrued liabilities consist of the following at December 31:

                                                                   2003               2002
                                                            ------------------- ------------------

Accrued payroll and related taxes and benefits                     $244,441            $247,607
Accrued vacation                                                    143,955             187,321
Warranty reserve                                                     85,000              85,000
Other accrued expense                                                50,000                   -
Accrued interest                                                      1,675              40,837
                                                            ------------------- ------------------
                                                                   $525,071            $560,765
                                                            =================== ==================

7. Income Taxes

Deferred tax assets and liabilities 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:

                                                                          2003                2002
                                                                     ------------------- -------------------
Deferred tax assets:
    Accruals and expenses not currently deductible                     $       303,978     $       345,145
    Fixed asset and other basis differences                                    289,329                   -
    Net operating loss carryforward                                            881,804                   -
    Federal and state tax credits                                              169,169                   -
    Charitable contribution carryforward                                     1,869,742           1,869,742
    Capital loss carryforward                                                3,375,029           1,771,200
                                                                     ------------------- -------------------
Total deferred tax assets                                                    6,889,051           3,986,087
Deferred tax liabilities:
    Fixed asset and other basis differences                                          -            (254,832)
                                                                     ------------------- -------------------
Total deferred tax liabilities                                                       -            (254,832)
Valuation allowance                                                         (6,889,051)         (3,640,942)
                                                                     ------------------- -------------------
Net deferred taxes                                                     $             -     $        90,313
                                                                     =================== ===================

The benefit (provision) for income taxes consists of the following:

                                                              2003               2002              2001
                                                        ------------------ ----------------- ------------------
Current taxes:
    Federal                                               $     133,710      $     144,194     $     (84,497)
    State                                                        25,315             49,700            14,325
    R&D credit                                                        -             14,233            43,972
Deferred taxes:
    Federal                                                     (82,323)          (194,468)          114,586
    State                                                        (7,990)           (18,875)           11,121
                                                        ------------------ ----------------- ------------------
Benefit (provision) for income taxes                      $      68,712      $      (5,216)    $      99,507
                                                        ================== ================= ==================
</TABLE>
<PAGE>


7. Income Taxes (continued)

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

                                                               2003              2002              2001
                                                         ----------------- ------------------ ----------------

Federal tax benefit (expense) at statutory rate            $   2,837,726     $     (74,636)     $     199,652
State income tax, net                                            261,631           (12,655)            16,795
Non-taxable items                                                      -                 -             37,300
Research and development credit                                  103,108            14,233             43,972
Permanent basis differences                                      155,703                 -           (172,464)
Benefit from charitable contribution                                   -            11,944                  -
Change in valuation allowance                                 (3,248,109)           83,692                  -
Other non-deductible expenses                                    (41,348)          (27,794)           (25,748)
                                                         ----------------- ------------------ ----------------
Total (provision) benefit for income taxes                 $      68,712     $      (5,216)     $      99,507
                                                         ================= ================== ================
</TABLE>

The valuation allowance recorded against the Company's deferred tax assets
relates to the following items:

o        During 2002, the Company made a charitable contribution of certain
         patent rights to an institution of higher education with a fair market
         value of $5,048,000. During 2002 a tax benefit of $11,944, as
         determined based upon applicable federal rates, was recognized for the
         charitable contribution. For income tax purposes, charitable
         contributions are only recognizable if a company has taxable income. A
         valuation allowance of approximately $1,870,000 has been provided for
         the contribution carryforward of $5,013,000 generated from the patent
         donation because the Company does not consider it to be more likely
         than not that this carryforward will be utilized. The contribution
         carryforward expires in 2007.

o        During  2001,  the Company  generated a capital  loss  carryforward  of
         approximately  $5,450,000  as a result of the sale of marketable
         securities  and the sale of the Aborn  corporate  shell.  This
         carryforward  expires  December  31,  2006. A full valuation  allowance
         was provided in 2001 for the capital loss of $5,000,000  generated
         from the sale of the Aborn  corporate shell  because the  Company did
         not  consider it to be more  likely  than not that this  carryforward
         will be  utilized.  The Company was able to utilize  portions of this
         capital  loss in 2002 and 2003,  resulting  in a decrease in the
         deferred  tax asset and the related  valuation  allowance  related to
         this  carryforward.  During 2003, the Company generated a capital loss
         of approximately  $5,090,000,  which expires December 31, 2008, as a
         result of its sale of JTech. The total remaining  capital loss
         carryforward for Federal purposes as of December 31, 2003 was
         approximately  $9,927,000 (See discussion below regarding capital loss
         carryforward  for state  purpose.  A full  valuation  allowance  has
         been  provided  because the Company did not consider it to be more
         likely than not that this carryforward will be realized.

o        During  2003,  the Company  generated  substantial  net  operating
         loss  carryforwards.  Under the  guidance of SFAS No. 109, Accounting
         for Income Taxes,  due to cumulative net losses in recent years,  the
         Company did not consider it to be more likely than not (as  defined by
         SFAS No.  109) that the  deferred  tax assets  related  to these net
         operating  losses and its other deferred  tax assets would be realized.
         As such,  the Company  provided a valuation  allowance  against all of
         its  remaining deferred  tax assets in 2003.  In 2003,  the Company
         generated a net  operating  loss  carryforward  for Federal  purposes
         of $1,609,000  which expires  December 31, 2023. For State of Utah
         purposes  capital losses are deductible  currently and, if not used,
         become part of net operating loss  carryforward.  For 2003 the Company
         had a net operating loss  carryforward for State purposes of
         $10,143,000  of which  $3,840,000  expires  December  31,  2016,  and
         $6,303,000  expires  December  31, 2018. A valuation allowance was
         established for these amounts.
<PAGE>

8. Debt

Bank Line of Credit

The Company maintains a line of credit arrangement with a financial institution
with availability of $6 million. The line was subsequently reduced to $3 million
on March 10, 2004. The line matures on May 29, 2004. The Company expects that it
will be able to renew its line of credit in May 2004. The line of credit is
collateralized by accounts receivable and inventory and bears interest at the
prime rate, which was 4.00% at December 31, 2003 and 4.25% at December 31, 2002.
The Company's balance on this line of credit was $1,810,970 at December 31, 2003
and $0 at December 31, 2002. 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. In the fourth
quarter of 2003, we failed to meet certain financial covenants of our line of
credit. We received a waiver for such covenants, and these covenants were
modified for the first three quarters of 2004, beginning with the quarter ending
March 31, 2004.

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 May 30, 2008. The bonds bear interest at an adjustable rate based on
the weekly tax-exempt floater rate, as determined by the remarketing agent. The
average rate for 2003 was 1.3%. The bonds mature on October 1, 2016. Principal
reductions occur in the amount of $100,000 per year. The outstanding balance was
$1,400,000 at December 31, 2003, of which $100,000 is classified as current.

Convertible Debentures

In connection with the acquisitions of Aborn and JTech on December 31, 1998, the
Company issued $1,350,000 of 7% interest-bearing convertible debentures and
$3,000,000 of 8% interest-bearing convertible debentures, respectively. The
convertible debentures increased from their original amounts at the acquisition
date to $5,447,188 at the end of 2000 due to certain earn-out provisions.
Accrued interest was due and payable quarterly beginning on April 1, 1999.
During December 2001, some of the convertible debentures were amended and the
maturity dates were extended one year, resulting in accrued interest and
principal maturity dates between March 30, 2002 and March 30, 2003. The
debentures were convertible to common stock through March 30, 2003 at $11 per
share. The Company made principal payments during 2002 of $2,184,188, which
reduced the outstanding balance to $1,738,970 at December 31, 2002. An
additional principal payment of $788,970 was made on January 6, 2003, with the
remaining balance of $950,000 paid on March 30, 2003.

Other Long-term Debt

On April 18, 2001, the Company entered into a Term Loan Agreement with a bank
for the amount of $1,000,000. The agreement is secured by the Company's
manufacturing facility. The proceeds from the Promissory Note were used to
reduce the balance on the Company's line of credit. The note was due on May 15,
2003. The Term Loan Agreement was renegotiated effective May 15, 2003, is now
due May 15, 2008 and is being amortized over a thirteen-year term, at an
interest rate of 5.4%. The outstanding balance at December 31, 2003 was
$870,038, of which $50,430 is classified as current.

<PAGE>

8. Debt (continued)
<TABLE>
<CAPTION>
<S>                  <C>                         <C>                         <C>                            <C>

The following is a summary of the Company's debt and other long-term obligations:

                                                      Payment due by period
                                                   More        More         More       More          More
    Contractual                     Less than      than        than         than       than          than
    Obligation          Total        1 -year      1- year     2- year     3- year     4- year      5- year
-------------------- ------------- ------------- ----------- ----------- ----------- ----------- -------------
-------------------- ------------- ------------- ----------- ----------- ----------- ----------- -------------
Line of Credit       $ 1,810,970    $ 1,810,970  $     -     $       -    $       -   $        - $          -
Industrial
 Development
  Bond                 1,400,000        100,000     100,000     100,000     100,000     100,000       900,000
Other
  Long-term debt         870,038         50,430      53,243      56,219      59,358     650,788             -
Capital Leases           122,950        122,950           -           -           -           -             -
                     ------------- ------------- ----------- ----------- ----------- ----------- -------------
                     ------------- ------------- ----------- ----------- ----------- ----------- -------------
Total                 $4,203,958    $ 2,084,350    $153,243    $156,219    $159,358    $750,788      $900,000
                     ============= ============= =========== =========== =========== =========== =============
</TABLE>


9. Lease Commitments

During the year ended December 31, 2000, the Company acquired certain equipment
with a cost of $662,720 under capital leases with terms of four years or less.
Accumulated depreciation related to such equipment is $575,357 and $453,632 at
December 31, 2003 and 2002, respectively. Such depreciation is included in
depreciation and amortization expense for 2003, 2002, and 2001.

Future minimum lease payments under capital leases consisted of the following at
December 31, 2003:

          Fiscal Year
          2004                                                        $  127,519
                                                                 ---------------
          Total minimum lease payments                                   127,519
          Amount representing interest                                     4,569
                                                                 ---------------
          Present value of minimum lease payments                     $  122,950
                                                                 ===============

The Company has entered into certain cancelable operating leases. Rental expense
for the years ended December 31, 2003, 2002, and 2001 was $0, $14,283, and
$82,503, respectively.

10. Employee Benefit Plans

401(k) Profit Sharing Plan

The Company maintains 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 up to four percent (4%) of the eligible employees' salaries and
an additional discretionary amount to be determined each year by the Board of
Directors. Employees are fully vested in the employer contributions after six
years. Contributions to the plan for the years ended December 31, 2003, 2002,
and 2001 were $146,590, $130,823, and $138,716, respectively.

Employee Stock Ownership Plan

Effective October 14, 1993, the Company adopted an Employee Stock Ownership Plan
that covered all employees over the age of 21, that were employed for at least
90 days, and who provided at least 1,000 hours of service per year.

<PAGE>


10. Employee Benefit Plans (continued)

Employee Stock Ownership Plan (continued)

Full vesting occurred after six years of service or upon normal retirement at 65
years of age. Contributions to the plan were at the discretion of the Board of
Directors, with no minimum annual funding requirements. Contributions to the
plan were made primarily with common stock of the Company.

The Employee Stock Ownership Plan was terminated effective December 31, 2001. As
part of the termination, all assets were transferred into the Company's 401(k)
profit sharing plan.

No contributions were made for the year ended December 31, 2001.

11. Stockholders' Equity

Preferred Stock

The Company is authorized to issue 2,000,000 shares of $.001 par value preferred
stock. None of the preferred stock was issued or outstanding at December 31,
2003 or 2002.

Common Stock Reserved for Future Issuance

At December 31, 2003, the Company had reserved 1,124,519 shares of common stock
for future issuance under the Company's stock option plans.

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"), which was ratified by shareholders in October 1993. 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. 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. All options granted under the 1999
Plan expire after five to ten years from the grant date and become exercisable
either immediately or up to six years from the grant date.

<PAGE>

11. Stockholders' Equity (continued)

Stock Option Plans (continued)

A summary of stock option activity for both plans, and related information for
the years ended December 31, 2001, 2002, and 2003 follows:
<TABLE>
<CAPTION>
<S>                                  <C>              <C>                             <C>               <C>

                                          Shares          Outstanding Stock Options          Weighted-
                                                     ------------------------------------
                                        Available       Number of           Price             Average
                                        for Grant        Shares           Per Share        Exercise Price
                                     -------------------------------- --------------------------------------
Balance at January 1, 2001                 213,967        910,685             2.50-7.00            4.84
   Options granted                         (17,500)        17,500             2.47-4.00            3.34
   Options exercised                             -           (133)                 5.00            5.00
   Options canceled                        187,835       (187,835)            2.50-5.00            4.78
                                     -------------------------------- --------------------------------------
Balance at December 31, 2001               384,302        740,217             2.47-7.00            4.82
   Options granted                        (229,500)       229,500              1.90-3.40           3.09
   Options exercised                             -              -
                                                                              -                    -
   Options canceled                        336,867       (336,867)             2.47-7.00           4.71
                                     -------------------------------- --------------------------------------
                                     -------------------------------- --------------------------------------
Balance at December 31, 2002               491,669        632,850            $1.90-5.00           $4.25
   Options granted                        (102,500)       102,500              1.90-2.86           1.99
   Options exercised                             -              -
                                                                              -                    -
   Options canceled                         42,400        (42,400)             4.00-5.00           4.85
                                     -------------------------------- --------------------------------------
Balance at December 31, 2003               431,569        692,950            $1.90-5.00           $3.86
                                     ================================ ======================================
</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, 2003:
<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
----------------- ---------------------------------- -----------------  ----------------- ---------------
   $1.90-3.40         322,000           5.4 years        $2.75                67,125          $2.92
    4.00-5.00         370,950           3.1 years         4.83               263,175           4.81
----------------- ---------------------------------- -----------------  ----------------- ---------------
   $1.90-5.00         692,950           4.1 years        $3.86               330,300          $4.43
================= ================================== =================  ================= ===============
</TABLE>
<PAGE>

12. Fair Value of Financial Instruments

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

     Cash and cash equivalents, accounts receivable, and accounts payable: The
     carrying amounts reported in the balance sheet for cash and cash
     equivalents, accounts receivable, and accounts payable approximate their
     fair values.

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

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

The carrying amounts and fair values of the Company's financial instruments are
as follows at December 31:
<TABLE>
<CAPTION>
<S>                                  <C>            <C>                                <C>              <C>
                                                    2003                               2002
                                     ----------------------------------- ----------------------------------
                                          Carrying            Fair            Carrying          Fair
                                           Amount            Value             Amount           Value
                                     ----------------- ----------------- ---------------- -----------------
 Cash and cash equivalents            $     668,089     $     668,089     $           -    $           -
 Accounts receivable                      3,830,341         3,830,341         4,522,785        4,522,785
 Marketable securities                       88,000            88,000                 -                -
 Accounts payable                         1,540,700         1,540,700         1,572,313        1,572,313
 Bank line of credit                      1,810,970         1,810,970            42,957           42,957
 Convertible debt                                 -                 -         1,738,970        1,745,760
 Industrial development bond              1,400,000         1,400,000         1,500,000        1,500,000
 Other long-term debt                       870,038           901,745         1,601,226        1,631,632
 Capital leases                             122,950           134,570           300,751          328,254
</TABLE>

13. Business Segments

Through December 31, 2003 the Company operated in three business segments:
Therapeutics, Physical Evaluation, and Applied Technology. The Therapeutics
segment includes the manufacture and sale of feeding pumps, disposable sets and
feeding tubes used by patients who require direct gastrointestinal nutrition
therapy (also called enteral feeding). The Physical Evaluation segment includes
the manufacture and sale of stand-alone and computerized products that measure
isolated muscle strength, joint range of motion and sensation. In the Applied
Technology segment, the Company provides design and manufacturing services to
medical device companies who, in turn, sell the Company's components and systems
under private labels or incorporate them into their products. The Company
evaluates the performance of the segments through gross profit, less selling and
marketing expenses, and research and development expenses (or contribution
margin). The Company does not allocate general and administrative expenses by
segment. General and administrative expenses are included in Corporate and
Unallocated amounts indicated below.

<PAGE>

13. Business Segments (continued)

For the year ended December 31, 2003 (in thousands):
<TABLE>
<CAPTION>
<S>                               <C>            <C>              <C>            <C>                    <C>

                                                                                  Corporate
                                                    Physical        Applied          and
                                  Therapeutics     Evaluation     Technology     Unallocated         Total
                                                                  --------------- --------------- --------------
Revenue                           $      12,406   $       3,016  $      10,448  $           --   $   25,870
Cost of sales                             9,124           1,369          7,053              --       17,546
                                 --------------- --------------- -------------- --------------- ------------
Gross profit                              3,282           1,647          3,395              --        8,324
Selling and marketing                     2,596           1,557            394              --        4,547
Research and development                    760             763            295              --        1,818
                                 --------------- --------------- -------------- --------------- ------------
Contribution margin                        (74)           (673)          2,706              --        1,959
General and administrative                   --              --             --           3,770        3,770
Asset and goodwill impairment             1,567              --             --              --        1,567
Loss on sale of business                     --           4,692             --              --        4,692
Other (income)/expense                       --              --             --             276          276
Benefit for income taxes                     --              --             --            (68)         (68)
                                 --------------- --------------- -------------- --------------- ------------
Net loss                                                                                          $ (8,278)
                                                                                                ============
                                 --------------- --------------- -------------- --------------- ------------
Total assets                     $         752    $         --   $       4,048  $       14,932   $   19,732
                                 =============== =============== ============== =============== ============
</TABLE>

During 2003 the Company changed how certain expenses were classified. Certain
prior year amounts have been reclassified to conform to the current year
presentation including research and development, general and administrative, and
selling and marketing costs.

The Company changed its methodology during the second quarter of 2003 to better
reflect its manufacturing overhead costs by business segment. The impact of this
methodology change on the gross profit of each segment for the year ended
December 31, 2003 is as follows: an increase in Therapeutics by approximately
$247,000, a decrease in Physical Evaluation by approximately $463,000, and an
increase in Applied Technology by approximately $216,000. Gross profit by
segment for previous years has not been adjusted for this change in methodology
because sufficient information was not available for those periods.

Included in the segment assets disclosed above are specifically identified fixed
assets and goodwill. Prior to the second quarter 2003, the Company also included
accounts receivable and inventory in segment assets. However, due to changes in
the accumulation of the Company's financial information, accounts receivable and
inventory are no longer tracked separately by segment. The Company has restated
all periods to conform to this presentation. All assets other than those
specifically identified fixed assets and goodwill are included in Corporate and
Unallocated. The only specifically identified fixed assets include nutritional
pumps and tooling, which are included in the Therapeutics segment. All other
fixed assets are used jointly by the segments. Goodwill represents approximately
$4,048,000 in Applied Technology.

On December 31, 2003, the Company completed the sale of its Physical Evaluation
business (See Note 2).
<PAGE>

13. Business Segments (continued)

For the year ended December 31, 2002 (in thousands):
<TABLE>
<CAPTION>
<S>                             <C>             <C>            <C>              <C>                     <C>
                                                                                  Corporate
                                                  Physical        Applied            and
                                Therapeutics     Evaluation      Technology      Unallocated          Total
                                -------------- --------------- --------------- --------------- -------------
Revenue                             $  12,125       $   3,650        $  9,721         $    --      $ 25,496
Cost of sales                           7,682           1,363           5,331              --        14,376
                                -------------- --------------- --------------- --------------- -------------
Gross profit                            4,443           2,287           4,390              --        11,120
Selling and marketing                   2,552           1,134             253              58         3,997
Research and  development                 672             199             418              --         1,289
                                -------------- --------------- --------------- --------------- -------------
Contribution margin                     1,219             954           3,719            (58)         5,834
General and administrative                 --              --              --           5,127         5,127
Other (income)/expense                     --              --              --             488           488
Provision for income taxes                 --              --              --               5             5
                                -------------- --------------- --------------- --------------- -------------
Net income                                                                                          $   214
                                                                                               =============
                                -------------- --------------- --------------- --------------- -------------
Total assets                    $       3,183      $     5,199   $      4,075    $     16,341      $ 28,798
                                ============== =============== =============== =============== =============
</TABLE>

All assets other than those specifically identified fixed assets and goodwill
are included in Corporate and Unallocated. The only specifically identified
fixed assets include nutritional pumps and tooling, which are included in the
Therapeutics segment. Goodwill represents approximately $842,000 in
Therapeutics, $5,199,000 in Physical Evaluation, and $ 4,048,000 in Applied
Technology.

For the year ended December 31, 2001 (in thousands):
<TABLE>
<CAPTION>
<S>                              <C>             <C>           <C>              <C>             <C>      <C>
                                                                                Corporate
                                                  Physical        Applied           and
                                Therapeutics     Evaluation      Technology     Unallocated          Total
                                -------------- --------------- --------------- --------------- -------------
Revenue                             $  13,009        $  3,754       $  13,119         $    --      $ 29,882
Cost of sales                           8,537           1,323           7,970              --        17,830
                                -------------- --------------- --------------- --------------- -------------
Gross profit                            4,472           2,431           5,149              --        12,052
Selling and marketing                   2,434             998             225             285         3,942
Research and development                  310             247             376              --           933
                                -------------- --------------- --------------- --------------- -------------
Contribution margin                     1,728           1,186           4,548           (285)         7,177
General and administrative                 --              --              --           6,158         6,158
Other (income)/expense                     --              --              --           1,606         1,606
Benefit for income taxes                   --              --              --            (99)          (99)
                                -------------- --------------- --------------- --------------- -------------
Net loss                                                                                           $  (488)
                                                                                               =============
</TABLE>

14. Related-Party Transactions

During December 2001, the Company sold the corporate shell of Aborn for $100,000
to Vijay Lumba, a former Company employee. The Company maintained certain
manufacturing rights, cash, accounts receivable, equipment, and inventory
related to this transaction (see Note 1).

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
$1,311,188 in cash and a convertible debenture in connection with the JTech
Stock Purchase. The Company paid $290,000 of the convertible debenture in
December 2001, and the remaining principal amount of $1,073,594 (inclusive of
the 1999 earn-out provision of $52,406) was paid on December 31, 2002.

<PAGE>

14. Related-Party Transactions (continued)

JTech also entered into an employment agreement with Mr. 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 and served until December 2002. Mr. Smith also served as Sr. Vice
President of ZEVEX International, Inc. and of ZEVEX, Inc., until December 31,
2003. On December 31, 2003, the Company completed the sale of its Physical
Evaluation business to Mr. Smith (see Note 2).