<PAGE>
                                   FORM 10-K

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


     [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 [FEE REQUIRED]

                           for the fiscal year ended
                              September 30, 1998

                                      or

     [  ] TRANSITION  REPORT  PURSUANT TO  SECTION  13  OR 15(d)  OF  THE
          SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                                    1-12318
                            Commission file number

                           BALLARD MEDICAL PRODUCTS
                           Exact name of registrant 
                          as specified in its charter

                                     UTAH
                 State or other jurisdiction of incorporation 
                                or organization

                                  87-0340144
                      I.R.S. Employer Identification No.                  


                12050 Lone Peak Parkway, Draper, Utah  84020  
                             Address and Zip Code 
                        of principal executive offices

                                (801) 572-6800
                        Registrant's telephone number, 
                             including area code 


     Securities registered to 12(b) of the Act:  None

     Securities registered pursuant to Section 12(g) of the Act: 

                          Title of Class:  Common   
                          Par Value:  $0.10 per share

     [X]  Yes  Indicate by check mark whether the Registrant (1)
     [ ]  No   has filed all reports  required to be filed by  Section 12
               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.    


                                       1 <PAGE>
 
     [ ]       Indicate by check mark  if disclosure of delinquent filers
               pursuant to Item 405 of Regulation S-K (Section 229.405 of
               this  chapter) is not  contained herein,  and will  not be
               contained,  to  the  best of  registrant's  knowledge,  in
               definitive proxy or information statements incorporated by
               reference in Part III  of this Form 10-K or  any amendment
               to this Form 10-K.  

     The aggregate market value of the voting stock held by nonaffiliates
     of the registrant as of 12/15/98: 

                                 $675,133,285

     The number of shares outstanding of the registrant's class of common
     stock, as of 12/15/98:

                                  30,547,908


                      DOCUMENTS INCORPORATED BY REFERENCE

     The following documents are incorporated by reference herein:

           1.  Annual  Report  to  Shareholders  for  fiscal  year  ended
               September  30,  1998:   Incorporated into  Parts I  and II
               hereof.
       

                           BALLARD MEDICAL PRODUCTS

                    Cross Reference Sheet Showing Location 
                     in Annual Report or Proxy Statement 
              of Information Required by Certain Form 10-K Items

                                                          LOCATION IN
                                                          PRINTED
                                                          REFERENCE
      FORM 10-K ITEMS                                     MATERIALS


      Part I
           Item 1.      Business                          Annual Report,
                                                          pp. 1-8

           Item 2.      Properties                        Annual Report,
                                                          pp. 3, 8

      Part II.
           Item 5.      Market for Registrant's Common    Annual Report p.
                        Equity and Related Stockholder    8
                        Matters

           Item 6.      Selected Consolidated Financial   Annual Report,
                        Data                              pp. 9, 10



                                       2 <PAGE>
 
           Item 7.      Management's Discussion and
                        Analysis of Financial Condition   Annual Report,
                        and Results of Operations         pp. 29-40

           Item 8.      Consolidated Financial
                        Statements and Supplementary      Annual Report,
                        Data                              pp. 11-28

                                  DEFINITIONS

          As  used   herein,  the  following  terms   have  the  meanings
     indicated:

           1.  "Annual Report" refers to  the Company's Annual Report for
               the  fiscal  year  ended  September  30,  1998,  which  is
               attached as Exhibit  13 to  this Form 10-K  and which  was
               mailed to shareholders on or about December 30, 1998.

           2.  "Ballard" refers to Ballard Medical Products.

           3.  "BI" refers to Ballard International, Inc., a wholly owned
               subsidiary of Ballard.

           4.  "BREH"  refers to  Ballard Real  Estate Holdings,  Inc., a
               wholly owned subsidiary of Ballard.

           5.  "Cardiotronics" refers  to Cardiotronics Systems,  Inc., a
               wholly owned subsidiary of Ballard.

           6.  The "Company"  and the  "Registrant" refer to  Ballard and
               its subsidiaries.

           7.  "MIC" refers to Medical Innovations  Corporation, a wholly
               owned subsidiary of Ballard.

           8.  "MIST ASSIST" refers to Mist  Assist, Inc., a wholly owned
               subsidiary of Ballard.

           9.  "PEPCO" refers to the Plastic Engineered Products Company,
               a wholly owned subsidiary of Ballard.

          10.  "PMP" refers to Ballard Medical Products (Canada) Inc. dba
               Preferred  Medical Products, a  wholly-owned subsidiary of
               Ballard.

          11.  "R2"  refers to R2  Medical Systems, Inc.,  a wholly owned
               subsidiary of Cardiotronics.

          12.  "Tri-Med"  refers to Tri-Med  Specialties, Inc.,  a wholly
               owned subsidiary of Ballard.







                                       3 <PAGE>
 
                                    PART I

     ITEM 1.  BUSINESS

          The information required by this item is incorporated herein by
     reference  from  the Company's  Annual  Report.   In  addition,  the
     following information is provided:

     BUSINESS DEVELOPMENTS

          KIMBERLY-CLARK CORPORATION MERGER

          Effective  December  23,  1998,  the  Company  entered  into  a
     definitive   merger   agreement   with  Kimberly-Clark   Corporation
     ("Kimberly-Clark").  Under  the terms of the  merger agreement, each
     stockholder  of Ballard  will  receive $25  worth of  Kimberly-Clark
     common  stock (which will be  valued based upon  the average closing
     price  of Kimberly-Clark  stock over  a period  of ten  trading days
     ending five days prior to the date of  closing) for each outstanding
     share  of Ballard  common stock.   The  transaction was  unanimously
     approved  by  Ballard's  Board  of Directors.    The  transaction is
     expected to close  in March or April,  1999, subject to  approval by
     Ballard's  stockholders,  appropriate   governmental  approval   and
     customary conditions.  It  is expected that the merger will  be tax-
     free  to  Ballard's stockholders.    In connection  with  the merger
     agreement, Ballard granted Kimberly-Clark an option to acquire 19.9%
     of  Ballard's outstanding  stock  under certain  circumstances.   In
     addition,  under certain circumstances, Kimberly-Clark would be paid
     a cash termination fee of $15,000,000 by Ballard.

          SALES AND DISTRIBUTION

          The  United States continues to be the principal market for the
     Company's  products.    The  Company's  125-person  sales  force  is
     complemented  by a  distribution system  comprised of  specialty and
     general line dealers.

          Sales by the  Company are  generated in many  areas within  the
     hospital,  such   as  intensive  care  units,   emergency  services,
     anesthesiology  departments,  oncology  departments,  pain  clinics,
     gastrointestinal   and  radiology   procedure  rooms,   burn  units,
     respiratory therapy, bone  marrow transplant units,  general nursing
     floors, and post-anesthesia care units, as well as the main hospital
     operating room and outpatient/ satellite surgical centers.  A second
     important  market  for certain  of  the  Company's  products is  the
     alternate care  market.    Alternate care  site  sales  continue  to
     improve  as patients are moved into these locations at an increasing
     rate.  

          The  sale of  the  Company's TRACH  CARE  products is  somewhat
     seasonal, in that  sales are  better during the  winter months  when
     there  is a greater incidence of respiratory illness.  Other product
     sales are not subject to seasonal differences.




                                       4 <PAGE>
 
          INDUSTRY SEGMENTS

          All products  of the Company are deemed to be of the same class
     and are sold in the same industry segment.

          RAW MATERIALS

          The  Company does  not  face any  serious supply  shortage with
     respect  to raw materials used  in the manufacture  of its products.
     Many of the  Company's products are manufactured from various resins
     and  plastics.   The Company  purchases resins  and plastics  from a
     number  of  different  vendors.   Resin  availability  is  presently
     adequate for the needs of the Company. 

          The Company's Chlorhexidinegluconate ("CHG") solutions  used in
     its FOAM CARE products  are purchased from two  different suppliers.
     The  4% CHG is currently purchased  from Xttrium Laboratories, Inc.,
     and  the 2% CHG is currently purchased from Huntington Laboratories,
     Inc.   The  Company has  written supply  contracts with  Xttrium and
     Huntington.  However,  there can  be no assurance  that the  Company
     will  be able to continue to have access to sufficient quantities of
     these CHG materials.  CHG is heavily regulated by the FDA.  

          The  Company purchases significant  amounts of  paper products,
     along with a number  of different chemicals used in  the manufacture
     of other hand wash solutions sold as part of the Company's FOAM CARE
     product  line.  There are many different suppliers of such chemicals
     and paper products.   Occasionally, paper  product companies are  in
     short supply, but the Company has adjusted lead times and made other
     adjustments so that this has not presented a  serious problem.  This
     is not expected to present a serious problem in the future either.

          The Company used to purchase substantial amounts of tubing from
     outside sources.  Now the Company extrudes most of its own tubing.

          The  Company  also   purchases  different  types  of   silicone
     materials from various  suppliers.  Depending upon the specific type
     of silicone involved, there are anywhere from a few to many sources.
     Some  manufacturers  have  scaled  back  their  supply  of  silicone
     materials which are  implanted or placed in the human  body for more
     than thirty  days, in  part because  of  legal problems  surrounding
     silicone breast  implants.   So  far, the  Company has  not had  any
     serious difficulty obtaining needed silicone materials.

          There are many  potential sources of balloon materials  used by
     the  Company in the MIC  enteral feeding product  line, although the
     Company currently purchases substantially  all of such balloons from
     one source.

          There are multiple vendors  of needles and syringes needed  for
     PMP products  and foam needed for  PEPCO products.  The  Company has
     encountered  supply problems regarding  needles, which are purchased
     from various vendors, including  some international suppliers.  Long
     lead  times (up to 18 weeks sometimes) are required for the ordering
     of certain needles.


                                       5 <PAGE>
 
          PATENTS

          The Company owns numerous  patents and patent applications with
     respect to its products  and feels that these patents  are important
     to the Company's ability to compete effectively in the market place.

          1.   TRACH CARE - The Company owns 26 U.S. patents with respect
     to its TRACH CARE family of products.  The expiration dates on these
     patents  range from February, 2003 to April, 2015.  The Company also
     has several U.S. and foreign  patents pending covering various TRACH
     CARE  improvements.  There are  also other pending  U.S. and foreign
     patents.

          2.   MIC - The MIC family of products (including products added
     from the April, 1996 acquisition of the assets of Endovations, Inc.)
     are protected by 32  U.S. patents owned by  the Company, along  with
     various foreign patents.   The U.S. patents expire  between January,
     1999 and  November,  2014.   The  Company also  has other  U.S.  and
     foreign  patents pending  on  MIC products,  and  is a  licensee  of
     certain patented technology under license agreements.

          3.   FOAM CARE - The Company's FOAM CARE products are protected
     by 11 U.S.  patents either owned or  licensed by the Company,  along
     with a number of foreign patents.  The Company's U.S. patents expire
     between July 2002 and August, 2011.  The Company also has other U.S.
     and foreign patents pending, covering its FOAM CARE technology.

          4.   EASI-LAV - The Company owns 6 U.S. patents with respect to
     its EASI-LAV products, with expiration dates ranging from June, 2006
     to  July,  2014.   There  are also  other  pending U.S.  and foreign
     patents.

          5.   CARDIOTRONICS/R2 -  The Company owns 14  U.S. patents with
     respect to its Cardiotronics  products with expiration dates ranging
     from December, 2000 to October, 2016.  There are  other pending U.S.
     and foreign patents.

          6.   TRI-MED - The Company licenses  2 patents with respect  to
     its Tri-Med products, which expire in June, 2005 and May, 2006. 

     TRADEMARKS

          1.   BALLARD -  Although patents  and registered trademarks  do
     not provide  guaranteed protection,  the Company believes  that they
     are  important  to its  competitive  position  in  the  health  care
     marketplace.   The Company's rights in a given trademark should last
     indefinitely, so long as  the Company continues  to use the mark  to
     identify  the particular  product involved.   Ballard  owns numerous
     trademarks, including without  limitation the  following which  have
     been registered in the U.S. Patent and Trademark Office:

               REGISTRATION   REGISTRATION        REGISTERED
               NUMBER         DATE                TRADEMARK

               2,187,694      September 8, 1998   CODE BLUE EASI-TUBE

                                         6 <PAGE>
 
               REGISTRATION   REGISTRATION        REGISTERED
               NUMBER         DATE                TRADEMARK

               1,987,599      July 16, 1996       TRACH CARE MAC
               1,970,481      April 23, 1996      MIST ASSIST
               1,840,243      June 21, 1994       FOAM CARE
               1,837,691      May 31, 1994        FLASH FOAM
               1,818,717      February 1, 1994    CHAR-FLO
               1,797,703      October 12, 1993    CODE BLUE EASI-LAV
               1,793,553      September 21, 1993  BAL-CATH
               1,757,543      March 9, 1993       DENTASWAB POLY-PLUS
               1,753,765      February 23, 1993   BALLARD UNIT DOSE
               1,690,024      June 2, 1992        ENDO-GUARD
               1,662,948      October 29, 1991    PEPCO
               1,655,483      September 3, 1991   EASI-LAV
               1,608,110      July 31, 1990       TRACH CARE WET PAK
               1,569,479      December 5, 1989    SAFETY DRAIN
               1,509,875      October 25, 1988    DENTASWAB
               1,500,402      August 16, 1988     READY CARE
               1,491,006      June 7, 1988        SAFETY SHIELD KIT
               1,403,724      August 5, 1986      ENDOCAINE
               1,358,802      September 10, 1985  FOAM CARE
               1,358,803      September 10, 1985  FOAM CARE (stylized)
               1,338,744      June 4, 1985        BALLARD MEDICAL PRODUCTS
               1,330,753      April 16, 1985      ENDO-GUARD with design
               1,328,358      April 2, 1985       TRACH CARE
               1,328,357      April 2, 1985       DOUBLE SCRUB
               1,325,596      March 19, 1985      FOAM CARE DOUBLE SCRUB
               1,286,773      July 24, 1984       XYLO-TOL
               1,277,803      May 15, 1984        LAC-TOL
               1,274,743      April 24, 1984      QUIK-PREP
               1,225,871      February 1, 1983    R2

          2.   MIC - MIC has registered the following trademarks with the
     United States  Patent and  Trademark Office,  in addition to  others
     pending:

               REGISTRATION   REGISTRATION        REGISTERED
               NUMBER         DATE                TRADEMARK

               2,187,626      September 8, 1998   MIC
               2,145717       March 24, 1998      KEEN EDGE
               2,036,645      February 11, 1997   BASICS
               2,004,268      October 1, 1996     LARIAT
               1,912,396      August 15, 1995     THERMAL OPTION 
               1,897,441      June 6, 1995        WE MAKE LIFE A LITTLE EASIER
               1,853,026      September 6, 1994   CAN-OPT
               1,746,978      January 19, 1993    SHUR-FORM
               1,713,379      September 8, 1992   MIC-KEY
               1,607,979      July 31, 1990       ENDOVATIONS
               1,548,136      July 18, 1989       MEDICAL INNOVATIONS
                                                  CORPORATION (with Snakes)
               1,512,575      November 15, 1988   SECUR-LOK
               1,414,121      October 21, 1986    MIC (with Snakes)

                                     7 <PAGE>
          3.   TRI-MED - Tri-Med has  registered the following trademarks
     with the United States  Patent and Trademark Office, in  addition to
     others pending:

               REGISTRATION   REGISTRATION        REGISTERED
               NUMBER         DATE                TRADEMARK

               2,147,638      March 31, 1998      QUICK-TAP
               2,101,784      September 30, 1997  PYTEST
               1,701,374      July 21, 1992       CLOTEST

          The Company also  maintains trademark registrations in  various
     foreign countries and has other trademark registrations pending.

          MANUFACTURING BACKLOG

          Generally, all  sales of product  by the Company  include terms
     requiring payment  within  thirty to  forty-five days.   Product  is
     typically  not allowed to be returned unless defective or shipped in
     error.   As  of  November  17, 1998,  the  Company  had back  orders
     (believed  to be  firm) of  approximately $106,992,  in contrast  to
     approximately  $219,279 in  back orders  at the  same time  in 1997.
     Back  orders are generally  filled within ten  days.  Most  of these
     back orders are custom kits.

          COMPETITION

          Each of the Company's products competes in major markets within
     the health care  industry.   Many of the  Company's competitors  are
     larger  and more established in  the market place  than the Company,
     and many  competitors have  larger research staffs,  facilities, and
     marketing forces.   However, the aggressive  marketing, consultative
     sales  force, and  unique features  of  the Company's  product lines
     continue  to be well received  and are helping  the Company maintain
     and,  in some  cases,  increase  its portion  of  the market.    The
     Company's market share and competition vary from product to product.
     The Company estimates there are approximately seven to ten competing
     companies  for its FOAM CARE products, three or four competitors for
     its  TRACH  CARE   products,  four  or  five   competitors  for  its
     Cardiotronics product line,  and eight  to ten  competitors for  its
     Tri-Med product  line.  Depending  upon the specific  product, there
     are  anywhere from no competitors  to three or  four competitors for
     MIC  products.   Each  year,  there  are  an  increasing  number  of
     competitors for each of these product lines.  

          EMPLOYEES 

          The Company currently has 1336 full-time employees, 788 of whom
     are hourly production employees including quality  control, molding,
     and liquid compounding.  The total U.S. and foreign sales  force now
     numbers  125, split into a TRACH CARE/CARDIO/PMP sales force with 39
     representatives,   MIC/ENDOVATIONS/COX   sales    force   with    48
     representatives,   and  a   PMP/FOAM  CARE   sales  force   with  26

                                       8 <PAGE>
 
     representatives,  and  12 international  sales representatives.   In
     addition,  there  are  16  full-time  division  and  national  sales
     managers, 3 sales trainers, 10 marketing employees,  and 3 strategic
     accounts employees.  

          MANUFACTURING AND WORKING CAPITAL

          All  of Ballard's  products are  assembled, and  many component
     parts  are  manufactured,  at  the Company's  premises,  located  in
     Draper,  Utah  and  Pocatello,  Idaho, where  Ballard  has  complete
     facilities  for the  design and  construction of  the Company's  own
     tooling,  prototype  molds, and  production  molds.   The  Company's
     CLOTEST product  is manufactured at a facility  in Perth, Australia,
     and  its  PYTEST  product   is  manufactured  at  its  facility   in
     Charlottesville,  Virginia.    The  Company uses  plastic  injection
     molding  and assembly techniques in  the manufacture of  many of its
     products.  

          RESEARCH AND DEVELOPMENT

          The  Company maintains  a  staff of  design engineers,  project
     managers,   and   other  employees   for  continuing   research  and
     development of products.   We are committed to constantly  searching
     for new products and  for improvements to existing products,  and we
     are  committed  to allocating  sufficient  resources  to meet  these
     important objectives.   The following  table sets forth  the amounts
     expended by  the Company in the last three fiscal years for Company-
     sponsored, in-house research and development activities:

                                      9/30/98      9/30/97     9/30/96
           Company-sponsored, 
           in-house research and 
           development expenses    $2,866,929   $2,856,409  $3,184,151

     ITEM 2.  PROPERTIES

          Information  required by  this item  is incorporated  herein by
     reference  from  the  Company's Annual  Report.    In  addition, the
     following information is provided:

          The Company  owns a 393,735 square-foot  plant on approximately
     25  acres  of  land  in  Draper,  Utah.     The  Company  also  owns
     approximately 31 acres of  undeveloped land surrounding its facility
     in Draper, Utah.

          The Company recently completed  construction of a laboratory at
     its Draper, Utah facility  to accommodate the move of  the Company's
     laboratory  in Virginia (acquired  through the Tri-Med acquisition).
     The approximate construction costs  of this laboratory was $360,000.
     This space will also be used  for the manufacturing of all H. pylori
     diagnostic products  (CLOtest and PYtest) acquired  through the Tri-
     Med acquisition.

          The  Company   also  owns   a  208,000  square-foot   plant  on
     approximately 25 acres of land in Pocatello, Idaho.

                                       9 <PAGE>
 
          Management  estimates  given  the  current  product  mix  being
     manufactured in its  facilities, the existing Utah  and Idaho plants
     have a single-shift capacity as follows:

               Plant                    Capacity
               _____                    ________

               Draper, Utah             $175-$200 million

               Pocatello, Idaho         $75 to $85 million

          May 15, 1998 the Company entered  into a Sublease on its former
     Cardiotronics  facility  located  at 5966  LaPlace  Court,  Carlsbad
     California  92008.    This   sublease  should  cover  the  Company's
     obligations under  the lease  on the Cardiotronics  building through
     the expiration of its lease.

          The  Company's  lease on  the  Kansas  City facility  (acquired
     through  the  Tri-Med acquisition)  ended  September 3,  1998.   The
     Company also has a small  manufacturing facility in Perth, Australia
     which  it is leasing  as a result  of the Tri-Med  acquisition.  The
     parties  have  verbally negotiated  to end  this  lease on  or about
     January 15, 1999, at  which time the Perth, Australia  facility will
     be closed.

          In  August, 1996,  the Company  acquired, indirectly  through a
     Canadian  subsidiary, a 12,000 square foot building (on 1.5 acres of
     land)  in Thorold,  Canada.   The building  has been  leased  by the
     Company to a tenant.

     ITEM 3.  LEGAL PROCEEDINGS

          BALLARD  MEDICAL PRODUCTS V.  ALLEGIANCE HEALTHCARE CORPORATION
          AND SORENSON CRITICAL CARE, INC.

          The  parties to this case are  in the final stages of discovery
     (i.e.,  the exchange  of  information  and  documents,  depositions,
     etc.).  Ballard's motion for  preliminary injunction, filed in July,
     1998, was denied by the court.  A pretrial conference is tentatively
     scheduled with the court in February, 1999.

          ROGER LEE HEATH v. BAXTER, WALTERS, TOWNSEN, ET AL.

          On or about  August 3, 1998, the United States Court of Appeals
     for the 7th Circuit  affirmed the District Court's dismissal  of Mr.
     Heath's lawsuit  with prejudice.   Subsequently,  Mr. Heath filed  a
     petition for a  writ of  certiorari with the  United States  Supreme
     Court.   The parties  are waiting to  see whether the  Supreme Court
     will agree to hear an appeal of this matter.

          OTHER LITIGATION

          The  Company is  also  a party  to ordinary  routine litigation
     (including  other product  liability  litigation) incidental  to the
     Company's business.


                                      10 <PAGE>
 
     ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          During  the fourth quarter  of the fiscal  year ended September
     30, 1998, no matters were submitted to a vote of shareholders.

     CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

          Certain statements  contained in  this Annual Report  and other
     written and oral statements made from time to time by the Company do
     not relate strictly  to historical or current facts.   As such, they
     are  considered "forward-looking  statements" which  provide current
     expectations  or forecasts of future events.  Such statements can be
     identified  by   the  use  of  terminology   such  as  "anticipate,"
     "believe,"   "estimate,"   "expect,"   "intend,"   "may,"   "could,"
     "possible," "plan," "project," "will," "forecast" and  similar words
     or expressions.  The  Company's forward-looking statements generally
     relate  to   its  growth  strategies,   financial  results,  product
     development  and regulatory  approval programs,  and sales  efforts.
     One  must   carefully   consider  forward-looking   statements   and
     understand  that  such statements  involve  a variety  of  risks and
     uncertainties, known  and unknown, and may be affected by inaccurate
     assumptions, including,  among others,  those discussed below.   See
     "Risk Factors."   Consequently, no forward-looking  statement can be
     guaranteed and actual results may vary materially.

          The Company  does not  undertake to update  any forward-looking
     statement,  but  investors  are   advised  to  consult  any  further
     disclosures by the Company on  this subject in its filings with  the
     Securities and Exchange Commission,  especially on Forms 10-K, 10-Q,
     and  8-K (if  any), in  which the Company  discusses in  more detail
     various important factors that could  cause actual results to differ
     from  expected or historic results.  The Company notes these factors
     as  permitted by  the  Private Securities  Litigation Reform  Act of
     1995.  It is not  possible to foresee or identify all  such factors.
     As such, investors  should not consider any list  of such factors to
     be  an   exhaustive  statement   of  all  risks,   uncertainties  or
     potentially inaccurate assumptions.

                                 RISK FACTORS

          COMPETITION.   The medical device industry  is characterized by
     rapidly evolving technology and increased competition.  There  are a
     number of companies  that currently offer, or are in  the process of
     developing,  products  that compete  with  products  offered by  the
     Company, including the Company's  flagship TRACH CARE closed suction
     catheter.   Some  of  these competitors  have substantially  greater
     capital resources, research and development staffs and experience in
     the  medical device  industry.   These  competitors  may succeed  in
     developing technologies  and products  that are more  effective than
     those currently used or produced by the Company or that would render
     some  products offered  by the  Company obsolete  or noncompetitive.
     Competition  based on  price is  becoming an  increasingly important
     factor  in  customer   purchasing  patterns  as  a  result  of  cost
     containment  pressures on,  and  consolidation in,  the health  care

                                      11 <PAGE>
 
     industry.  Such competition  has exerted, and is likely  to continue
     to exert, downward  pressure on the  prices the  Company is able  to
     charge for its products.  The Company may not be able to offset such
     downward  price  pressure  through  corresponding  cost  reductions.
     Price  reductions could  have  an adverse  impact  on the  business,
     results of  operations, financial  condition, or  cash flows  of the
     Company. 

          INTELLECTUAL PROPERTY RIGHTS.   From time to time,  the Company
     has  received, and in the future may receive, notices of claims with
     respect to possible infringement of the intellectual property rights
     of  others or notices  of challenges  to the  Company's intellectual
     property rights.  In some instances such notices have given rise to,
     or  may in  the  future give  rise to,  litigation.   Any litigation
     involving the  intellectual property  rights of  the Company  may be
     resolved  by means of a  negotiated settlement or  by contesting the
     claim through the judicial  process.  There can be no assurance that
     the  business, results of  operations or the  financial condition of
     the Company  will  not suffer  an  adverse  impact as  a  result  of
     intellectual  property  claims that  may  be  commenced against  the
     Company  in  the  future.   The  Company  owns  certain patents  and
     proprietary information acquired  while developing  its products  or
     through  acquisitions, and  the Company  is the licensee  of certain
     other technology.  As patents expire, more competing products may be
     released  into the marketplace by  other companies.   The ability of
     the Company  to continue to  compete effectively with  other medical
     device  companies may  be materially  dependent upon  the protection
     afforded  by   its  patents  and  the   confidentiality  of  certain
     proprietary information.   There  can be  no assurance  that patents
     will  be  issued  for  products and  product  improvements  recently
     released  into  the  marketplace  or for  products  presently  being
     developed.

          MANAGED  CARE AND  OTHER  HEALTH  CARE PROVIDER  ORGANIZATIONS.
     Managed care and other health care provider organizations have grown
     substantially  in terms of the  percentage of the  population in the
     United   States  that   receives  medical   benefits   through  such
     organizations  and in terms of  the influence and  control that they
     are  able to exert over an increasingly  large portion of the health
     care industry.   These  organizations are continuing  to consolidate
     and grow, increasing the ability of these organizations to influence
     the  practices  and pricing  involved  in  the purchase  of  medical
     devices, including the products sold by the Company.

          HEALTH CARE REFORM/PRICING PRESSURE.   The health care industry
     in  the United States continues  to experience change.   Health care
     reform  proposals have been formulated  by members of  Congress.  In
     addition,  state legislatures  periodically consider  various health
     care  reform  proposals.     Federal,  state  and  local  government
     representatives  will, in  all  likelihood, continue  to review  and
     assess  alternative  health  care   delivery  systems  and   payment
     methodologies,  and  ongoing public  debate of  these issues  can be
     expected.    Cost  containment  initiatives,  market  pressures  and
     proposed changes  in  applicable laws  and  regulations may  have  a
     dramatic effect on  pricing or potential demand for medical devices,
     the  relative costs associated with doing business and the amount of

                                      12 <PAGE>
 
     reimbursement  by  both  government  and  third-party  payors.    In
     particular, the  industry is experiencing market-driven reforms from
     forces within the industry that are exerting pressure on health care
     companies to reduce health care costs.  These market-driven  reforms
     are  resulting in  industry-wide consolidation  that is  expected to
     increase the downward  pressure on product margins,  as larger buyer
     and supplier groups exert  pricing pressure on providers  of medical
     devices and other health  care products.  Both short-term  and long-
     term cost  containment  pressures, as  well  as the  possibility  of
     regulatory  reform,  may have  an  adverse impact  on  the Company's
     results  of  operations  and  financial condition.    The  Company's
     products  consist primarily  of  disposable medical  devices.   Cost
     containment pressures  on hospitals  are leading some  facilities to
     use  certain disposable devices longer  than they have  been used in
     the past, even  longer than  permitted by product  labelling.   This
     phenomenon could result  in a  reduction in  Company sales,  because
     extended use and device reuse mean fewer unit purchases.

          GOVERNMENT REGULATION.  There has been a trend in recent years,
     both in the United States and outside the United States, toward more
     stringent  regulation of, and enforcement of requirements applicable
     to, medical  device manufacturers.    The continuing  trend of  more
     stringent regulatory  oversight in product clearance and enforcement
     activities has  caused  medical device  manufacturers to  experience
     longer approval  cycles, more uncertainty, greater  risk and greater
     expense.  At the  present time, there are no  meaningful indications
     that this trend will be  discontinued in the near-term or  the long-
     term either in the United States or abroad.  The  Company expects to
     continue to incur additional  operating expenses associated with its
     ongoing  regulatory  compliance program,  but  the  amount of  these
     incremental  costs cannot  be completely  predicted and  will depend
     upon  a variety of factors, including future changes in statutes and
     regulations governing medical device manufacturers.  There can be no
     assurance that  such compliance  requirements and  quality assurance
     programs will not have an adverse impact on the business, results of
     operations or financial condition of the Company or that the Company
     will  not  experience  problems   associated  with  FDA   regulatory
     compliance.

          NEW  PRODUCT INTRODUCTIONS.   As the  existing products  of the
     Company become  more mature and its existing markets more saturated,
     the  importance  of  developing   or  acquiring  new  products  will
     increase.    The  development  of  any  such  products  will  entail
     considerable time  and expense,  including research and  development
     costs  and  the  time  and  expense  required  to  obtain  necessary
     regulatory  approvals, which  could adversely  affect the  business,
     results  of operations or financial condition of the Company.  There
     can be  no  assurance that  such development  activities will  yield
     products that can be commercialized profitably, or that any  product
     acquisition can  be consummated on commercially  reasonable terms or
     at  all.    Any  failure  to acquire  or  develop  new  products  to
     supplement  more mature products could have an adverse impact on the
     business,  results  of  operations  or financial  condition  of  the
     Company.

          TECHNOLOGICAL CHANGE.   The  medical technology as  utilized by

                                      13 <PAGE>
 
     the Company has  been subject to rapid advances.   While the Company
     feels that it currently possesses  the technology necessary to carry
     on its business, its  commercial success will depend on  its ability
     to remain current with respect to such technological advances and to
     retain experienced  technical personnel.  Furthermore,  there can be
     no assurance that  other technological advances will  not render the
     Company's technology and certain products uneconomical or obsolete.

          PRODUCT LIABILITY EXPOSURE.   Because its products are intended
     to  be  used   in  health   care  settings  on   patients  who   are
     physiologically  unstable and  may also  be seriously  or critically
     ill, the Company is exposed  to potential product liability  claims.
     From  time to  time,  patients  using  the Company's  products  have
     suffered serious injury or death, which has led to product liability
     claims against the Company.  Some product liability claims have been
     inherited by the Company through business acquisitions.

          The Company maintains product  liability coverage in the amount
     of $5,000,000 through Medmarc, 4000 Legato Road, Suite 800, Fairfax,
     Virginia.    This is  a  claims made  policy,  with a  deductible of
     $10,000  per occurrence and $75,000 aggregate maximum per year.  The
     Company  maintains  excess  liability  coverage  in  the  amount  of
     $10,000,000  through American  International Group  Specialty Lines,
     Inc., 70  Pine Street, New York,  New York.  The  Company deems this
     coverage  sufficient for  its business.   However,  there can  be no
     assurance  that such coverage will ultimately  prove to be adequate,
     or   that  such  coverage  will  continue  to  remain  available  on
     acceptable terms or any terms at all.

          ACQUISITIONS.  In order to continue increasing sales volume and
     profits,  the Company  relies  heavily  on  a program  of  acquiring
     business  and  new product  lines from  other  companies.   There is
     always  a significant risk that  a given acquisition  by the Company
     will  prove  to   be  unsuccessful  or   end  up  not   contributing
     sufficiently to sales  and profit growth of  the Company.  There  is
     also  a  risk that  undiscovered  or  contingent  liabilities of  an
     acquired  company could  negatively impact  the  Company's financial
     position  or   even  the   acquisition  transaction  itself.     The
     integration of any businesses that  the Company might acquire  could
     require substantial  management resources.   The moving  of acquired
     product  lines can  also result  in interruptions in  production and
     backorders.  There  can be  no assurance that  any such  integration
     will be accomplished without having a short or potentially long-term
     adverse  impact on the business, results  of operations or financial
     condition of the Company or that the benefits expected from any such
     integration will be fully realized.

          From time to time  the Company issues  its own common stock  in
     order to acquire other companies.   Such increases in the  number of
     outstanding  Company shares  could  have a  dilutive  effect on  the
     Company's earnings per  share and  on the Company's  book value  per
     share   depending  upon   several  factors   including:     (1)  the
     profitability of the acquired  company; (2) the number of  shares of
     Company common stock issued for the acquisition; and (3) whether the
     transaction can be  treated as a pooling of interests.  The issuance
     of Company common stock for  material acquisitions could also result

                                      14 <PAGE>
 
     in large blocks of Company stock being held by new voting groups and
     could therefore have an effect on the voting control of the Company.

          The Company prefers whenever possible to use its stock,  rather
     than cash, to acquire  other companies and intends to  continue this
     acquisition policy.

          The   Company  continues   to  devote   substantial  management
     resources to looking  for additional companies and product  lines to
     acquire.  At almost any  given point in time, the Company  is in the
     process  of  a  preliminary   review  of  various  potential  target
     companies,  or  involved in  more  comprehensive  due diligence,  or
     involved in preliminary or final negotiations for the acquisition.  

          INTANGIBLES.  As of September  30, 1998, $38,327,628 (17.2%) of
     the Company's total assets  consisted of intangible assets  (cost in
     excess of fair value  of net assets acquired  and patents and  other
     intangibles) net  of amortization.  $26,524,776  of these intangible
     assets  represent the difference between  the purchase price paid by
     the Company for various  acquisitions, and the fair market  value of
     net assets purchased, net of  amortization.  The approximate  amount
     of amortization expense related to intangibles for fiscal year  1998
     was $4,089,000, and this of course reduces net income.  There can be
     no assurance  that assets,  businesses, and product  lines purchased
     through  acquisitions  will retain  their value.   If  such acquired
     assets  were  to  lose  value, corresponding  goodwill  included  in
     intangibles may have to be  written off all at once, resulting  in a
     possible significant charge to earnings and earnings per share.  The
     Company periodically  reviews the  carrying value of  its intangible
     assets based on current and anticipated undiscounted  cash flows and
     recognizes impairment when  such cash  flows will be  less than  the
     carrying values.

          DIVIDENDS.   Prior to January, 1990, no dividends had been paid
     by the Company  on its shares of Common Stock.  The Company has paid
     dividends since January, 1990.   However, there can be  no assurance
     that  dividends will be paid  on shares in  the future, particularly
     since the  Company prefers to reserve its cash and liquid assets for
     growth and possible business acquisitions.

          UNCERTAINTY OF  FINANCIAL RESULTS AND CAPITAL NEEDS.  There may
     be substantial  fluctuations in the Company's  results of operations
     because  of  the  timing  and  recording   of  revenues  and  market
     acceptance of existing Company products.  The ability of the Company
     to  expand  its manufacturing  and  marketing  operations cannot  be
     predicted with certainty.   If revenues do not continue  to increase
     as rapidly as they have in  the past few years, or if manufacturing,
     marketing, or research and development are not successful or require
     more money than is anticipated,  the Company may have to  scale back
     product marketing, development and production efforts and attempt to
     obtain  external  financing.   There can  be  no assurance  that the
     Company would be  able to  obtain timely external  financing in  the
     amounts required or that  such financing, if available, would  be on
     terms advantageous to the Company. 

          SUPPLY OF RAW MATERIALS.  Certain of the Company's products are

                                      15 <PAGE>
 
     dependent upon  raw materials for which  there are few sources.   So
     far, the Company has  not had any serious problems  obtaining needed
     raw materials. 

          IMPACT OF  CURRENCY FLUCTUATIONS; IMPORTANCE  OF FOREIGN SALES.
     Because  certain sales of products by the Company outside the United
     States typically are denominated in local currencies, the results of
     operations of the Company are expected to continue to be affected by
     changes in exchange rates between certain foreign currencies and the
     United  States Dollar.  There  can be no  assurance that the Company
     will not experience currency  fluctuation effects in future periods,
     which  could  have an  adverse impact  on  its business,  results of
     operation  or financial  condition.   The  operations and  financial
     results of the Company  also may be significantly affected  by other
     international factors, including changes in governmental regulations
     or  import  and  export   restrictions,  and  foreign  economic  and
     political conditions generally.

          The Company's ability  to continue to sell products into Europe
     is  dependent  to a  large  extent on  its  ability to  maintain the
     important ISO  9001/EN  4601 certification  and  the CE  marking  of
     conformity.  If the  Company were to lose such  certifications, such
     loss would  have a material,  adverse impact on  international sales
     and profits.

          For the  fiscal year  ending September 30,  1998, international
     sales ($18,221,425) were 12.1% of net sales of the Company. 

          POSSIBLE  VOLATILITY OF STOCK PRICE.   The market  price of the
     Company's  stock is, and  is expected to continue  to be, subject to
     significant fluctuations  in  response to  variations  in  quarterly
     operating results, trends in the health care industry in general and
     the medical device industry in particular, and certain other factors
     beyond  the control  of  the Company.    In addition,  broad  market
     fluctuations, as  well as  general economic or  political conditions
     and  initiatives,  may adversely  impact  the  market  price of  the
     Company's stock, regardless of the Company's operating performance.

          YEAR  2000 ISSUES.  The  approaching Year 2000  could result in
     challenges   related   to  computer   software,   manufacturing  and
     communications equipment, accounting records, and relationships with
     suppliers  and  customers.    The  Company  is  in  the  process  of
     addressing the Year 2000 Issue.  See "2000 ISSUES."


                                    PART II

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

          The  information  required  by  Item  5  of  this  Part  II  is
     incorporated herein by reference from the Company's Annual Report.




                                      16 <PAGE>
 
     ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

          The information required by Item 6 of this Part II is
     incorporated by reference from the Company's Annual Report.

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

          The  information  required  by  Item  7  of  this  Part  II  is
     incorporated herein by reference from the Company's Annual Report.

     ITEM 8.   CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          The Company's  consolidated balance sheets as  of September 30,
     1998 and 1997 and the related consolidated statements of operations,
     stockholders' equity and cash  flows for each of the three  years in
     the  period ended  September  30, 1998  are  incorporated herein  by
     reference from the Company's Annual Report.

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

          There  are   no  disagreements  on  accounting   and  financial
     disclosure to be disclosed under this Item 9.


                                   PART III

     ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          DIRECTORS

          The  names  of  the  Company's  directors  and  their  business
     experience for at  least the last  five years are  set forth  below.
     There is  no arrangement or  understanding between any  director and
     any other  person pursuant to  which the  director was or  is to  be
     selected as a director or nominee:

           Name, Age, and Position  Director
           with the Company         Since     Principal Occupation
           _______________________  ________  ____________________

           Dale H. Ballard (76)     1978      President, Chief
           President, Chief                   Executive Officer,
           Executive Officer,                 Chairman of the Board
           Chairman of the Board              (1)

           John I. Bloomberg (63)   1981      Managing General
           Director                           Partner, private
                                              investment companies (2)

           J. Dallas VanWagoner     1984      Retired Physician (3)
           (61) Director

           Robert V. Petersen (72)  1986      Professor Emeritus of
           Director                           Pharmaceutics,
                                              University of Utah (4)
                                         17 <PAGE>
 
           Name, Age, and Position  Director
           with the Company         Since     Principal Occupation
           _______________________  ________  ____________________

           E. Martin Chamberlain    1988      Vice President of 
           (58), Vice President of            Regulatory Affairs,
           Regulatory Affairs,                Secretary (5)
           Secretary, Director

           Dale H. Ballard, Jr.     1993      President of Stratco,
           (51), Director                     a financial planning
                                              and investment firm (6)

           Paul W. Hess (44)        1993      General Counsel (7)
           Director, 
           General Counsel

          (1)  Mr.  Ballard  has  served  as  President, Chief  Executive
     Officer,  and Chairman of the Board of Directors since the formation
     of the  Company in 1978.   Mr. Ballard  holds a Bachelor  of Science
     Degree in Pharmacy from the University of Utah.  

          (2)  From July, 1981 to  the present, Mr. Bloomberg has  been a
     General Partner  of J.I.B.  Associates, Bricoleur Partners,  Olympic
     Growth Fund,  and Utah Capital Corp.,  private investment companies.
     From 1963 to 1981,  Mr.  Bloomberg's positions included  Senior Drug
     Analyst  at  Kidder  Peabody  (1963-1965),  Associate  Director   of
     Research  at  CBWL-Hayden  Stone,  now  a  part  of  Shearson/Lehman
     (1965-1972),  Director  of Research  and  Senior  Vice President  at
     Ladenberg,  Thalmann &  Co.  (1972-1976), Security  Analyst at  Alex
     Brown and Sons (1976-1979), and a Limited Partner and Vice President
     of Bear Stearns  & Co.  (1979-1981).  Mr.  Bloomberg graduated  from
     Amherst College  with a  B.A. in Chemistry  and received  an MBA  in
     Business Administration from Harvard Business School in 1962.  He is
     on  the Board of Directors of the  John Moran Eye Center, University
     of Utah.

          (3)  Dr.  VanWagoner received  his  B.S.E.E.  degree  from  the
     University of Utah in 1961, and M.S.E.E. in 1964.  He graduated from
     St.  Louis University  School of Medicine  in 1970.   He  is a board
     certified obstetrician and gynecologist and a member of the American
     College of Obstetrics  and Gynecology.   Dr. VanWagoner  has been  a
     clinical instructor with the  University of Utah School  of Medicine
     and has assisted companies in the health care industry with numerous
     research projects.   He  retired his private  practice in  November,
     1996.

          (4)  Dr. Petersen received a B.S. (Honors) in Pharmacy from the
     University of Utah in 1950, and a Ph.D. in Pharmaceutical Chemistry,
     with  minors  in  Organic   Chemistry  and  Pharmacology,  from  the
     University  of Minnesota  in 1955.   Dr.  Petersen has  held various
     academic  positions with the University  of Utah since  1957 and has
     been a  Professor of Pharmacy  since 1967.   He was Chairman  of the
     Department  of Applied Pharmaceutical Sciences from 1965 to 1978 and



                                      18 <PAGE>
 
     Chairman of the  Department of Pharmaceutics from 1978  to 1982.  He
     retired from the University of Utah  July 1, 1992, and now serves as
     a professor emeritus of  pharmaceutics.  Dr. Petersen has acted as a
     consultant  to  various  companies,  including  Albion  Laboratories
     (1964-1982),  Deseret  Pharmaceutical  Company,   Inc.  (1970-1989),
     Sorenco,  Inc.  (1978-present),  Kolmar   Laboratories  (1983-1987),
     Sorenson  Development  (1983-1989,  and  1993  -  present),  Pacific
     Chemicals  of Seoul,  Korea  (1989-91),  and Ciba-Geigy  Corporation
     (1989-91).   He served as a member of  the board of directors of the
     American Foundation for Pharmaceutical  Education from 1973 to 1975,
     since 1980  has served as a member of the board of directors for the
     Drug Standards Division of the United States Pharmacopeia - National
     Formulary, and  in 1990 was appointed  to the board  of directors of
     the U.S.P. Committee of Revisions (1990-1995).  Dr. Petersen is past
     president  of the American  Association of Colleges  of Pharmacy and
     from 1972 to 1987 was  the University of Utah College of  Pharmacy's
     liaison  to  the  board  of  trustees  of  the  Utah  Pharmaceutical
     Association. 

          (5)  Dr. Chamberlain joined the  Company in August, 1982, as  a
     project  manager.   He  received his  B.S.  degree in  Molecular and
     Genetic Biology in  1967, his  Master of Arts  degree in  Biological
     Science with  a minor  in Chemistry in  1969, and  his Doctorate  in
     Biology with  Biochemistry as an allied field in 1973.  Between 1974
     and 1981, he held a faculty appointment with the University of Utah,
     working with the Departments of Biology and the School of Medicine's
     Department of  Obstetrics and Gynecology, in  biological and medical
     research.  Dr. Chamberlain became Vice President in October, 1993 in
     addition to his appointment as Secretary of the Company in 1983.  In
     July,  1994  he became  Vice President  of  Regulatory Affairs.   He
     served as Director of Quality Assurance for the Company from 1986 to
     1994. 

          (6)  Dale H. Ballard, Jr.  is the son  of Dale H. Ballard,  the
     Company's Chief Executive Officer.  Dale Ballard, Jr. graduated from
     Brigham  Young University in 1970, with a Bachelor of Science Degree
     in  Business Management,  with minors  in Accounting  and Economics.
     From  1972   until  April,  1992,  he  owned  and  operated  Ballard
     Construction Company, a closely-held corporation engaged principally
     in  the  business   of  road   and  asphalt   construction.     From
     approximately  1977 to  April,  1992, Mr.  Ballard  also operated  a
     property  management  business  called  Empire  Properties.   Empire
     Properties  was a  wholly-owned subsidiary  of Ballard  Construction
     Company.   In  April, 1992,  Mr. Ballard  sold his  construction and
     landscaping  businesses.   Subsequently  he formed  a new  financial
     planning and investment company called Stratco.

          (7)  Paul W.  Hess joined  the Company  as in-house  counsel in
     August,  1993.  He had  served as outside  general corporate counsel
     for the  Company, through his former law  firm Strong & Hanni, since
     approximately  1985.   In October,  1993, Mr.  Hess was  elected and
     appointed by the  Board of Directors as  General Counsel.   Mr. Hess
     worked  as an attorney for Strong &  Hanni from 1981 until 1993.  He

                                      19 <PAGE>
 
     received his B.S. degree in Accounting from Brigham Young University
     in 1978 and his Juris  Doctorate degree from the University  of Utah
     College of  Law  in 1981.    Mr. Hess  is  also a  Certified  Public
     Accountant.

          EXECUTIVE OFFICERS

          The  President,  Executive  Vice  President,  Vice  Presidents,
     Secretary,  Treasurer,  and  General  Counsel  of  Ballard   Medical
     Products are elected annually at the regular meeting of the Board of
     Directors following  the Annual Meeting of Shareholders and serve at
     the discretion of  the Board of Directors.   There is no arrangement
     or understanding between any executive officer  and any other person
     pursuant to which he was  or is to be  selected as an officer.   The
     business  background  for  at least  the  past  five  years of  each
     executive officer is as follows:

          Name and Age                  Background
          ____________                  __________

          Dale H. Ballard (76)          President, Chief Executive
                                        Officer, Chairman of the Board (1)

          Harold R. ("Butch")           Executive Vice President,
          Wolcott (52)                  General Manager (2)

          E. Martin Chamberlain (58)    Vice President of Regulatory
                                        Affairs and Corporate Secretary (3)

          Donald C. Eiring (49)         Vice President of Sales for 
                                        Critical Care Division (4)

          Dennis B. Cox (45)            Vice President of Sales for
                                        Interventional Division (5)

          Clyde H. Baker (43)           Vice President of Sales for
                                        Primary Care Division (6)

          Chris Thomas (39)             Vice President of Corporate
                                        Development (7)

          R. Dennis Eyre (57)           Vice President of Marketing for
                                        Critical Care Division (8)

          Bradford D. Bell (49)         Vice President of International 
                                        Division (9)

          Kenneth R. Sorenson (55)      Treasurer and Chief Financial
                                        Officer (10)

          Paul W. Hess (44)             General Counsel (11)

          (1)  See "Directors".

          (2)  Mr. Wolcott  was appointed  by the  Board of  Directors as
     Executive Vice  President of Ballard in June, 1994.  He was hired by

                                      20<PAGE>
     the Company as General Manager in December,  1992.  Prior to joining
     Ballard, he  was employed by  Pilot Cardiovascular Systems,  Inc. in
     San  Clemente, California,  from April,  1991 until  December, 1992,
     where  he worked initially as Vice President of Operations and later
     as Chief Operating Officer.   From April, 1990  to April, 1991,  Mr.
     Wolcott  provided  consulting  services to  various  medical  device
     companies.  From January, 1987 until April, 1990, Mr. Wolcott worked
     for Catheter Technology Corporation of Salt Lake City, Utah, as Vice
     President of Manufacturing.

          (3)  See "Directors".

          (4)  Mr. Eiring has been an employee of Ballard since April 27,
     1992.   He has served as  Vice President of Sales  for Critical Care
     Division since July, 1998.  From July, 1997 to July, 1998, he served
     as National  Sales Manager.  Prior  to July, 1998, Mr.  Eiring was a
     Division  Manager over  sales  representatives.    He started  as  a
     Division  Manager  in the  Ohio Division  in  October, 1993  and was
     transferred to the Chicago Division in October, 1995. 

          (5)  Mr. Cox  joined Ballard in  May, 1995  in connection  with
     Ballard's acquisition of Cox Medical Enterprises, Inc.  In February,
     1998,  Mr.   Cox  was   appointed  Vice   President  of  Sales   for
     Interventional  Division.   From  May, 1995  to  February, 1998,  he
     served  as a Product Manager and Marketing Manager for endoscopy and
     enteral feeding products  of Ballard.   From June,  1989 until  May,
     1995, Mr. Cox was Vice President of Cox Medical Enterprises, Inc.

          (6)  Mr. Baker joined Ballard  and was appointed Vice President
     of  Sales for  Ballard's  Primary Care  Division in  December, 1998.
     From June,  1997 to December, 1998 he was the Vice President of U.S.
     Sales  Cardiovascular Surgery,  Baxter Cardiovascular  Group, Baxter
     Healthcare  in Irvine, California.  From  June, 1994 to May, 1997 he
     was  the Senior Vice  President of  the Customer  Satisfaction Group
     (sales,  marketing,  new product  development,  regulatory, customer
     service) of Research Medical, Inc. in Midvale, Utah.
      
          (7)  Mr.  Thomas  has been  an  employee of  the  Company since
     October,  1988.    He  was  appointed  Vice  President of  Corporate
     Development  in February 12, 1998.  From November, 1997 to February,
     1998  he served as Executive  Director of Strategic  Accounts.  From
     November,  1995 to November, 1997 he served as Director of Strategic
     Accounts.   He served as National Accounts Manager from August, 1994
     to November,  1995.  Prior to  that, he was a  Division Manager over
     sales representatives  in the  Mideast Division.   Prior  to August,
     1991 he was a sales representative for Ballard.
       
          (8)  Mr. Eyre  has served  as Vice President  of Marketing  for
     Critical Care Division  since July,  1998.  From  February, 1998  to
     July 1998, he was Vice President of the Critical Care Division.  Mr.
     Eyre  joined the Company in 1995 as Director of International Sales.
     He  served in this role  until becoming Vice  President in February,
     1998.  For a period of  nineteen years prior to joining the Company,
     Mr.  Eyre  worked  for  Deseret Medical  and  its  acquiror,  Becton
     Dickinson Vascular Access, as director of field sales. 

                                     21<PAGE>
          (9)  Mr.  Bell  was  appointed  Vice  President  of  Sales  and
     Marketing on August 1, 1994.  He served as Director of Marketing for
     Ballard since  October, 1991.  Prior to  coming to work for Ballard,
     Mr. Bell worked for Bard  Access Systems (formerly named  Davol/Cath
     Tech, Inc.), where  he served as Director of Marketing from the fall
     of 1988 until October, 1991.  

          (10) Mr. Sorenson joined  the Company  in July, 1985.   He  has
     worked  in  the  Company's  Finance  Department  since  joining  the
     Company.  He  became Treasurer of the Company in  August, 1985.  Mr.
     Sorenson is a graduate of Brigham Young University in Accounting.

          (11) See "Directors".

     SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

          Section 16(a) of  the Securities Exchange Act of  1934 requires
     the Company's directors  and executive officers  to file reports  of
     ownership and  changes in  ownership of  the Company's  Common Stock
     with the Securities and  Exchange Commission and the New  York Stock
     Exchange,  and  the Company  is required  to  identify any  of those
     individuals who failed  to file such reports on a  timely basis.  To
     the best of  the Company's knowledge,  based upon a  review of  such
     reports furnished to the Company and written representations that no
     other  reports  were required,  there were  no  late filings  by the
     Company's directors or executive officers in fiscal year 1998.  

     ITEM 11.  EXECUTIVE COMPENSATION

     DIRECTORS

          During  the fiscal year ended  September 30, 1998,  each of the
     members of the Board of Directors received $500 in cash compensation
     for  his services  as a director.   There  is no  standard agreement
     pursuant to which the directors are compensated for their services.

     EXECUTIVE OFFICERS

          The following table sets forth the compensation paid or awarded
     by the Company to the  Company's Chief Executive Officer and  all of
     the Company's  other executive  officers who are  considered "highly
     compensated" under  regulations promulgated  by  the Securities  and
     Exchange Commission,  for each of  the fiscal years  ended September
     30, 1998, 1997, and 1996:

                          SUMMARY COMPENSATION TABLES

     ANNUAL COMPENSATION
                                                                OTHER
                               FISCAL                          ANNUAL
                                 YEAR                         COMPEN-
           NAME AND PRINCIPAL   ENDED                BONUS     SATION
           POSITION              9/30  SALARY ($)      ($)        ($)

           Dale H. Ballard,      1998     250,000   40,767        (1)
           President             1997     233,333   45,678        (1)
                                 1996     200,000   40,595        (1)
                                      22 <PAGE>
                                                                0THER
                               FISCAL                          ANNUAL
                                 YEAR                         COMPEN-
           NAME AND PRINCIPAL   ENDED                BONUS     SATION
           POSITION              9/30  SALARY ($)      ($)        ($)

           Harold R. "Butch"     1998     149,667   43,631        (1)
           Wolcott, Executive    1997     140,333   45,381        (1)
           Vice President        1996     132,500   35,038        (1)

           Donald C. Eiring,     1998     105,833    5,000        (1)
           Vice President        1997      93,333        0        (1)
                                 1996     105,529        0        (1)

           Dennis B. Cox,        1998     124,167        0        (1)
           Vice President        1997     125,000        0        (1)
                                 1996     125,000        0        (1)

           Chris Thomas,         1998     119,683   22,818        (1)
           Vice President        1997      98,333   20,676        (1)
                                 1996      84,167   15,000        (1)

           R. Dennis Eyre,       1998      83,834   24,329        (1)
           Vice President        1997      79,583   23,546        (1)
                                 1996      75,000   16,332        (1)

           Bradford D. Bell,     1998     133,333    1,056        (1)
           Vice President        1997     134,167   40,969        (1)
                                 1996     120,833   31,001        (1)

           Kenneth R.            1998      97,333   28,001        (1)
           Sorenson, Chief       1997      91,333   28,160        (1)
           Financial Officer     1996      84,750   20,867        (1)

           Paul W. Hess          1998     125,236   15,008        (1)
           General Counsel       1997     111,769   21,481        (1)
                                 1996     133,750   15,696        (1)

     LONG-TERM COMPENSATION (2)

                                                SECURITIES  ALL OTHER
                                    FISCAL      UNDERLYING    COMPEN-
           NAME AND PRINCIPAL   YEAR ENDED         OPTIONS     SATION
           POSITION                   9/30  GRANTED (#)(3)     ($)(5)

           Dale H. Ballard,           1998         (4) N/A      (6) 0
           President                  1997         (4) N/A      (6) 0
                                      1996         (4) N/A      (6) 0

           Harold R. ("Butch")        1998               0      3,173
           Wolcott, Executive         1997           8,000      5,852
           Vice President             1996           6,000      6,225

           Donald C. Eiring,          1998               0      4,258
           Vice President             1997           5,000      3,909
                                      1996           5,000      3,846

                                       23<PAGE>
                                                SECURITIES  ALL OTHER
                                    FISCAL      UNDERLYING    COMPEN-
           NAME AND PRINCIPAL   YEAR ENDED         OPTIONS     SATION
           POSITION                   9/30  GRANTED (#)(3)     ($)(5)

           Dennis B. Cox,             1998               0      4,758
           Vice President             1997           2,000      5,208
                                      1996           2,000      5,000

           Chris Thomas,              1998               0      3,975
           Vice President             1997           6,000      3,375
                                      1996           4,000      4,567

           R. Dennis Eyre,            1998               0      3,887
           Vice President             1997           4,000      3,317
                                      1996           3,000        750

           Bradford D. Bell,          1998               0      5,108
           Vice President             1997           5,000      5,592
                                      1996           5,000      7,408

           Kenneth R.                 1998               0      4,162
           Sorenson,                  1997           5,000      3,185
           Chief Financial            1996           5,000      5,669
           Officer

           Paul W. Hess,              1998               0      5,223
           General Counsel            1997           4,000      5,024
                                      1996           4,000      5,515

          (1)  The  personal benefits  and  perquisites  received by  the
     named executives were less than the reporting thresholds established
     by  the Securities and Exchange Commission (the lesser of $50,000 or
     10% of the individual's cash compensation).

          (2)  The  Company  does  not   have  benefit  plans   involving
     Restricted Stock Awards, Stock  Appreciation Rights (SARs), or Long-
     Term Incentive Plans (LTIPs)

          (3)  There  were  no option  grants  to  any executive  officer
     during the fiscal year ended September 30, 1998.

          (4)  No options have ever been granted to Mr. Ballard under any
     of the Company's Incentive Stock Option Plans.

          (5)  These figures represent the Company's contributions to its
     401(k)  retirement plan  for  the benefit  of the  named executives.
     Messrs. Eiring,  Cox, Thomas,  Bell, and Sorenson  are 100%  vested,
     Messrs. Wolcott and Hess are 80% vested, and Mr. Eyre is 40% vested.

          (6)  Mr. Ballard is not a  participant in the Company's  401(k)
     plan.



                                     24<PAGE>
     AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED SEPTEMBER 30, 1998

                                        Number of
                   Shares               Securities          Value of
                 Acquired               Underlying         Unexercised
                       on     Value    Unexercised        In-the-Money
                 Exercise  Received  Options at Year       Options at
      Name            (#)       ($)      End (#)        Year End ($) (1) 

                                       Exer-  Unexer-       Exer-  Unexer-
                                     cisable  cisable     cisable  cisable

      Dale H.
      Ballard         N/A       N/A      N/A      N/A         N/A      N/A

      Harold R.
      ("Butch")
      Wolcott       6,767    82,050   14,000        0      20,500        0

      E. Martin
      Chamber-
      lain              0         0   10,000        0      16,875        0

      Donald C.
      Eiring        3,000    33,562    8,000        0      10,000        0

      Dennis B.
      Cox               0         0    2,000        0         250        0

      Chris
      Thomas        4,000    32,000    6,000        0         750        0

      R. Dennis
      Eyre              0         0    4,000        0         500        0

      Bradford
      D. Bell      10,000   153,825   29,600        0     201,625        0

      Kenneth
      R.
      Sorenson          0         0   15,000        0      63,125        0

      Paul W.
      Hess              0         0    8,000        0      13,500        0

          (1)  The  fair market  value (i.e., the  closing price)  of the
     Company's common stock on  September 30, 1998 ($20 per  share) minus
     the exercise price.

     COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

          The  full  Board  of   Directors  functions  as  the  Company's
     Compensation  Committee.   The  Board has  no separate  Compensation
     Committee.   The  following Board  members  are also  employees  and
     executive officers of the Company:

                                     25<PAGE>
               Dale H. Ballard, Chairman of the Board, CEO, and President

               E. Martin Chamberlain, Vice President of Regulatory
               Affairs and Secretary

               Paul W. Hess, General Counsel

     Dale  H. Ballard, Jr., also  a Board member,  is the son  of Dale H.
     Ballard.  

          During  the last  completed fiscal  year, any  deliberations in
     Board  meetings   regarding  executive  officer   compensation  were
     participated in by all members of the Board. 

     STOCK OPTION COMMITTEE

          The Company's  incentive stock  option plans (the  "Plans") are
     administered by two stock option committees.  Stock Option Committee
     A ("Committee A") is  authorized to grant options only  to employees
     who are not also officers or directors of the Company.  Stock Option
     Committee B ("Committee B")  is authorized to grant options  only to
     employees who are also officers or directors of the Company.

          Committee B was originally formed in response to old Rule 16b-3
     promulgated  by  the  Securities and  Exchange  Commission  ("SEC").
     Section  16(b) enables  an issuer  (or one  of its  shareholders) to
     bring  suit to recover profits gained by an insider from short-swing
     transactions.   A transaction which  meets the requirements  of Rule
     16b-3 is exempt from Section 16(b) of the Securities Exchange Act of
     1934.

          Rule 16b-3 was amended  by the SEC, effective August  15, 1996.
     Old Rule 16b-3 required,  among other things, that option  grants to
     officers and directors,  be made by the full  Board of Directors (if
     each member is a "disinterested  person"), or by a committee  of two
     or more  directors, each  of whom  is a  "disinterested person".   A
     "disinterested person" is a director who is not, during the one year
     prior  to service  as an  administrator of  the applicable  Plan, or
     during  such service,  granted  or awarded  options pursuant  to any
     Plan.

          The August, 1996  amendment to Rule 16b-3,  among other things,
     eliminated the  need to have a committee  of "disinterested persons"
     for  such option grants to officers and directors.  Nevertheless, in
     an August, 1996 Special Meeting of the Company's Board of Directors,
     the  Board  voted  to continue  the  practice  of administering  the
     Company's Plans through the existing Committee A and Committee B.

          Each Committee must be  comprised of two persons, both  of whom
     must  be members  of the  Board of  Directors.  However,  members of
     Committee  B  must  be  "disinterested persons"  as  defined  above.
     Committee A is currently comprised of Dale H. Ballard (the President
     of the Company) and E. Martin Chamberlain (a Vice  President and the
     Secretary  of the Company).   Committee B is  currently comprised of
     Dale  H. Ballard  and J. Dallas  VanWagoner, M.D., both  of whom are

                                      26 <PAGE>
     "disinterested  persons".   Dr.  VanWagoner is  not  an employee  or
     officer of the Company.

     NO EMPLOYMENT CONTRACTS

          The  Company  has  no  written  employment  contract  with  any
     executive  officer.   Like  all  but a  very  few  of the  Company's
     employees,  the executive officers  are "at-will employees", meaning
     either  the  employee or  the Company  can terminate  the employment
     relationship at any time for any reason or for no reason.

              BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION

     COMPENSATION POLICIES

          The Board of Directors establishes and periodically reviews the
     compensation of the Chief Executive  Officer.  Compensation of other
     executive officers has been  left to the judgment and  discretion of
     Dale H. Ballard, Chief  Executive Officer.  The Board has  left such
     other  compensation  to  the  discretion  of  the  CEO  because  the
     compensation levels of all such executive officers have historically
     been  reasonable  in the  judgment of  the  Board of  Directors, and
     because  the  Company  has   been  successful  under  Mr.  Ballard's
     leadership and under this compensation system.

          There is  no specific relationship of  corporate performance to
     executive compensation.  No formula or specific evaluation procedure
     is  followed.   Rather,  the compensation  policy is  subjective and
     informal.   However, compensation for executives  is based generally
     on the  principles that  compensation must  (1) be competitive  with
     other quality companies  in order  to help motivate  and retain  the
     talent  needed to  grow the  Company's business;  and (2)  provide a
     strong  incentive for  key  personnel and  sales representatives  to
     achieve the Company's goals.

          The  Company  has a  history  of relying  upon  incentive stock
     options  as an  important element  of each  executive's compensation
     package.  This  program has  generally enabled the  Company to  keep
     salaries and  bonuses at  relatively modest  levels.  The  Company's
     successful sales and profit record  suggests, we believe, that these
     principles which form  the basis for  our compensation program  have
     delivered the desired results.

     ELEMENTS OF EXECUTIVE COMPENSATION

          It  has been  the  Company's policy  for  many years  that  the
     executive compensation  program  consists of  base salary,  bonuses,
     insurance benefits, and stock options.  In addition, the Company has
     provided automobiles to its executive officers and certain other key
     employees.

          The Company's salary levels  are determined by comparisons with
     companies  of  similar  size  and  complexity  in  the  health  care

                                      27<PAGE>
     industry.   Salary increases are determined in view of the financial
     performance  of  the  Company,  the individual  performance  of  the
     executive,  and any  promotions  of, or  increased  responsibilities
     assumed  by, the  executive.   Bonuses are  determined by  the Chief
     Executive Officer at the  end of each fiscal year,  based upon these
     same factors.   Bonuses  are  completely discretionary  and are  not
     based upon any formula.

          All employee stock options  are granted pursuant to one  of the
     Company's incentive stock option plans.  The Company makes incentive
     stock option  grants periodically at no less than 100% of the market
     price on the effective date of the grant.  

          In  addition  to  the above  compensation,  executive officers,
     along with all employees of the Company, are eligible to participate
     in  the Company's 401(k) retirement plan.  This plan is available to
     all employees after  they have been employed  by the Company  for at
     least one year.  The plan  allows employees to make contributions to
     the plan from  salary reductions each  year, up  to an annual  limit
     which  is  generally 15%  of  a  participant's annual  compensation.
     Under  the   401(k)  plan,  the  Company   matches  a  participant's
     contribution up  to 4% of his  or her salary.   Employees are always
     fully vested in their  own contributions and become fully  vested in
     any contributions made by the Company after six years of service.

     COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

          The  compensation of Dale H. Ballard, Chairman of the Board and
     Chief Executive  Officer, consists  of a base  salary, typically  an
     annual  bonus, insurance benefits, and the use  of a vehicle.  At no
     time in  the Company's  history has  Mr. Ballard  received incentive
     stock options under any  incentive stock option plan.   In addition,
     Mr. Ballard is not a  participant in the Company's 401(k) retirement
     plan.  

          There  is   no  specific  relationship  between  the  Company's
     performance  and   Mr.  Ballard's  compensation.     Again,  only  a
     subjective, informal  policy is followed.   The  Board of  Directors
     periodically  reviews  Mr.  Ballard's  base  salary  and  bonus  and
     approves his  compensation based  on the  Board's evaluation of  his
     performance, his length  of service as Chief  Executive Officer, and
     competitive Chief  Executive Officer  pay information.   Mr. Ballard
     has historically determined his  own salary and bonus.   The Company
     has  enjoyed an overall strong performance, and Mr. Ballard has been
     the  Company's  able  Chief  Executive Officer  from  the  Company's
     formation.  

          The Board  feels that  Mr. Ballard  has been under  compensated
     over  the  years  in view  of  his  excellent  performance as  Chief
     Executive Officer.





                                      28 <PAGE>
     SECTION 162(m) POLICY.  

          Under  Section 162(m) of  the Internal Revenue  Code, no income
     tax  deduction  is  allowed  to  a  publicly  held  corporation  for
     remuneration paid to certain  executive officers (including the CEO)
     to the extent that  the amount of such remuneration with  respect to
     any given  employee/executive officer  for the taxable  year exceeds
     $1,000,000.  The Board's current policy is that the Company will not
     pay remuneration to any one  employee during a given tax  year which
     would not be deductible by the Company because of the Section 162(m)
     limits.

                                        BOARD OF DIRECTORS

                                        Dale H. Ballard, Chairman
                                        John I. Bloomberg
                                        J. Dallas VanWagoner
                                        Robert V. Petersen
                                        E. Martin Chamberlain
                                        Dale H. Ballard, Jr.
                                        Paul W. Hess


                            STOCK PERFORMANCE GRAPH

          The  following  graph shows  the  yearly  percentage change  in
     cumulative total  shareholder return  on the Company's  Common Stock
     during the  preceding five  fiscal years  ended September 30,  1998,
     compared  with the  Standard  &  Poor's  500  Stock  Index  and  the
     published  Standard  &  Poor's  Health Care  (Medical  Products  and
     Supplies) Industry Index.  The comparison assumes $100 were invested
     on September 30, 1993 in the  Company's Common Stock, and in each of
     the  foregoing   indices  the  comparison  assumes  reinvestment  of
     dividends.

     WRITTEN DESCRIPTION OF THE STOCK PERFORMANCE GRAPH 
     FOR EDGAR FILING.

          The graph line of  each of these three securities  is described
     below:

          BALLARD MEDICAL PRODUCTS.   The graph shows that  $100 invested
     in Ballard Medical Products Common Stock on September 30, 1993 would
     be worth the following values on the respective dates shown:

                         September 30, 1994        62
                         September 30, 1995        99
                         September 30, 1996       117
                         September 30, 1997       146
                         September 30, 1998       121

          S&P 500.   The graph  shows that $100  invested in the  S&P 500
     Index on September  30, 1993 would be worth the  following values on
     the respective dates shown:

                                      29 <PAGE>
                         September 30, 1994       104   
                         September 30, 1995       135    
                         September 30, 1996       162      
                         September 30, 1997       227         
                         September 30, 1998       248

          S&P HEALTH  CARE (MEDICAL  PRODUCTS AND SUPPLIES).   The  graph
     shows  that $100 invested in  the S&P Health  Care (Medical Products
     and  Supplies)  Index  on September  30,  1993  would  be worth  the
     following values on the respective dates shown:

                         September 30, 1994       128
                         September 30, 1995       207    
                         September 30, 1996       249  
                         September 30, 1997       307
                         September 30, 1998       371

     ITEMS 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 
               AND MANAGEMENT

                            PRINCIPAL STOCKHOLDERS

          So far as is known to management, as of September 30, 1998, the
     following persons owned beneficially more than 5% of the outstanding
     shares of the Company's Common Stock:

           NAME AND ADDRESS     AMOUNT AND NATURE       PERCENTAGE OF
           OF BENEFICIAL            OF BENEFICIAL  OUTSTANDING COMMON
           OWNER                        OWNERSHIP           STOCK (1)

           State Farm Mutual
           Automobile
           Insurance Company
           One State Farm
           Plaza,
           Bloomington, IL
           61710                    (2) 2,264,502               7.14%

           State of Wisconsin
           Investment Board         (3) 3,096,100               9.76%
           121 East Wilson
           St., P.O. Box
           7842, Madison, WI
           53207

           FMR Corp.                (4) 3,687,300              11.62%
           82 Devonshire St.
           Boston, MA 02109-
           3614

          (1)  All percentages are calculated on the basis of outstanding
     shares of common stock, plus shares (in the denominator) which could
     be acquired  within 60 days of September 30, 1998 by the exercise of
     outstanding stock options.

                                      30 <PAGE>
          (2)  The shares held by State Farm are owned as follows:

                                                                   Shares

               State Farm Balanced Fund                           427,751

               State Farm Growth Fund, Inc.                       820,000

               Mutual Automobile Insurance                      1,016,751
                                                                _________

                    Total                                       2,264,502

          (3)  The shares held  by the  State of Wisconsin  are owned  as
     follows:

                                                                   Shares

               Investment Board                                 1,484,600

               Investment Board - 
               Variable Retirement Trust Fund                   1,611,500
                                                                _________

                    Total                                       3,096,100

          (4)  The shares held by FMR Corporation are owned as follows:

                                                                   Shares

               Advisor Health Care Fund                            31,100

               FMR Corporation                                    557,500

               Fidelity International Ltd. (Bermuda)               18,600

               Fidelity Low Priced Stock Fund                   2,668,600

               Fidelity New Millennium Fund                        77,200

               Select Portfolios Biotechnology                    334,300
                                                                _________

                    Total                                       3,687,300






                                      31 <PAGE>
                         STOCK OWNERSHIP OF MANAGEMENT

          The following table sets  forth, as of September 30,  1998, the
     number of shares of  Common Stock of the Company  beneficially owned
     by  each of the Company's  directors and executive  officers, and by
     all of the Company's directors and executive officers as a group:

                                             AMOUNT AND    PERCENTAGE
                                              NATURE OF            OF
                                             BENEFICIAL   OUTSTANDING
           BENEFICIAL OWNER,                  OWNERSHIP  COMMON STOCK
           POSITION WITH COMPANY           (SHARES) (4)           (1)


           Dale H. Ballard, President,         Direct 0
           CEO and Chairman of the         (2) Indirect
           Board                              1,063,769
                                            Exercisable
                                            Options N/A
                                        Total 1,063,769         3.35%

           John I. Bloomberg, Director       Direct 800
                                             Indirect 0
                                            Exercisable
                                            Options N/A
                                              Total 800           (3)

           J. Dallas VanWagoner, M.D.      Direct 2,700
           Director                          Indirect 0
                                            Exercisable
                                            Options N/A
                                            Total 2,700           (3)

           Robert V. Petersen,               Direct 676
           Director                          Indirect 0
                                            Exercisable
                                            Options N/A
                                              Total 676           (3)

           E. Martin Chamberlain,              Direct 0
           Director, Vice President of       Indirect 0
           Regulatory Affairs, and          Exercisable
           Secretary                     Options 10,000
                                           Total 10,000           (3)

           Dale H. Ballard, Jr.,          Direct 46,534
           Director                      Indirect 1,651
                                            Exercisable
                                            Options N/A
                                           Total 48,185           (3)



                                      32 <PAGE>
                                             AMOUNT AND    PERCENTAGE
                                              NATURE OF            OF
                                             BENEFICIAL   OUTSTANDING
           BENEFICIAL OWNER,                  OWNERSHIP  COMMON STOCK
           POSITION WITH COMPANY           (SHARES) (4)           (1)

           Paul W. Hess, Director,             Direct 0
           General Counsel               Indirect 1,466
                                            Exercisable
                                          Options 8,000
                                            Total 9,466           (3)

           Harold R. ("Butch")                 Direct 0
           Wolcott, Executive Vice           Indirect 0
           President and General            Exercisable
           Manager                       Options 14,000
                                           Total 14,000           (3)

           Donald C. Eiring,               Direct 1,024
           Vice President of Sales for       Indirect 0
           Critical Care Division           Exercisable
                                          Options 8,000           (3)
                                            Total 9,024

           Dennis B. Cox,                      Direct 0
           Vice President of Sales for       Indirect 0
           Interventional Division          Exercisable
                                          Options 2,000
                                            Total 2,000           (3)

           Chris Thomas,                       Direct 0
           Vice President of Sales for       Indirect 0
           Corporate Development           Exerciseable
                                          Options 6,000
                                            Total 6,000           (3)
   
           R. Dennis Eyre,                     Direct 0
           Vice President of Marketing       Indirect 0
           for Critical Care Division       Exercisable
                                          Options 4,000
                                            Total 4,000           (3)

           Bradford D. Bell, Vice          Direct 1,000
           President of International        Indirect 0
           Sales                            Exercisable
                                         Options 29,600
                                           Total 30,600           (3)

           Kenneth R. Sorenson,              Direct 534
           Treasurer                         Indirect 0
                                            Exercisable
                                         Options 15,000           (3)
                                           Total 15,534

                                      33 <PAGE>
                                             AMOUNT AND    PERCENTAGE
                                              NATURE OF            OF
                                             BENEFICIAL   OUTSTANDING
           BENEFICIAL OWNER,                  OWNERSHIP  COMMON STOCK
           POSITION WITH COMPANY           (SHARES) (4)           (1)

           All directors and executive    Direct 53,268
           officers as a group (15             Indirect
           persons)                           1,066,886
                                            Exercisable
                                         Options 96,600
                                        Total 1,216,754         3.83%

          (1)  All percentages are calculated on the basis of outstanding
     shares  of common stock, plus shares which could be acquired, within
     60 days of September 30, 1998, by the exercise  of outstanding stock
     options. 

          (2)  These shares are owned as follows:                  Shares

               Dale H. Ballard Family Living Trust                641,120

               Alice B. Ballard Family Living Trust               422,289

               Indirect ownership through 
               Ballard Family Properties, Ltd.                        360

                    Total                                       1,063,769

          (3)  Percentage of shares owned does not exceed 1%. 

          (4)  "Exercisable Options"  listed  indicate shares  of  common
     stock which could  be acquired  by the exercise  of incentive  stock
     options held  by executive officers,  exercisable within 60  days of
     September 30, 1998. 


                                    PART IV

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

          (a) DOCUMENTS FILED AS PART OF REPORT

               1.   CONSOLIDATED FINANCIAL
                    STATEMENTS

          The following are included in the Annual Report incorporated by
     reference into Parts I and II of this report:

               Independent Auditor's Report, dated November 13, 1998;

                                      34 <PAGE>
               Consolidated Balance  Sheets as of September  30, 1998 and
               1997;

               Consolidated Statements  of Operations for the Years Ended
               September 30, 1998, 1997, and 1996;

               Consolidated  Statements of  Stockholders' Equity  for the
               Years Ended September 30, 1998, 1997, and 1996;

               Consolidated Statements of Cash  Flows for the Years Ended
               September 30, 1998, 1997 and 1996;

               Notes to Consolidated Financial Statements.
      
               2.   CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

          The following are included in this report:

               Independent Auditors' Report dated November 23, 1998;

               Supplemental  Schedule II  -  Valuation Accounts  for  the
               Three Years Ended September 30, 1998;

               Other schedules  required by  Rule 5.04 of  Regulation S-X
               are omitted because of the absence of the conditions under
               which  they   are   required  or   because  the   required
               information  is  included  in the  consolidated  financial
               statements or related notes.

               3.   EXHIBITS

          See "Ballard  Medical Products  Index to Exhibits"  attached to
     this report.

          (b)  REPORTS ON FORM 8-K

          On March 10, 1998 and July 14, 1998 the Company filed Form 8-Ks
     with regard  to its acquisition  of Tri-Med.   The Company filed  an
     amended  Form  8-K  on July  20,  1998  to  voluntarily restate  its
     financial statements  to  reflect the  pooling of  interests in  its
     acquisition of Tri-Med.
      
          (c)  EXHIBITS

          See "Ballard  Medical Products  Index to Exhibits"  attached to
     this report.

          (d)  SEPARATE FINANCIAL STATEMENT
               SCHEDULES

          Not applicable.

                                      35 <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.

     Date:  December 30, 1998           BALLARD MEDICAL PRODUCTS

                                        By:  Dale H. Ballard,
                                             President, Director
                                             (Principal 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.

     Date:  December 30, 1998           By:  Dale H. Ballard
                                             Director

     Date:  December 30, 1998           By:  E. Martin Chamberlain
                                             Director

     Date:  December 30, 1998           By:  Dale H. Ballard, Jr.
                                             Director

     Date:  December 30, 1998           By:  Paul W. Hess
                                             Director

     Date:  December 30, 1998           By:  Kenneth R. Sorenson
                                             Treasurer (Principal
                                             Financial Officer)




















                                      36 <PAGE>
     INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES

     To the Board of Directors and Stockholders of 
     Ballard Medical Products:

          We consent  to the  incorporation by reference  in Registration
     Statement  Nos. 33-23232,  33-34384, 33-43910,  33-50040, 333-18661,
     and  333-59471 on  Form S-3  and in  Registration Statement  Nos. 2-
     90684, 2-94306, 33-0840, 33-17698, 33-25628, 33-36851, 33-41720, 33-
     56302,  33-73194, 33-57735,  333-01941, 333-22827, and  333-59465 on
     Form S-8 of  Ballard Medical  Products (the Company)  of our  report
     dated  November 23,  1998  (December  23,  1998  as  to  the  second
     paragraph of  Note 11), appearing in this Annual Report on Form 10-K
     of the Company for the year ended September 30, 1998.

          Our  audits of  the  financial statements  referred  to in  our
     aforementioned   report  also   included  the   financial  statement
     schedules of the Company which are included in this Annual Report on
     Form   10-K.     These   financial  statement   schedules  are   the
     responsibility of  the Company's management.   Our responsibility is
     to express  an opinion based  on our audits.   In our  opinion, such
     financial statement  schedules, when  considered in relation  to the
     basic financial statements taken  as a whole, present fairly  in all
     material respects the information set forth therein.

                                                    Deloitte & Touche LLP
                                                     Salt Lake City, Utah
                                                        December 29, 1998




 






















                                      37 <PAGE>
     SUPPLEMENTAL SCHEDULE II
     BALLARD MEDICAL PRODUCTS
     VALUATION ACCOUNTS
     FOR THE THREE YEARS IN THE PERIOD 
     ENDED SEPTEMBER 30, 1998

                       BALANCE AT    ADDITION     WRITE-OFFS  BALANCE AT
                        BEGINNING          TO            AND      END OF
                          OF YEAR   ALLOWANCE     DEDUCTIONS        YEAR

      ALLOWANCE FOR
      DOUBTFUL
      ACCOUNTS:

           1998          $858,000  $1,845,000   $(1,738,000)    $965,000

           1997          $192,000  $1,226,000     $(560,000)    $858,000

           1996          $125,000     $67,000           None    $192,000

      ALLOWANCE FOR
      SALES RETURNS
      AND REBATES:

           1998        $1,660,000        None           None  $1,660,000

           1997          $805,000    $965,000     ($110,000)  $1,660,000

           1996          $500,000    $305,000           None    $805,000

      ALLOWANCE FOR
      INVENTORY
      OBSOLESCENCE:

           1998        $1,116,948       $None     $(366,948)    $750,000

           1997          $652,917    $601,860     $(137,829)  $1,116,948

           1996          $130,453    $522,464           None    $652,917
















                                      38 <PAGE>
                           BALLARD MEDICAL PRODUCTS

                               Index to Exhibits

       EXHIBIT
       NO.        EXHIBIT DESCRIPTION   SEQUENTIALLY NUMBERED PAGE

       3.1        Restated Certificate  Incorporated herein by
                  of Incorporation,     reference to Exhibit 3.1 to
                  dated June 18, 1987   Form 10-K, filed December
                                        29, 1989.

       3.2        July 10, 1991         Incorporated herein by
                  Articles of           reference to Exhibit 4.2 to
                  Amendment to          the Registration Statement
                  Articles of           on Form S-3, filed November
                  Incorporation         13, 1991, Registration No.
                                        33-43910.

       3.3        September 20, 1993    Incorporated herein by
                  Articles of           reference to Exhibit 3.3 to
                  Amendment to          Form 10-K filed December
                  Articles of           16, 1993.
                  Incorporation

       3.4        Amended and Restated  Incorporated herein by
                  Bylaws, dated         reference to Exhibit 3.3 to
                  October 12, 1992      Form 10-K, filed December
                                        24, 1992.

       4.1        See Exhibits 3.1,
                  3.2, 3.3, 3.4, 10.1,
                  10.2, 10.3, 10.4,
                  10.5, 10.6, 10.7,
                  10.8 and 10.9

       9          None

      10.1        Material Contract:    Incorporated herein by
                  1988 Incentive Stock  reference to the
                  Option Plan           Registration Statement on
                                        Form S-8, filed November
                                        18, 1988, Registration No.
                                        33-25628.





                                     39 <PAGE>
      EXHIBIT
      NO.         EXHIBIT DESCRIPTION   SEQUENTIALLY NUMBERED PAGE

      10.2        Material Contract:    Incorporated herein by
                  1990 Incentive Stock  reference to the
                  Option Plan           Registration Statement on
                                        Form S-8, filed September
                                        17, 1990, Registration No.
                                        33-36851.

      10.3        Material Contract:    Incorporated herein by
                  1991 Incentive Stock  reference to Exhibit 4.2 to
                  Option Plan           Registration Statement on
                                        Form S-8, filed July 10,
                                        1991, Registration No. 33-
                                        41720.

      10.4        Material Contract:    Incorporated herein by
                  1992 Incentive Stock  reference to Exhibit 4.3 to
                  Option Plan           Registration Statement on
                                        Form S-8, filed with Post-
                                        Effective Amendment No. 1
                                        on April 9, 1993,
                                        Registration No. 33-56302.

      10.5        Material Contract:    Incorporated herein by
                  Amended and Restated  reference to Exhibit 4.5 to
                  1993 Incentive Stock  Registration Statement on
                  Option Plan           Form S-8, filed December
                                        20, 1993, Registration No.
                                        33-73194.

      10.6        Material Contract:    Incorporated herein by
                  1994 Incentive Stock  reference to Exhibit 10.8
                  Option Plan           to Form 10-K filed December
                                        15, 1994. 

      10.7        Material Contract:    Incorporated herein by
                  1995 Incentive Stock  reference to Exhibit 10.9
                  Option Plan           to Form 10-K filed December 
                                        8, 1995. 

      10.8        Material Contract:    Incorporated herein by
                  1996 Incentive Stock  reference to Exhibit 10.10
                  Option Plan           to Form 10-K filed December
                                        9, 1996.

      10.9        Material Contract:    Incorporated herein by
                  1997 Incentive Stock  reference to Exhibit 10.9
                  Option Plan           to Form 10-K filed December
                                        15, 1997.


                                     40 <PAGE>
      EXHIBIT
      NO.         EXHIBIT DESCRIPTION   SEQUENTIALLY NUMBERED PAGE

      10.10       Material Contract:    Incorporated herein by
                  Agreement of          reference to Exhibit 19 to
                  Settlement dated      Form 10-Q, filed May 15,
                  March 1, 1990, with   1990.
                  Smiths Industries
                  Medical Systems,
                  Inc. and Smiths
                  Industries PLC

      10.11       Material Contract:    Incorporated herein by
                  Agreement dated       reference to Exhibit 10.21
                  effective October 1,  to Form 10-K, filed
                  1993 between Ballard  December 16, 1993.
                  Medical Products and
                  H. Earl Wright and
                  The Wright Foamer
                  Co.

      10.12       Material Contract:    Incorporated herein by
                  Stock Purchase        reference to Exhibit 99.1
                  Agreement (with       to Form 8-K, filed December
                  various "Sellers"     23, 1996.
                  named therein)

      11          Computation of        p. 43
                  Income Per Common
                  Share and Common
                  Equivalent Share

      12          Not Applicable

      13          Ballard Medical       p. 44
                  Products 1998 Annual
                  Report for the year
                  ended September 30,
                  1998

      16          Not Applicable

      18          Not Applicable

      21          Subsidiaries of       p. 103
                  Ballard Medical
                  Products

      22          Not Applicable

      24          Not Applicable

      25          Not Applicable

      26          Not Applicable

                                      41 <PAGE>
      EXHIBIT
      NO.         EXHIBIT DESCRIPTION   SEQUENTIALLY NUMBERED PAGE

      27          Financial Data        p. 105
                  Schedule

      28          Not Applicable
















































                                      42 <PAGE>
 
                                  EXHIBIT 11

     BALLARD MEDICAL PRODUCTS

     COMPUTATION OF INCOME PER COMMON SHARE 
     AND COMMON SHARE - ASSUMING DILUTION
     FOR THE THREE YEARS IN THE PERIOD ENDED SEPTEMBER 30, 1998

                                   Period                            Income
                     Cumulative      Out-     Average         Net       Per
                         Shares  Standing      Shares       Income    Share

       Income
       per 
       common
       share -
       basic:
       1998      11,047,301,335       365  30,266,579  $32,013,520    $1.06

       1997      10,738,074,430       365  29,419,382   31,262,739    $1.06

       1996      10,258,531,225       365  28,105,565   25,909,521    $0.92

       Income
       per 
       common
       share -
       diluted:

       1998      11,260,031,000       365  30,849,400  $32,013,520    $1.04

       1997      11,056,029,215       365  30,290,491   31,262,739    $1.03

       1996      10,816,966,625       365  29,635,525   25,909,521     0.87




















                                      43 <PAGE>
 
                                  EXHIBIT 13

                           BALLARD MEDICAL PRODUCTS
                                 ANNUAL REPORT
                                     1998
                               CORPORATE PROFILE

          Ballard Medical Products is an innovative medical technology
     company, offering a range of specialized medical devices.  Our
     products are sold in 62 countries, and the customers purchasing our
     products include more than 12,500 hospitals and other medical care
     facilities worldwide.

     Since going public in 1983, the Company has enjoyed a very
     successful history of growth, as shown in the following chart:

                            Consolidated Net Sales
                                   (Approx.)
                            ______________________

                         1983                $100,000
                         1984                 300,000
                         1885               2,200,000
                         1986               5,400,000
                         1987               9,600,000
                         1988              15,100,000
                         1989              20,600,000
                         1990              29,100,000
                         1991              38,300,000
                         1992              49,800,000
                         1993              69,600,000
                         1994              71,400,000   
                         1995              90,000,000
                         1996             109,900,000
                         1997             132,700,000
                         1998             150,100,000

          The chart below shows our net income growth over the last five
     years:
                                  Net Income
                                   (Approx.)
                                  __________

                         1994             $17,300,000
                         1995              21,900,000
                         1996              25,900,000
                         1997              31,300,000
                         1998              32,000,000

          As used in this report, the term the "Company" refers to
     Ballard Medical Products ("Ballard") and its subsidiaries:  Medical
     Innovations Corporation ("MIC"), Ballard Real Estate Holdings, Inc.
     ("BREH"), Ballard Purchase Corporation ("BPC"), Ballard
     International, Inc. ("BI"), Mist Assist, Inc. ("Mist Assist"),
     (Ballard Medical Products (Canada) Inc. dba Preferred Medical
     Products ("PMP"), Plastic Engineered Products Company ("PEPCO"),

                                      44 <PAGE>
     Cardiotronics Systems, Inc. ("Cardiotronics"), and Tri-Med
     Specialties, Inc. ("Tri-Med").

          At September 30, 1998, the Company employed 1,398 people in 10
     countries.  

          The Company's common stock is traded on the New York Stock
     Exchange under the symbol BMP.


                                1998 IN REVIEW

          Fiscal year 1998 was another record setting year for the
     Company.  The table below compares highlights of fiscal year 1998 to
     1997 (see also "Consolidated Statements of Operations" and
     "Consolidated Balance Sheets" herein):

                                                1998           1997
                                                ____           ____

          Net Sales                     $150,062,671   $132,743,037

          Net Income                     $32,013,520    $31,262,739

          Earnings Per Share                   $1.04          $1.03

          International Sales            $18,221,425    $12,289,986

          Cash and Cash Equivalents      $10,231,524    $21,624,043

          Investments                    $60,327,337    $26,628,312

          Total Current Assets          $134,585,612   $100,936,673

          Total Assets                  $222,688,188   $194,192,382

          Current Liabilities             $7,240,883    $12,950,419 

          Long Term Debt                          $0             $0

          Stockholders' Equity          $215,447,305   $181,241,963

          Return on Equity                     14.9%          17.2%

          Return on Assets                     14.4%          16.1%

          Current Ratio                    18.6 to 1       7.8 to 1

          We continue to be very pleased with these results, particularly
     in view of the increasing pricing and competitive pressures on many
     of our products.  We believe that in spite of world economic
     problems in general, international markets still offer the Company
     important growth opportunities.

                                      45 <PAGE>
          For the first time in the Company's history, net sales to
     unaffiliated customers outside of the U.S.A. exceeded ten percent
     (10%) of the Company's consolidated net sales.  See "Notes to
     Consolidated Financial Statements."

          In February, 1998, the Company acquired Tri-Med with facilities
     in Kansas City, Kansas; Charlottesville, Virginia; and Perth,
     Australia.  Tri-Med is a manufacturer of helicobacter pylori (H.
     pylori) diagnostic products.  Found in more than 60% of Americans
     aged 60 and over, H. pylori has been linked to peptic ulcer disease
     and may also be a causative factor in stomach cancer.  The
     international market for this test is even greater, especially in
     third world countries where the incidence of H. pylori is
     significant.  The extremely pervasive H. pylori bacterium lives only
     in the stomach lining, usually producing an inflammation and
     weakening the natural protection against stomach acid.  This may
     then cause an ulcer; however, not all patients with H. pylori
     infection progress to ulcer disease.  If an ulcer is treated only
     with medication to reduce the stomach acid, it may recur if H.
     pylori is present.  However, if the ulcer is treated also with an
     antibiotic to eradicate the H. pylori, then the ulcer can be
     permanently cured.

          Although a number of tests are available for the diagnosis of
     H. pylori infection, they are often invasive, expensive, time-
     consuming, or only indicate exposure to H. pylori rather than
     detecting active infection.  Tri-Med's products are used to diagnose
     this infection.  See "Tri-Med Products."

          This acquisition opens a new frontier of opportunity within the
     call pattern of the Company's Interventional Division sales force
     and gives us a greater opportunity to succeed in international
     markets.

          In March, 1998, we completed the monumental task of relocating
     the duplicate manufacturing operations of Cardiotronics from
     Carlsbad, California to our Pocatello, Idaho facility.  In
     September, 1998 we also relocated the Kansas City operations of Tri-
     Med to Draper, Utah, so as to eliminate that duplicate facility.  We
     believe the consolidation of operations that the Company has
     accomplished during the past two years will help the Company to
     reduce manufacturing costs through increased efficiencies.  


                                   PRODUCTS

          The Company's strong commitment to acquisitions, research and
     development, and product enhancements has enabled the Company to
     continue to succeed in certain domestic markets, such as the closed
     suctioning market, the chronic enteral feeding market, the
     endoscopic products market, the heart stimulation electrodes market,
     and now in the H. pylori diagnosis market.  The Company's TRACH CARE
     closed suction catheter and MIC enteral feeding and endoscopic
     products families are responsible for more than ten percent (10%) of
     the Company's consolidated net sales, as shown in the table below:

                                      46 <PAGE>
                    Net Sales of Principal Product Families
                    _______________________________________

                                      1998           1997           1996

      TRACH CARE               $59,896,555    $57,381,810    $52,782,574
      (% of total net sales)       (39.9%)        (43.2%)        (48.0%)

      MIC                      $39,140,249    $32,288,498    $24,235,195
      (% of total net sales)       (26.1%)        (24.3%)        (22.1%)

       The Company's products are described below (for definitions of
     various technical and medical terms, see "Glossary of Technical and
     Medical Terms").

     TRI-MED PRODUCTS

          *    The principal products of Tri-Med are: (1) CLOtest, a
     rapid urease test for the detection of H. pylori, that can be used
     in conjunction with Ballard s Thermal Option biopsy forceps, and (2)
     PYtest, a breath test for the detection of H. pylori.  CLOtest has
     become the  gold standard  for the detection of urease activity. 
     The PYtest is a Carbon 14 noninvasive urea breath test, released by
     Tri-Med in the spring of 1997.

          Both the CLOtest and the PYtest products are inventions of
     Barry J. Marshall, M.D., who was featured on a segment of ABC s
      20/20."  Dr. Marshall first established a causal link between the
     H. pylori bacterium and peptic ulcer disease in the 1980s.  Both the
     CLOtest and PYtest products are covered by patents held by Dr.
     Marshall and licensed to the Company.

     ORCA

          *    ORCA is our newest oral care product which incorporates
     all currently used tools in a single user friendly platform.  ORCA
     incorporates suction swabs, suction catheters, Yankhauer suction and
     a soft toothbrush all capable of simultaneous vacuum and refreshing
     minted rinse to finish each procedure.  ORCA was introduced by
     Ballard in September, 1998.

     CARDIOTRONICS PRODUCTS

          *    The Cardiotronics products of Ballard consist of a full
     line of stimulation electrodes and cables and other interface
     systems used for external defibrillation and pacing.  Cardiotronics
     is the only manufacturer of multi-function stimulation electrodes
     with pacing, defibrillation and continuous electrocardiogram ("ECG")
     monitoring capabilities all in one electrode.  Cardiotronics
     pioneered the development of stimulation electrode products designed
     for specific procedures and settings including:  (a) multi-function
     electrodes for the emergency room and critical care setting, (b)
     radiolucent products for the catheterization lab and (c) sterile
     electrodes for the operating room.  Cardiotronics is the only
     company that has developed a patented hydropolymer gel specifically
     designed for stimulation electrode therapies.  This unique

                                      47 <PAGE>
     hydropolymer gel is the lowest impedance gel available on the
     market.

          *    Cardiotronics also offers a portfolio of cables and other
     interface systems which allow the hospital customer to standardize
     using Cardiotronics stimulation electrodes.

     TRACH CARE PRODUCTS

          *    The TRACH CARE closed endotracheal suction catheter system
     continues to be the Company's flagship product in the intensive
     care/critical care arena.  It enables patients with endotracheal
     tubes, on ventilators, to have their airways suctioned while
     maintaining ventilator support, thus improving patient care. 
     Further, this product reduces infection risks due to its "closed"
     design, keeping both users and the environment from contaminating
     the suction catheter and from being contaminated.

          The TRACH CARE system is available in sizes, from adult to
     neonatal, as well as in several variations such as Wet Pak and
     Double Lumen.  This family of products also includes a line of
     accessories used to complement TRACH CARE such as Metered Dose
     Inhaler adapters, BALLARD UNIT DOSE, Start Kit, etc.  These
     accessories are designed to allow the TRACH CARE catheter to be
     used, among other things, as a drug delivery system or to adapt it
     to specific patient needs.

          *    The Neonatal "Y" TRACH CARE catheter is an improved
     suction catheter, engineered for use on sophisticated neonatal
     ventilators.  It provides a side stream catheter approach, which not
     only gives greater patient flexibility, but also couples closed
     suction with high frequency oscillators, high frequency jet
     ventilators, and volume and physiologic monitors.  

          *    The TRACH CARE Double Swivel Elbow is a calibrated closed
     suction catheter which provides more patient comfort and
     flexibility, and gives the clinician a better "feel" for the
     catheter during the suction procedure.  

          *    The SAFETY DRAIN closed drain provides clinicians with a
     way to empty the ventilator circuit of condensate without opening
     it.  Users are thereby able to complete the closed system started
     with the TRACH CARE catheter, thus providing additional safety for
     both clinician and patient.

          *    Heat and Moisture Exchangers (HMEs) have been offered by
     the Company since December, 1993.  The HMEs (manufactured for
     Ballard by Datex-Engstrom AB) provide a means of humidifying the
     patient's airways during ventilation and are sold with our TRACH
     CARE catheter.  The Company is Datex-Engstrom's exclusive HME
     distributor in the United States and Canada.

     MIC PRODUCTS

          The chronic enteral feeding market is experiencing rapid growth
     due to the aging of the population.  There is also an emerging
     physician consensus that early post-operative enteral support
     benefits the high risk surgical patient by decreasing septic
                                     48 <PAGE>
     morbidity, and improving wound healing and recovery time.  MIC's
     full range of specialty feeding tubes places the Company firmly in a
     position to take advantage of the growing enteral feeding market.  

          *    The MIC Gastrostomy Tube (G-tube) is the first tube
     specifically designed for the gastrostomy procedure.  The MIC
     Gastrostomy Tube can be placed by surgeons, gastro-enterologists,
     interventional radiologists and replaced by qualified registered
     nurses at bedside in the hospital, and in home care and alternate
     care settings.  The unique design of the MIC Gastrostomy Tube
     becomes a problem solver for the physician and other care givers. 
     The MIC Gastrostomy Tube virtually eliminates inadvertent tube
     dislodgement, controls gastric leakage, and is provided in several
     sizes and versions, to accommodate a wide range of patient needs.

          *    The successful MIC-KEY Skin Level Gastrostomy Feeding Kit
     continues to be the gastrostomy tube of choice for the pediatric
     patient, because of its unique aesthetic appearance and its ease of
     insertion and removal.

          *    A pediatric version of the MIC Transgastric Jejunal Tube
     allows for simultaneous gastric decompression and jejunal feeding. 
     The prior, adult version has shown strong growth in the adult arena.

          *    The MIC-PEG provides the gastroenterologist, surgical
     endoscopist, and interventional radiologist, with the ability to
     initially place a gastrostomy tube by minimally invasive technique. 
     The PEG is later replaced by a G-tube or MIC-KEY skin level
     gastrostomy tube for long-term nutrition.

          *    The CB-X1/X2 disposable cleaning brush is a versatile
     device that offers maximum channel scrubbing power and the ability
     to scrub endoscope components.

          *    The patented THERMAL OPTION disposable biopsy forceps
     features a scalpel-edged cutting surface enabling the endoscopist to
     obtain precision-cut tissue samples as well as providing "on demand"
     coagulating capability for greater patient safety and cost
     efficiency.

          *    The disposable CAN-OPT needle-knife papillotome is an
     endoscopic device used to open the ampulla in order to facilitate
     entry into the bile duct for the detection of gallstones.

          *    The disposable CAN-OPT dual-lumen ERCP system consists of
     a dual lumen catheter providing a completely separate channel for
     the contrast medium and the guidewire.  This allows simultaneous
     injection of the contrast medium, while advancing the guidewire in
     the biliary tree following cannulation for the detection of
     gallstones.

          *    Our disposable cytology brush incorporates a unique
     barium-loaded cap, which provides radiographic visualization and
     maximum cell retention while minimizing cell sample contamination.

          *    The precurved TLC and DLC ERCP catheters allow for smooth,
     atraumatic cannulation of the biliary tree.  The TLC features a
     triple lumen catheter configuration with separate wire guide and
                                      49 <PAGE>
     contract media injection channels plus a separate third inaccessible
     channel with six radiopaque markers spaced 2 cm apart, which may be
     used for the accurate measurement of biliary/pancreatic strictures.

          *    The TAXI guidewire features a Teflon-sheathed nitonol core
     wire with silicone coating providing enhanced flexibility and kink
     resistance, allowing access to the biliary tree.  The highly pliable
     radiopaque tip provides the endoscopist with radiographic
     visualization while the fully insulated wire provides for
     sphincterotomy with wire guide in place.

          *    The unique, precurved "wedge tip" multi-lumen papillotomes
     provide unparalleled orientation combined with ease of cannulation
     for greater procedural efficiency during ERCP.

          *    The Keen Edge Disposable Biopsy Forcep is an endoscopic
     device used to obtain tissue samples from the gastrointestinal
     system.  This differs from our THERMAL OPTION coagulating/biopsy
     forcep in that it is noncoagulating and allows us to provide a low-
     end competitive product without sacrificing margins on the THERMAL
     OPTION forceps.

          *    The Disposable Injection/Washing-Injection Needle is an
     endoscopic accessory used to deliver fluid to specific sites in the
     gastrointestinal system.  Particular procedures are:

               (a)  Sclerotherapy - The injection of medication into the
     varix to reduce or eliminate potential esophageal bleeds; especially
     prevalent in alcoholics.

               (b)  Lesion Injection - Direct injection of a medication
     into a lesion to promote healing within the GI tract.

               (c)  Hemostasis - Direct injection of a medication into a
     lesion to promote healing within the GI tract.

               (d)  Tattooing - Injection of dye to specific sites prior
     to a surgical resection of the GI tract.

               (e)  Saline Assisted Polypectomy - Injection of saline
     into base of polyp to raise polyp off mucosal floor - reduces chance
     of bowel perforation.

          *    The Disposable Irrigation Catheter is an endoscopic
     accessory that delivers a concentrated stream of fluid to specific
     sites, usually employed to remove adhesions or residual fecal
     material from the colon to enhance visual examination of underlying
     mucosa.

          *    The ENDO-GUARD Disposable Bite Block is an endoscopic
     accessory placed between a patient's teeth to protect physician's
     fingers, patient's teeth and endoscope, during gastroscopies, ERCP
     procedures, or mechanical esophageal dilations.

     FOAM CARE PRODUCTS

          FOAM CARE foamers and solutions are designed for use throughout
     the hospital and are the Company's principal product in the
                                     50 <PAGE>
     operating room.  FOAM CARE is one of our franchise products.  Its
     foamers utilize a unique, patented, foaming device that turns the
     soap solution into rich foam lather.

          FOAM CARE products provide users with cost savings when
     compared to common liquid soaps.  FOAM CARE products are gentle on
     the hands and, in the operating room, are complemented by our DOUBLE
     SCRUB brush, a soft-on-the-hands surgical scrub brush.

     PMP PRODUCTS

          The Company offers a variety of pain management products,
     described below:

          *    Single Shot Epidural Trays - Trays specifically designed
     for steroid injections in chronic pain management clinics. 
     Specialty needles, and custom packaging reduce waste and lower
     costs.

          *    Specialty Needles - Allow the physician to utilize the
     smallest needles feasible in order to minimize pain and
     complications such as spinal headache.

          *    Pediatric Trays and Mini-Kits - Allow the physician to
     select special products specifically designed for the pediatric
     population.

          *    Epidural Catheters, Trays and Mini-Kits - Provide a choice
     of configuration to insure the most cost effective choices for the
     physician based on patient needs.

     OTHER PRODUCTS

          *    An array of sponge-tipped, oral swabs (DENTASWAB) which
     allow for routine oral care in patients admitted to oncology,
     critical care, surgery, and alternate care sites.  The swabs are
     used to clean and refreshen the mouth as well as to stimulate the
     gums, oral mucosa and tongue.  Proper oral care is a cornerstone to
     preventing nosocomial pneumonia.

          *    The EASI-LAV gastric lavage system is a closed gastric
     lavage system.  It is used to clean out the stomach in drug overdose
     patients or those with gastric bleeding.  It makes the lavage
     process cleaner, faster and more effective while providing
     additional clinician protection.  This product is used in the
     hospital emergency room and gastrointestinal labs.

          *    The CHAR-FLO activated charcoal system is a unique
     charcoal delivery system designed for use with our EASI-LAV system
     in over-dose patients.  It enables faster, more accurate and
     environmentally clean charcoal delivery.

          *    The BAL Cath catheter product is designed to obtain
     bronchoalveolar lavage samples for use in the diagnosis of
     nosocomial and opportunistic respiratory infections.  Because it is
     used without a bronchoscope, it is much more cost effective for the
     hospital.
                                      51 <PAGE>
          *    The MIST ASSIST breathing exerciser (inspiratory flow
     control device), which combines inspiratory breathing exercises,
     medication delivery via inhalers or nebulizers, and expiratory
     breathing exercises.  This combination of therapies into one device
     can provide significant cost savings to hospitals.


                             CAPITAL EXPENDITURES

          In June, 1998, the Company completed construction of an office
     complex addition (approximately 14,500 square feet) at its Draper,
     Utah facility, at a total construction cost of approximately
     $1,300,000.  Various other remodelling projects (none of which were
     individually material) were also completed during the fiscal year in
     order to prepare portions of the Pocatello and Draper facilities for
     acquired manufacturing operations to be relocated.

          The Company continued to focus during the year on upgrading and
     improving its manufacturing operations, including the acquisition
     and assembly of additional automation assembly equipment, the
     purchase of additional machines, the purchase and construction of
     additional molds, etc.


                                 COMMON STOCK

     TRADING

          The Company's common stock is traded on the New York Stock
     Exchange ("NYSE").  The following table sets forth, for the
     respective periods indicated, the high and low sales prices for the
     Company's common stock, as reported and summarized by the NYSE for
     fiscal years 1998 and 1997:
                                   FISCAL YEAR 1998   FISCAL YEAR 1997

           QUARTER                    HIGH      LOW      HIGH       LOW

           First Quarter            24 5/8  21 7/16    19 5/8   16  1/4

           Second Quarter           27 3/8  22         21 1/4   17  7/8

           Third Quarter            27 3/8  17  3/16   21 1/4   18  1/8

           Fourth Quarter           20 7/8  17 15/16   25       19 9/16

          On December 10, 1998, the closing quotation for the Company's
     Common Stock, as reported by the WALL STREET JOURNAL, was 23 9/16
     high and 22 13/16 low.  As of December 10, 1998, there were
     approximately 1,044 holders of the Company's common stock (based
     upon the number of record holders and including individual
     participants in security position listings).  

     DIVIDENDS

          The Company has paid the following cash dividends during the
     two most recent fiscal years:
                                      52 <PAGE>
                                                         DIVIDEND 
           RECORD DATE             PAYMENT DATE          PER SHARE

           December 16, 1996       January 3, 1997          $.05

           June 16, 1997           July 3, 1997             $.05

           December 16, 1997       January 5, 1998          $.05

           June 16, 1998           July 3, 1998             $.05

          The Company currently expects to continue to pay comparable
     dividends in the future.  However, there can be no assurance of
     this.

                             FINANCIAL HIGHLIGHTS

     SELECTED CONSOLIDATED FINANCIAL DATA (1)(2)



                    1998          1997           1996           1995        1994

   Net
   Sales    $150,062,671  $132,743,037   $109,881,342    $90,041,201 $71,421,894
   Other
   Income
   Net        $5,878,172    $5,539,812     $5,309,380     $4,101,037  $3,518,832

   Net
   Income    $32,013,520   $31,262,739    $25,909,521    $21,939,876 $17,254,823

   Net
   Income
   Per
   Common
   Share-
   Diluted         $1.04         $1.03          $0.87          $0.75       $0.61

   Total
   Assets   $222,688,188  $194,192,382   $144,164,584   $115,216,589 $94,361,714

   Cash
   Divi-
   dends
   Declared 
   Per
   Share (4)        $.11          $.11           $.11           $.10        $.07

                                      53 <PAGE>
          (1)  The consolidated financial data shown above includes the
     accounts of Ballard and its wholly-owned subsidiaries, MIC, BREH,
     BI, PMP, BPC, Mist Assist, PEPCO, Cardiotronics and Tri-Med.  The
     accounts of Mist Assist, PMP and Cardiotronics are included as of
     July 19, 1996, August 28, 1996, and December 10, 1996, respectively,
     which reflect their respective acquisition dates.

          (2)  The combination of Ballard with PEPCO and Tri-Med were
     accounted for as poolings of interests.  The selected consolidated
     financial data have been prepared as if Ballard, PEPCO, and Tri-Med
     had been combined for all periods presented.

          (3)  Results include the benefit from a cumulative effect of a
     change in accounting for income taxes in fiscal year 1994.

          (4)  Includes cash dividends paid by PEPCO and Tri-Med.

     SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (1)(2)
     (UNAUDITED)

      FISCAL YEAR 1998
      QUARTERS ENDED:       9/30/98      6/30/98      3/31/98     12/31/97

      Net Sales         $38,995,250  $38,249,804  $36,135,728  $36,681,889

      Gross Margin       24,971,836   24,403,387   21,647,920   23,481,540

      Net Income          9,113,694    8,845,647    5,543,174    8,511,005

      Net Income Per
      Common Share -
      Diluted                   .30          .29          .18          .28

      FISCAL YEAR 1997
      QUARTERS ENDED:       9/30/97      6/30/97      3/31/97     12/31/96

      Net Sales         $36,111,363  $33,961,010  $32,517,823  $30,152,841

      Gross Margin       23,617,232   21,684,191   21,117,431   19,296,755

      Net Income          8,574,114    7,777,121    7,826,526    7,084,978

      Net Income Per 
      Common Share -
      Diluted                   .28          .26          .26          .24

          (1)  See additional analysis of net sales, margins, and net
     income in "Management's Discussion and Analysis of Financial
     Condition and Results of Operations."

          (2)  See footnote explanations to "Selected Consolidated
     Financial Data."




                                      54 <PAGE>
                         INDEPENDENT AUDITORS' REPORT

     To the Board of Directors and Stockholders of Ballard Medical
     Products:

          We have audited the accompanying consolidated balance sheets of
     Ballard Medical Products and subsidiaries as of September 30, 1998
     and 1997, and the related consolidated statements of operations,
     stockholders' equity, and cash flows for each of the three years in
     the period ended September 30, 1998.  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.  The consolidated financial statements give retroactive
     effect to the merger of Ballard Medical Products and Tri-Med
     Specialties, Inc., which has been accounted for as a pooling of
     interests as described in Note 8 to the consolidated financial
     statements.  We did not audit the balance sheets of Tri-Med
     Specialties, Inc. as of September 30, 1997, or the related
     statements of operations, stockholders' equity, and cash flows of
     Tri-Med Specialties, Inc. for the year ended September 30, 1997,
     which statements reflect total assets of $7,743,715 as of September
     30, 1997, and total revenues of $7,435,859 for the year ended
     September 30, 1997.  Those statements were audited by other auditors
     whose report has been furnished to us, and our opinion, insofar as
     it relates to the amounts included for Tri-Med Specialties, Inc. for
     1997, is based solely on the report of such other auditors.

          We conducted our audits in accordance with generally accepted
     auditing standards.  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 and the report
     of the other auditors provide a reasonable basis for our opinion.  

          In our opinion, based on our audits and the report of the other
     auditors, the consolidated financial statements referred to above
     present fairly, in all material respects, the financial position of
     Ballard Medical Products and subsidiaries as of September 30, 1998
     and 1997, and the results of their operations and their cash flows
     for each of the three years in the period ended September 30, 1998
     in conformity with generally accepted accounting principles.

     Deloitte & Touche LLP
     Salt Lake City, Utah

     November 23, 1998
     (December 23, 1998
     as to paragraph 2 of Note 11)


                                      55 <PAGE>
 
     BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
     CONSOLIDATED BALANCE SHEETS
     SEPTEMBER 30, 1998 AND 1997
      ASSETS                                          1998           1997 

      CURRENT ASSETS:
      Cash and cash equivalents                $10,231,524    $21,624,043 

      Investments available for sale            60,327,337     26,628,312 

      Accounts receivable - trade
      (less allowance for doubtful
      accounts:  1998 - $965,000, 1997 -
      $858,000 and allowance
      for sales returns and
      rebates:  1998 and 1997 - $1,660,000)     31,184,303     26,380,031 

      Royalties receivable                         424,891        375,673 

      Note receivable                            3,973,920 

      Other receivables                          1,694,393        908,753 

      Inventories - net:
         Raw materials                           8,493,138     10,856,390 
         Work-in-process                         3,726,160      5,527,765 
         Finished goods                         11,034,393      4,507,579 

      Deferred income taxes                        628,611      2,233,042 

      Income tax refund receivable               2,481,210      1,830,946 

      Prepaid expenses                             385,732         64,139 
                                               ___________    ___________ 
                                                           
         Total current assets                  134,585,612    100,936,673 
                                               ___________    ___________ 
                                                           
      PROPERTY AND EQUIPMENT:
      Land                                         873,865        873,865 

      Buildings                                 31,355,161     28,922,203 

      Molds                                      5,703,400      4,891,734 

      Machinery and equipment                   14,989,207     11,097,145 

      Vehicles                                     913,876        785,440 

      Furniture and fixtures                     3,923,088      3,264,578 

      Leasehold improvements                        49,507        116,850 

      Construction in process                    4,415,848      4,142,563 
                                               ___________    ___________ 

         Total                                  62,223,952     54,094,378 
                                      56 <PAGE>
      ASSETS                                          1998           1997

      Less accumulated depreciation            (14,167,300)   (10,746,905)
                                               ___________    ___________ 

         Property and equipment - net           48,056,652     43,347,473 
                                               ___________    ___________ 

      INTANGIBLE ASSETS: 
      Cost in excess of fair value of net
      assets acquired (less accumulated
      amortization:  1998 - $7,484,173;
      1997 - $5,245,666)                        26,524,776     29,443,283 

      Patents and other
      intangibles (less accumulated
      amortization:  1998 - $4,738,961;         11,802,852     13,068,452 
      1997 - $2,980,386)                       ___________    ___________ 

          Total intangible assets               38,327,628     42,511,735 
                                               ___________    ___________ 

      DEFERRED INCOME TAXES                      1,712,389      2,139,902 
                                               ___________    ___________ 
      OTHER ASSETS                                   5,907      5,256,599 
                                               ___________    ___________ 

      TOTAL                                   $222,688,188   $194,192,382 
                                              ============    ============

      LIABILITIES AND STOCKHOLDERS' EQUITY            1998           1997 
      CURRENT LIABILITIES:

      Accounts payable                          $1,208,938     $3,216,908 

      Income taxes payable                       1,243,450 

      Contract payable                                          3,975,000 
      Line of credit                                            1,425,000 

      Accrued liabilities:
         Employee compensation                   3,608,774      3,438,849 
         Royalties                                 589,021        432,617 
         Other                                     590,700        462,045 
                                                __________     __________ 

         Total current liabilities               7,240,883     12,950,419 
                                                                          



                                      57 <PAGE>
      ASSETS                                          1998           1997

      COMMITMENTS AND CONTINGENT
      LIABILITIES (Notes 6, 7, and 9) 
      STOCKHOLDERS' EQUITY:  
      Common stock - $.10 par value;
      75,000,000 shares authorized;
      issued and outstanding:
      1998 - 30,423,733 shares;
      1997 - 30,062,733 shares                   3,042,373      3,006,273 

      Additional paid-in capital                61,158,851     54,942,666 

      Unrealized losses on investments
      available for sale                          (107,480)      (223,783)

      Retained earnings                        151,353,561    123,516,807 
                                               ___________    ___________ 

         Total stockholders' equity            215,447,305    181,241,963 
                                               ___________    ___________ 

      TOTAL                                   $222,688,188   $194,192,382 
                                               ===========    =========== 

     See notes to consolidated financial statements.



















                                      58 <PAGE>
 
     BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF OPERATIONS
     FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996

                                        1998            1997          1996

      NET SALES                 $150,062,671    $132,743,037  $109,881,342

      COST OF PRODUCTS SOLD       55,557,988      47,027,428    38,048,879
                                 ___________     ___________   ___________

      GROSS MARGIN                94,504,683      85,715,609    71,832,463
                                 ___________     ___________   ___________

      OPERATING EXPENSES:
      Selling, general and 
      administrative              43,092,315      37,503,070    31,593,508

      Research and development     2,866,929       2,856,409     3,184,151

      Royalties                    1,956,033       1,849,203     1,687,542
                                 ___________     ___________   ___________

         Total operating
         expenses                 47,915,277      42,208,682    36,465,201
                                 ___________     ___________   ___________

      OPERATING INCOME            46,589,406      43,506,927    35,367,262
                                 ___________     ___________   ___________
      OTHER INCOME:
      Interest income - net        2,609,864       2,129,276     1,917,925

      Royalty income               2,095,000       2,465,840     2,400,000

      Other - net                  1,173,308         944,696       991,455
                                 ___________     ___________   ___________

         Total other income -
         net                       5,878,172       5,539,812     5,309,380
                                 ___________     ___________   ___________
      INCOME BEFORE 
      INCOME TAXES                52,467,578      49,046,739    40,676,642

      INCOME TAX EXPENSE          20,454,058      17,784,000    14,767,121
                                 ____________    ___________   ___________

      NET INCOME                 $32,013,520     $31,262,739   $25,909,521
                                 ===========     ===========   ===========
      NET INCOME PER 
      COMMON SHARE:

      Basic                            $1.06           $1.06         $0.92
                                 ===========     ===========   ===========

                                      59 <PAGE>
   
                                        1998            1997          1996

      Diluted                          $1.04           $1.03         $0.87
                                 ===========     ===========   ===========

      COMMON SHARES:

      Basic                       30,266,579      29,419,382    28,105,565
                                 ===========     ===========   ===========

      Diluted                     30,849,400      30,290,491    29,635,525
                                 ===========     ===========   ===========

     See notes to consolidated financial statements.







































                                      60 <PAGE>
 
     BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
     FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996

                                                        Unrealized
                                                            Gains/
                                                       (Losses) on
                                                           Invest-
                                           Additional        ments
                      Common                  Paid-in    Available     Retained
                      Shares      Amount      Capital     for Sale     Earnings
                 ___________ ___________  ___________   __________ ____________

      BALANCE,
      OCTOBER 
      1, 1995    27,867,747  $2,786,775   $29,113,001   ($142,728) $78,708,313 
      Net
      income                                                        25,909,521 

      Cash
      dividends
      paid                                                          (3,030,140)

      Common                            
      stock                             
      issued 
      from
      exercise
      of stock
      options     1,252,309     125,230     9,689,509

      Acquisi-
      tion and
      retire-
      ment of 
      treasury
      stock        (350,000)    (35,000)                            (6,126,421)

















                                          61 <PAGE>
 
                                                        Unrealized
                                                            Gains/
                                                       (Losses) on
                                                           Invest-
                                           Additional        ments
                      Common                  Paid-in    Available     Retained
                      Shares      Amount      Capital     for Sale     Earnings
                 ___________ ___________  ___________   __________ ____________

      Tax
      benefit
      attribut-
      able to
      apprecia-
      tion in
      value of
      stock 
      issued 
      in con-
      junction 
      with the
      exercise
      and
      disqual-
      ifying
      disposi-
      tions of
      incentive
      stock 
      options                                  36,609
      Unre-
      alized
      losses on
      invest-
      ments 
      available
      for sale-
      net of
      tax                                                 (13,836)
                 ___________ ___________   __________  ___________ ____________

      BALANCE,
      SEPTEMBER
      30,1996    28,770,056   2,877,005    38,839,119    (156,564)  95,461,273 

      Net
      income                                                        31,262,739 

      Cash
      dividends
      paid                                                          (3,207,205)



                                          62 <PAGE>
 
                                                        Unrealized
                                                            Gains/
                                                       (Losses) on
                                                           Invest-
                                           Additional        ments
                      Common                  Paid-in    Available     Retained
                      Shares      Amount      Capital     for Sale     Earnings
                 ___________ ___________  ___________   __________ ____________

      Common
      stock
      issued
      from
      exercise
      of stock
      options     1,292,677     129,268   11,129,231 

      Tax
      benefit
      attribut-
      able to
      apprecia-
      tion in
      value of
      stock
      issued 
      in con-
      junction
      with the
      exercise
      and
      disqual-
      ifying
      disposi-
      tions of
      incentive
      stock
      options                              4,974,316 

      Unre-
      alized
      losses on
      invest-
      ments 
      available
      for sale-
      net of
      tax                                                 (67,219)
                 ___________ ___________  ___________   __________ ____________

      BALANCE,
      SEPTEM-
      BER 30,
      1997       30,062,733   3,006,273    54,942,666    (223,783) 123,516,807 

                                          63 <PAGE>
 
                                                        Unrealized
                                                            Gains/
                                                       (Losses) on
                                                           Invest-
                                           Additional        ments
                      Common                  Paid-in    Available     Retained
                      Shares      Amount      Capital     for Sale     Earnings
                 ___________ ___________  ___________   __________ ____________

      Net
      income                                                        32,013,520 

      Cash
      dividends
      paid                                                          (3,323,594)

      Common
      stock
      issued
      from
      exercise
      of stock
      options       398,500     39,850      4,277,664

      Acquisi-
      tion and
      retire-
      ment of
      treasury
      stock         (37,500)    (3,750)                               (853,172)

      Tax
      benefit
      attribut-
      able to
      apprecia-
      tion in
      value of
      stock
      issued
      in con-
      junction
      with the
      exercise
      and
      disqual-
      ifying
      disposi-
      tions of
      incentive
      stock
      options                               1,938,521

                                          64 <PAGE>
 
                                                        Unrealized
                                                            Gains/
                                                       (Losses) on
                                                           Invest-
                                           Additional        ments
                      Common                  Paid-in    Available     Retained
                      Shares      Amount      Capital     for Sale     Earnings
                 ___________ ___________  ___________   __________ ____________

      Unre-
      alized
      gains on
      invest-
      ments
      available
      for sale-
      net of
      tax                                                 116,303 
                 _________   __________   ___________   __________ ____________
      BALANCE,
      SEPTEM-
      BER 30,
      1998       30,423,733 $3,042,373    $61,158,851   $(107,480) $151,353,561
                 ========== ==========    ===========   ========== ============


     See notes to consolidated financial statements.



























                                          65 <PAGE>
 
     BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF CASH FLOWS
     FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996

                                      1998              1997               1996
      CASH FLOWS FROM
      OPERATING
      ACTIVITIES:
      Net income              $32,013,520       $31,262,739        $25,909,521 

      Adjustments to
      reconcile net
      income to net
      cash provided by
      operating
      activities:

      Depreciation and
      amortization              8,371,983         7,002,801          3,947,487 

      Gain on disposal
      of property                 (76,423)       (6,246,680)          (446,320)

      Gain on sale of 
      Neuro investment         (1,135,813)

      Write-down of 
      Neuro investment                            4,900,000 

      Write-down of
      intangible assets         1,019,610 

      Tax benefit from
      disqualifying
      dispositions of
      incentive stock
      options                   1,938,521         4,974,316             39,609 

      Provision for
      losses, sales
      returns, and
      rebates on
      accounts
      receivable - trade        1,845,000         2,191,000            372,000 

      Deferred income
      taxes                     2,031,944          (373,168)           442,122 

      Changes in
      operating assets
      and liabilities-
      net of effects
      from purchases of
      subsidiaries:
      Accounts
      receivable -
      trade                    (6,649,272)       (7,454,819)        (6,200,073)

                                      66 <PAGE>
                                     1998              1997               1996
      Royalties and
      other receivables          (112,488)          712,078           (106,639)

      Inventories              (2,361,957)       (5,829,249)        (1,382,921)

      Income tax refund
      receivable                 (650,264)        1,443,054         (1,170,430)

      Prepaid expenses           (321,593)          250,872            102,417 

      Accounts payable         (2,007,970)         (643,857)           936,506 

      Income taxes
      payable                   1,243,450 

      Accrued
      liabilities                 354,984          (754,491)           243,121 
                              ___________        ___________        __________ 
         Net cash
         provided by
         operating
         activities            35,503,232        31,434,596         22,683,400 
                              ___________        __________        ___________ 
      CASH FLOWS FROM
      INVESTING ACTIVITIES:

      Capital
      expenditures for
      property and
      equipment                (9,153,167)      (14,515,895)       (15,398,935)

      Proceeds from
      sales of property
      and equipment               196,860         6,514,131            564,418 

      Purchases of
      investments
      available for sale      (77,822,719)      (46,959,814)       (30,569,641)

      Proceeds from
      maturities of
      investments 
      available for sale       44,280,703        46,902,342         22,231,406 

      Proceeds from
      sale of Neuro 
      investment                1,797,273 

      Investment in
      and advances to
      affiliates                                 (1,281,661)        (4,462,625)

      Purchases of
      intangible assets          (931,699)         (714,952)        (2,852,331)

      Purchases of
      other assets                                 (109,938)           (12,532)
                                      67 <PAGE>
                                     1998              1997               1996
      Payments for
      purchase of
      subsidiaries,
      net of cash
      acquired                                  (12,323,417)        (5,618,432)
      Investment in 
      notes receivable                              (34,134)
                               ___________      ___________        ____________

         Net cash used
         in investing
         activities           (41,632,749)      (22,523,338)       (36,118,672)
                              ___________       ___________        ___________ 
      CASH FLOWS FROM
      FINANCING
      ACTIVITIES:

      Cash dividends
      paid                     (3,323,594)       (3,207,205)        (3,030,140)

      Proceeds from
      issuance of
      common stock from
      exercise of
      options                   4,317,514        11,258,499          9,814,739 

      Proceeds from
      borrowings on
      Tri-Med line of
      credit                    1,325,000         1,750,000 

      Proceeds from
      Tri-Med notes
      payable                                        12,651 

      Payments on 
      Tri-Med notes
      payable                  (1,325,000)

      Payments on
      Tri-Med line of
      credit                   (2,750,000)         (325,000)

      Payment on 
      Tri-Med contract
      payable                  (2,650,000)       (1,850,000)

      Purchase of
      treasury stock             (856,922)                          (6,161,421)

      Repayment of
      long-term debt
      assumed in
      acquisitions                               (9,444,995)          (517,754)
                              ___________       ___________        ___________ 

                                      68 <PAGE>
                                     1998              1997               1996
         Net cash
         provided by  
         (used in)
         financing 
         activities            (5,263,002)       (1,806,050)           105,424 
                               __________       ___________        ___________ 
      NET INCREASE
      (DECREASE) IN
      CASH AND CASH
      EQUIVALENTS             (11,392,519)        7,105,208        (13,329,848)

      CASH AND CASH
      EQUIVALENTS,
      BEGINNING OF YEAR        21,624,043        14,518,835         27,848,683 
                               __________        __________         __________ 
      CASH AND CASH
      EQUIVALENTS, END
      OF YEAR                 $10,231,524       $21,624,043        $14,518,835 
                              ===========        ==========         ========== 

      SUPPLEMENTAL
      DISCLOSURE OF
      CASH FLOW
      INFORMATION - 
      Cash paid during
      the year for
      income taxes            $17,172,117       $11,993,115        $15,458,820 
                               __________        __________         __________ 

      Cash paid during
      the year for
      interest                   $296,069           $16,435                None
                               __________        __________         ___________

     See notes to consolidated financial statements.

     SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
     ACTIVITIES:

          During 1997, the Company recorded a write-down of its
     investment in Neuro Navigational Corporation ("Neuro") totaling
     approximately $4,900,000 as a result of the Company's assessment
     that the carrying amount of the Neuro investment would not be
     recoverable by the Company.  During 1998, the Company sold its
     investment in Neuro for cash of $1,797,273, net of selling expenses,
     and a receivable of $450,000.

          On February 25, 1998, the Company entered into a business
     combination with Tri-Med Specialties, Inc. in exchange for 1,067,733
     shares of the Company's common stock.  This transaction has been
     accounted for by the Company as a "pooling" and as such, the
     Company's accompanying consolidated financial statements as of
     September 30, 1998 and 1997 and for the three years in the period

                                      69 <PAGE>
     ended September 30, 1998 have been restated as if the transaction
     had occurred on October 1, 1995 (see Note 8).

          On July 2, 1997, Tri-Med acquired certain rights and licenses
     of Delta West Pty. Limited for a note payable totaling $5,825,000
     (see Note 8).

          During 1997, the Company recorded a gain on the sale of a
     parcel of land totaling approximately $6,300,000.  The gain is
     included in other income in the accompanying consolidated statement
     of operations.  In connection with the sale, the Company received
     $3,265,700 in cash and a promissory note of $3,973,920.  The note is
     due in April 1999.

          On December 10, 1996, the Company acquired all of the
     outstanding capital stock of Cardiotronics Systems, Inc.
     (Cardiotronics) in a purchase transaction for $12,722,404 in cash. 
     In conjunction with the merger, liabilities were assumed as follows:

               Fair value of assets acquired
               (including goodwill of $13,136,000)            $25,070,528

               Cash paid                                       12,722,404
                                                              ___________

               Liabilities assumed                            $12,348,124
                                                              ===========

          On September 27, 1996, the Company entered into a business
     combination with Plastic Engineered Products Corporation in exchange
     for 238,727 shares of the Company's common stock.  This transaction
     has been accounted for by the Company as a "pooling" and as such,
     the Company's accompanying consolidated financial statements as of
     September 30, 1996 and for the year ended September 30, 1996 were
     restated as if this transaction had occurred on October 1, 1995.

          In addition, during the year ended September 30, 1996, the
     Company entered into three acquisition transactions accounted for as
     purchases as follows (see Note 8):

          *    On April 19, 1996, the Company acquired substantially all
     of the assets of Endovations, Inc. for approximately $1,220,000
     cash.  In conjunction with this purchase, the Company recorded
     goodwill of approximately $400,000 and the fair value of assets
     acquired approximated $820,000.

          *    On July 19, 1996, the Company purchased all of the
     outstanding capital stock of Mist Assist, Inc. for approximately
     $673,600 cash.  In conjunction with the acquisition, liabilities
     were assumed as follows:




                                      70 <PAGE>
 
               Fair value of assets acquired 
               (including goodwill of $680,000)                  $800,000

               Cash paid                                          673,600
                                                                 ________

               Liabilities assumed                               $126,400
                                                                 ========

          *    On August 28, 1996, the Company purchased all of the
     outstanding capital stock of Preferred Medical Products for
     approximately $3,600,000 cash (see Note 8).  In conjunction with the
     acquisition, liabilities were assumed as follows:

          Fair value of assets acquired
          (including goodwill of $2,900,000)                   $4,320,970

          Cash paid                                             3,604,440
                                                                _________

          Liabilities assumed                                    $716,530
                                                                =========

     See notes to consolidated financial statements.

     BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996

     1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

          ORGANIZATION - Ballard Medical Products (Ballard) and its
     subsidiaries develop, manufacture, and market specialized medical
     products.

          BASIS OF PRESENTATION - The consolidated financial statements
     include the accounts of Ballard and its wholly-owned subsidiaries,
     Medical Innovations Corporation (MIC), Ballard Real Estate Holdings,
     Inc. (BREH), Ballard Purchase Corporation (BPC), Ballard
     International, Inc. (BI), Plastic Engineered Products Company
     (PEPCO), Ballard Medical Products (Canada) Inc. dba Preferred
     Medical Products (PMP), Mist Assist, Inc. (Mist Assist),
     Cardiotronics Systems, Inc. (Cardiotronics), and Tri-Med
     Specialties, Inc. (Tri-Med) (see Note 8) (collectively, the
     Company).  All significant intercompany accounts and transactions
     have been eliminated in consolidation.

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

                                      71 <PAGE>
          INVESTMENTS AVAILABLE FOR SALE - Investments available for sale
     consist of tax-free municipal bonds.  Investments are recorded at
     fair market value.  The Company classifies all of its investments as
     available for sale.

          INVENTORIES - Inventories are stated at the lower of cost (on a
     first-in, first-out basis) or market.

          PROPERTY AND EQUIPMENT - Property and equipment are stated at
     cost.  Depreciation is computed on the straight-line method over the
     estimated useful lives as follows:

               Buildings                30 to 40 years
               Molds                           5 years
               Machinery and equipment   5 to 10 years
               Vehicles                   3 to 5 years
               Furniture and fixtures     3 to 5 years
               Leasehold improvements     3 to 5 years
               
          INTANGIBLE ASSETS - Intangible assets include goodwill, patent
     rights, and license costs which are stated at cost and are being
     amortized using the straight-line method over their estimated lives,
     which range from four to seventeen years.

          REVENUE RECOGNITION - Revenues are recognized when the related
     product is shipped.  The Company records an allowance for estimated
     sales returns and rebates.

          INCOME TAXES - The Company utilizes an asset and liability
     approach for financial accounting and reporting for income taxes. 
     Deferred income taxes are provided for temporary differences in the
     bases of assets and liabilities as reported for financial statement
     and income tax purposes.

          STOCK-BASED COMPENSATION - The Company has elected to continue
     to apply Accounting Principles Board (APB) Opinion 25 (as permitted
     by SFAS No. 123, "Accounting for Stock-Based Compensation").  The
     appropriate required disclosure of the effects of SFAS No. 123 are
     included in Note 5.

          STATEMENTS OF CASH FLOWS - For purposes of the consolidated
     statements of cash flows, the Company considers cash and interest
     bearing securities with original maturities of less than three
     months to be cash equivalents.

          LONG-LIVED ASSETS - The Company evaluates the carrying value of
     long-term assets including intangibles based on current and
     anticipated undiscounted cash flows and recognizes impairment when
     such cash flows will be less than the carrying values.

          OTHER - Certain reclassifications have been made to the prior
     years financial statements to conform to classifications adopted in
     the current year.

                                      72 <PAGE>
          INCOME PER SHARE - Effective for the year ended September 30,
     1998, the Company adopted SFAS No. 128, "Earnings Per Share," and
     retroactively restated its earnings per share for 1997 and 1996, to
     conform with the statement.  Accordingly, net income per common
     share is computed by both the basic method, which uses the weighted
     average number of the Company's common shares outstanding and the
     diluted method, which includes the dilutive common shares from stock
     options, as calculated using the treasury stock method.  The
     difference between the Company's basic and diluted earnings per
     share is attributable to stock options.  The effect of stock options
     was to increase the number of common shares by approximately
     582,821, 871,109, and 1,529,960 during the years ended September 30,
     1998, 1997, and 1996, respectively.

     2.  INVESTMENTS AVAILABLE FOR SALE

          Investments available for sale at September 30, 1998 and 1997
     consist of tax-free municipal bonds.

          The amortized cost and fair value of investments available for
     sale at September 30, 1998 and 1997 is as follows:

                                            1998                1997 

           Amortized cost            $60,492,691         $26,972,594 

           Gross unrealized                                          
           gains                         127,920                None 

           Gross unrealized
           losses                       (293,274)           (344,282)
                                     ___________          ___________

           Fair value                $60,327,337         $26,628,312 
                                     ===========         =========== 

          As of September 30, 1998 and 1997, all municipal bonds had a
     contractual maturity of one year or less.  During the years ended
     September 30, 1998, 1997, and 1996, there were no gross realized
     gains or gross realized losses from sales of investments classified
     as available for sale.

     3.  LINE OF CREDIT

          At September 30, 1998, Ballard had an unsecured line of credit
     with a bank totaling $5,000,000 which expires February 15, 1999. 
     The line, if drawn upon, bears interest at the bank's base rate
     (8.25% at September 30, 1998).  No compensating cash balances are
     required.  As of September 30, 1998 and during the year then ended,
     there were no borrowings under the line of credit.
                      
          In July, 1997, Tri-Med (see Note 8) entered into two line of
     credit agreements with a bank.  The Company paid off the outstanding
     balance on the credit agreements and both agreements were terminated
     in February 1998.

                                      73 <PAGE>
 
     4.  INCOME TAXES

          The Company has recorded net deferred tax assets and
     liabilities at September 30, 1998 and 1997 which consisted of the
     following temporary differences and carryforward items:

                                   1998                     1997
                            Current     Long-Term     Current    Long-Term
      Deferred income
      tax assets:

      Allowance for 
      uncollectible
      accounts
      receivable          $375,340                   $320,513

      Allowance for
      sales returns
      and rebates          645,740                    664,785

      Allowance
      for obsolete
      inventory            291,750                    451,658

      Accrued expenses     330,246                    280,925

      Unrealized
      losses on
      investments           57,874                    120,498

      Net operating
      loss carry-
      forwards of
      acquired 
      subsidiaries         277,082    $3,221,517      394,663   $3,416,727
                          ________    ___________    ________   __________

      Total              1,978,032     3,221,517    2,233,042    3,416,727

      Deferred income 
      tax liabilities:

      Deferred gain on
      installment sale  (1,349,421)

      Differences
      between tax
      basis and 
      financial
      reporting basis
      of property
      and equipment                   (1,509,128)              (1,276,825)
                        ___________    _________   __________   __________

      Net                  $628,611   $1,712,389   $2,233,042   $2,139,902
                        ===========    ==========   =========    =========

                                      74 <PAGE>
          The components of income tax expense (benefit) for the years
     ended September 30, 1998, 1997, and 1996 are summarized as follows:

                                  1998              1997              1996
      Current:
      Federal              $15,580,657       $16,243,278       $12,421,679

      State                  2,841,457         1,913,890         1,903,320
                            __________        __________        __________

                            18,422,114        18,157,168        14,324,999
                            ==========        ==========        ==========
      Deferred:
      Federal                1,718,534          (324,388)          402,473

      State                    313,410           (48,780)           39,649
                             _________       ___________        __________

                             2,031,944          (373,168)          442,122
                             _________       ___________        __________

      Total                $20,454,058       $17,784,000       $14,767,121
                           ===========       ===========        ==========

          Income tax expense differed from amounts computed by applying
     the statutory Federal tax rate to pretax income as follows:

                                   1998            1997            1996 

      Computed Federal
      income tax expense
      at statutory rate
      of 35%                $18,363,652     $17,166,358     $14,236,825 

      State income tax
      expense, net of
      Federal benefit         2,737,518       1,590,940       1,317,054 

      Tax exempt income        (637,874)       (410,736)       (553,876)

      Foreign sales
      corporation              (692,501)       (429,833)       (236,250)

      Amortization of
      goodwill                  788,331         642,986         335,763 

      Nontaxable income
      from pooled
      Subchapter S
      corporation              (166,673)       (292,758)       (107,269)

      Other                      61,605        (482,957)       (225,126)
                             __________      ___________     ___________

      Total                 $20,454,058     $17,784,000     $14,767,121 
                             ==========     ===========     =========== 

                                      75 <PAGE>
          As a result of the Company's acquisitions (see Note 8), the
     Company has net operating loss carryforwards for Federal income tax
     purposes of approximately $8,990,000, which can only be used to
     offset future taxable income of acquired subsidiaries.  The
     utilization of the tax loss carryforwards is subject to certain
     limitations and the carryforwards expire at various dates through
     the year 2011.

     5.  COMMON STOCK AND STOCK OPTIONS

          During the years ended September 30, 1998 and 1996, the Company
     repurchased 37,500 and 350,000 shares of its outstanding common
     stock for $856,922 and $6,161,421, respectively.  In accordance with
     Utah State law, this treasury stock was accounted for as retired
     common stock.  The Company did not repurchase any shares of its
     common stock during the year ended September 30, 1997.

          The Company has adopted several incentive stock option plans
     for salaried employees and reserved shares of common stock totaling
     approximately 2,647,330, 2,380,780, and 2,926,400 at September 30,
     1998, 1997, and 1996, respectively, for issuance under the plans. 
     Options are granted at a price not less than the fair market value
     on the date of grant, become exercisable between one to two years
     following the date of grant, and generally expire in seven years.

          Changes in stock options are as follows for the years ended
     September 30:

                                                        Weighted Average
      1998                                  Shares        Exercise Price

      Outstanding at beginning
      of year                           2,019,651                 $14.85

      Granted                              45,500                  23.53

      Exercised                          (398,500)                 10.83

      Forfeited                           (72,800)                 19.97
                                        _________                  _____
      Outstanding at end 
      of year                           1,593,851                 $15.82
                                        =========                  =====

      Options exercisable
      at year end                       1,339,776 
                                        ========= 

      Weighted average
      fair value of options
      granted during year                   $7.65 
                                       ========== 


                                      76 <PAGE>
                                                        Weighted Average
      1997                                  Shares        Exercise Price

      Outstanding at beginning
      of year                           2,517,553                 $10.06

      Granted                             856,475                  19.71

      Exercised                        (1,292,677)                  8.71

      Forfeited                           (61,700)                 15.46
                                       __________                  _____

      Outstanding at end of
      year                              2,019,651                 $14.85
                                        =========                  =====
      Options exercisable at
      year end                          1,056,976 
                                        ========= 

      Weighted average
      fair value of
      options granted
      during year                           $9.24 
                                        ==========

                                                        Weighted Average
      1996                                  Shares        Exercise Price

      Outstanding at beginning
      of year                           3,331,162                  $8.26

      Granted                             516,900                  16.63

      Exercised                        (1,252,309)                  7.84

      Forfeited                           (78,200)                 12.32
                                        __________                 _____

      Outstanding at
      end of year                       2,517,553                 $12.32
                                       ==========                  =====

      Options exercisable at
      year end
                                        1,799,351 
                                        ========= 

      Weighted average fair
      value of options granted
      during year
                                            $7.79 
                                        ========= 


                                      77 <PAGE>
          The following table summarizes information about stock options
     outstanding at September 30, 1998:

                   Options Outstanding                Options Exercisable
                                 Weighted
                                  Average
                                Remaining  Weighted               Weighted
       Range of       Number  Contractual   Average      Number    Average
       Exercise         Out-         Life  Exercise       Exer-   Exercise
         Prices     standing   (in years)     Price     cisable      Price

         $2.96-
          $4.36       54,002          0.8     $3.66      54,002      $3.66

          8.63-
          12.88      456,974          3.2      9.53     456,974       9.53

         13.50-
          19.88    1,037,375          5.5     18.89     823,300      18.73

         21.81-
          25.25       45,500          6.3     23.39       5,500      22.07
         ______    _________         ____    ______   _________      _____

         $2.96-
         $25.25    1,593,851          4.7    $15.82   1,339,776     $15.00
         ======    =========         ====    ======   =========     ======

          The Company accounts for stock options granted using APB
     Opinion 25.  Accordingly, no compensation cost has been recognized
     for its stock option plans.  Had compensation cost for the Company's
     stock-based compensation plans been determined based on the fair
     value at the grant dates for awards under those plans consistent
     with SFAS No. 123, the Company's net income and net income per
     common share would have changed to the pro forma amounts indicated
     below:

                                  1998             1997             1996
      Net income:
      As reported          $32,013,520      $31,262,739      $25,909,521

      Pro forma             29,588,871       26,230,287       24,574,540

      Net income per
      common share -
      basic:
      As reported                $1.06            $1.06            $0.92

      Pro forma                   0.96             1.00             0.91

      Net income per
      common share -
      diluted:
      As reported                $1.04            $1.03            $0.87

      Pro forma                   0.94             0.97             0.86

                                      78 <PAGE>
     The fair value of each option grant is estimated on the date of
     grant using the Black-Scholes option-pricing model with the
     following weighted-average assumptions used for grants in 1998, 1997
     and 1996, dividend yield of 0.4%, .06%, and 0.5%, respectively;
     expected volatility of 31%, 33%, and 33%, respectively; risk-free
     interest rate of 5.39%, 6.18%, and 5.36%, respectively; and expected
     lives of approximately 4 years, respectively.

     6.  COMMITMENTS AND CONTINGENT LIABILITIES

          The Company leases office and production facilities and office
     equipment under long-term operating lease agreements.  Rent expense
     on the above operating leases was approximately $464,000, $911,000,
     and $753,000 for the years ended September 30, 1998, 1997, and 1996,
     respectively.  The following represents the Company's future
     commitments under such leases:

                Year ending
                September 30          Gross       Sublease           Net

                1999               $373,173       $206,923      $166,250

                2000                204,193        114,708        89,485

                2001                 52,607                       52,607
                                   ________       ________      ________

                Total              $629,973       $321,631      $308,342
                                   ========       ========      ========

          The Company has agreements with the inventors of certain of its
     products which provide for the payment of royalties ranging from 2%
     to 6.5% of defined net sales or a fixed rate per unit sold of the
     related products.

          The Company is involved in certain litigation matters in the
     normal course of business which, in the opinion of management, will
     not result in any material adverse effects on the financial
     position, results of operations, or net cash flows of the Company.

     7.  PROFIT SHARING PLAN

          The Company sponsors an Employee Retirement and Savings Plan
     (the Plan) under Section 401(k) of the Internal Revenue Code.  The
     Plan is designed to allow participating employees to accumulate
     savings for retirement or other purposes.  Under the Plan, all
     employees, who have completed at least one year of service and have
     reached age 21, are eligible to participate.  The Plan allows
     employees to make contributions to the plan from salary reductions
     each year, up to a maximum of 15% of a participant's annual
     compensation.  Under the Plan, the Company matches up to 4% of a
     participant's contribution.  The Company may, if it desires, make
     additional contributions to the 401(k) Plan on behalf of its
     employees.  For the years ended September 30, 1998, 1997, and 1996,
     the Company expensed approximately $819,000, $757,000, and $621,000,
     respectively, as matching contributions to the Plan.  Employees are
     always fully vested in their own contributions and become fully
     vested in any contributions made by the Company after six years of
                                      79 <PAGE>
     service.  Employees are allowed to direct the investment of their
     Plan contributions within a group of designated investment funds.

     8.  BUSINESS COMBINATIONS

     Effective February 25, 1998, Ballard issued 1,067,733 shares of its
     common stock in exchange for all of the outstanding common stock of
     Tri-Med, a medical devices manufacturing company incorporated in
     1983 with operations in Kansas, Virginia, and Australia.  The assets
     and liabilities of Tri-med at the date of the combination were
     approximately $8,276,000 and $6,321,000 respectively.  Total net
     sales and net income of Tri-Med from October 1, 1997 to the date of
     combination were approximately $4,440,000 and $648,000.  The
     combination was accounted for as a pooling of interests.  The
     accompanying consolidated financial statements for 1997 and 1996
     have been restated as if Ballard and Tri-Med had been combined as of
     October 1, 1995, the beginning of the reporting period.  There were
     no intercompany transactions between Ballard and Tri-Med prior to
     the date of merger.  Concurrent with the acquisition, all
     outstanding balances under the Tri-Med lines of credit (see Note 3)
     were paid in full and such agreements were terminated.  Net sales,
     net income, and net income per share amounts of the previously
     separate companies for the years ended September 30, 1997 and 1996
     as previously reported and combined are as follows:

                               Ballard          Tri-Med         Combined
      1997:
        Net sales         $125,307,178       $7,435,859     $132,743,037

        Net income          30,426,287          836,452       31,262,739

        Net income
        per common
        share:
          Basic                   1.07              N/A             1.06

          Diluted                 1.04              N/A             1.03

      1996:
        Net sales         $103,525,263       $6,356,079     $109,881,342

        Net income          25,603,039          306,482       25,909,521

        Net income
        per common
        share:
          Basic                   0.95              N/A             0.92

          Diluted                 0.90              N/A             0.87

     In July 1997, Tri-Med acquired the rights to license and distribute
     the product CLOtest for $5,825,000 in exchange for a note payable to
     Delta West Pty. Limited.  Under the terms of this agreement, the
     Company is required to pay royalties to the inventor of CLOtest as a
     percentage of products sold.  The royalty percentage varies based on
     the level of sales.  Substantially all of the purchase price was
     allocated to trademarks, a covenant not to compete, and goodwill to

                                      80 <PAGE>
     be amortized using the straight-line method over 15 years.  The
     purchase price was allocated as follows:

               Plant and equipment                                $60,800
               Intellectual property other than trademarks        615,600
               Trademarks                                       4,172,600
               Covenant not to compete                             76,000

               All other assets and rights including goodwill     900,000
                                                                _________

               Total                                           $5,825,000
                                                                =========

          Effective December 10, 1996, the Company acquired all of the
     issued and outstanding capital stock of Cardiotronics for
     $12,723,000 in cash and the assumption of liabilities totaling
     $12,348,000.  The acquisition is being accounted for using the
     purchase method of accounting; as such, results of operations have
     been included in the accompanying consolidated financial statements
     from the date of acquisition.  In conjunction with the acquisition,
     the Company recorded goodwill of approximately $13,136,000, which is
     being amortized over 15 years.

          The unaudited pro forma results of operations of the Company for
     the years ended September 30, 1997 and 1996 (assuming the acquisition of
     Cardiotronics had occurred as of October 1, 1995) are as follows:

                                              1997                1996

          Net sales                   $133,971,074        $119,391,331

          Net income                    30,703,183          21,243,285

          Net income 
          per common share:
            Basic                            $1.04               $0.76

            Diluted                           1.01                0.72

          On September 27, 1996, the Company issued 238,727 shares of its
     common stock in exchange for all of the outstanding common stock of
     PEPCO, a medical research and manufacturing company incorporated in
     1987 and headquartered in Canal Fulton, Ohio.  The assets and
     liabilities of PEPCO at the date of combination were approximately
     $684,000 and $88,000 respectively.  The combination was accounted
     for as a pooling of interests.  The accompanying consolidated
     financial statements have been prepared as if Ballard and PEPCO had
     been combined for all periods presented.

          On April 19, 1996, the Company acquired substantially all of
     the assets of Endovations, Inc. (Endovations) for approximately
     $1,220,000 in cash.  The acquisition has been accounted for using
     the purchase method of accounting; as such, Endovations' results of
     operations have been included in the accompanying consolidated
     financial statements from the date of acquisition.  In conjunction
     with this acquisition, the Company recorded goodwill of

                                      81 <PAGE>
     approximately $400,000, which is being amortized on a straight-line
     basis over 15 years.

          Effective July 19, 1996, the Company acquired all of the issued
     and outstanding common stock of Mist Assist for approximately
     $673,600 in cash and the assumption of liabilities totaling
     approximately $126,400.  The acquisition has been accounted for
     using the purchase method of accounting; as such, results of
     operations have been included in the accompanying consolidated
     financial statements from the date of acquisition.  In conjunction
     with the acquisition, the Company recorded goodwill of approximately
     $680,000, which is being amortized on a straight-line basis over 15
     years.

          During 1998, the Company recorded a write-down of its
     investment in Mist Assist totaling approximately $681,000 as a
     result of the Company's assessment that the carrying amount of the
     investment in Mist Assist would not be recoverable by the Company. 
     The write-down is included in selling, general, and administrative
     expenses in the accompanying consolidated statement of operations.

          On August 28, 1996, the Company acquired all of the issued and
     outstanding common stock of PMP for cash of approximately
     $3,600,000.  The acquisition has been accounted for using the
     purchase method of accounting; as such, results of operations have
     been included in the accompanying consolidated financial statements
     from the date of acquisition.  In conjunction with the acquisition,
     the Company recorded goodwill of approximately $2,900,000, which is
     being amortized on a straight-line basis over 15 years.

     9.  FOREIGN EXPORT SALES

          The Company markets its products internationally through
     dealers and distributors.  All foreign export sales are denominated
     in U.S. dollars.  The following table summarizes approximate foreign
     export sales by geographic areas:

                                  1998             1997             1996

      Europe               $10,533,000       $7,544,000       $4,664,000

      Asia Pacific           4,322,000        2,488,000        1,757,000

      Other                  3,366,000        2,258,000        1,451,000
                            __________       __________        _________

      Total foreign 
      export sales         $18,221,000      $12,290,000       $7,872,000
                            ==========       ==========        =========

     10.  EFFECT OF RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

     In June 1997, the Financial Accounting Standards Board (FASB) issued
     SFAS No. 130, "Reporting Comprehensive Income."  SFAS No. 130
     establishes standards for reporting and display of comprehensive
     income and its components (revenues, expenses, gains and losses) in
     a full set of general-purpose financial statements.  This statement

                                      82 <PAGE>
     requires that an enterprise (a) classify items of other
     comprehensive income separately from retained earnings and
     additional paid-in capital in the equity section of a statement of
     financial position.  SFAS No. 130 is effective for fiscal years
     beginning after December 15, 1997.  Reclassification of financial
     statements for earlier periods provided for comparative purposes is
     required.  The adoption of SFAS No. 130 may result in additional
     disclosures regarding the Company's comprehensive income.

     In June 1997, the FASB issued SFAS No. 131, "Disclosures About
     Segments of an Enterprise and Related Information," which redefines
     how public business enterprises report information about operating
     segments in annual financial statements.  The statement also
     establishes standards for related disclosures about products and
     services, geographical areas, and major customers.  SFAS No. 131 is
     effective for financial statements for periods beginning after
     December 15, 1997.  In the initial year of application, comparative
     information for earlier years is to be restated.  The adoption of
     SFAS No. 131 will result in additional disclosures regarding the
     Company's segments.

     In June 1998, the FASB issued SFAS No. 133, "Accounting for
     Derivative Instruments and Hedging Activities," which supersedes
     SFAS No. 80, "Accounting for Futures Contracts," SFAS No. 105,
     "Disclosure of Information about Financial Instruments with Off-
     Balances-sheet Risk and Financial Instruments with Concentration of
     Credit Risk," and SFAS No. 119, "Disclosure about Derivative
     Financial Instruments and Fair Value of Financial Instruments," and
     also amends certain aspects of other SFAS's previously issued.  SFAS
     No. 133 establishes accounting and reporting standards for
     derivative instruments and hedging activities.  It requires that an
     entity recognize all derivatives as either assets or liabilities in
     the balance sheet and measure those instruments at fair value.  SFAS
     No. 133 is effective for the Company's financial statements for the
     year ending September 30, 2000.  The Company does not expect the
     impact of SFAS No. 133 to be material in relation to its financial
     statements.

     11.  SUBSEQUENT EVENTS

          On November 23, 1998, the Company entered into severance
     contracts with 24 employees.  The contracts provide that upon
     resignation or termination, the Company will pay severance
     compensation in an amount equal to from one to three years of the
     employee's annual base salary less applicable payroll taxes.  The
     contracts also provide that the Company will provide health
     insurance coverage for a period of from one to three years after
     resignation or termination and transfer to the employee all right,
     title, and interest in a Company vehicle then being used by the
     employee.  The salary component of the contracts is estimated to
     have a current aggregate value of approximately $4,000,000.

          On December 23, 1998, the Company entered into an agreement and
     plan of merger with Kimberly-Clark Corporation.  The terms and
     conditions of the merger are subject to satisfaction of certain
     conditions including approval by the Company's shareholders.
                                      83 <PAGE>
 
                   MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

          This analysis of the Company's operations encompassing the
     fiscal years ended September 30, 1998, 1997, and 1996 should be
     considered in conjunction with the consolidated balance sheets,
     statements of operations, and statements of cash flows.  All of the
     figures discussed herein have been adjusted to reflect the Company s
     stock and asset purchases and combinations (see  Notes to
     Consolidated Financial Statements ).

          Fiscal year 1998 was another record setting year for the
     Company in terms of sales, income and the generation of cash flows,
     as shown in the table below:

                                   % Increase                 % Increase
                          Fiscal         Over         Fiscal        Over
                            Year       Fiscal           Year      Fiscal
                            1998    Year 1997           1997   Year 1996

      Net sales     $150,062,671        13.0%   $132,743,037       20.8%

      Net income     $32,013,520         2.4%    $31,262,739       20.7%

      Net income
      per share            $1.04         0.5%          $1.03       18.1%

      Cash flows
      from
      operations     $35,503,232        12.9%    $31,434,596       38.6%

          The continued growth in sales is the result of strategic
     acquisitions, internal development of new products, broader product
     offerings, acquisition of national contracts with group purchasing
     organizations, rapid expansion in the international marketplace, and
     the overall efforts of an outstanding sales force.  Income and cash
     flow growth continues as a result of high margins and manufacturing
     expertise.

          With a continued emphasis on growth through acquisitions, the
     Company acquired Tri-Med (in a pooling of interests) in February,
     1998.  Tri-Med, with locations then in Kansas, Virginia and
     Australia, is a manufacturer of medical devices for the detection of
     H. pylori, a bacterium which causes peptic ulcer disease.  Net sales
     of Tri-Med during fiscal year 1998 were $11.1 million, an increase
     of 49.2% over fiscal year 1997.

          During fiscal year 1998 the Company focused its sales efforts
     and internally reported based upon three separate business units: 
     (1) Critical Care, which includes the Trach Care, Easi-lav, oral
     care, and Cardio families of products; (2) FOAM CARE and pain
     management products; and (3) Interventional, which includes enteral
     feeding, Tri-Med, and endoscopic products.

                                      84 <PAGE>
 
     RESULTS OF OPERATIONS

          SALES - Consistent, solid growth from year to year continues to
     result from the Company s ability to increase volume, both
     internally and through acquisitions.  For the most part, product
     pricing stabilized during 1998 with only isolated increases.  Slight
     decreases in net sales and margins have resulted from lower priced
     contracts with group purchasing organizations.

          Interventional sales reflect the fastest growing segment, with
     Tri-Med sales increasing 49.2% to $11,096,624, MIC (enteral feeding
     devices) sales increasing 21.2% to $31,104,700 and endoscopic
     product sales increasing 21.2% to $7,102,446.

          Endoscopic and enteral feeding product sales have increased as
     the Company has expanded the breadth of its product offerings.  More
     hospital doors are open to the Company as hospitals perceive the
     Company's product line to allow "one stop shopping" for GI products. 
     The Company feels that its GI product offering rivals the best of
     any of its competition.

          The table below summarizes domestic sales versus international
     sales as a percentage of total net sales:

          Fiscal year ended September 30,    1998      1997      1996

          Domestic                           87.9%     90.7%     92.8%

          International                      12.1%      9.3%      7.2%

          The table below summarizes international sales for the last
     three fiscal years:

                                             International Sales

                Fiscal year 1998                     $18,221,425

                % Increase over                            48.3%
                fiscal year 1997

                Fiscal year 1997                     $12,289,986

                % Increase over                            56.1%
                fiscal year 1996

          The international market place continues to show great promise
     for the Company.  Increases in international sales during fiscal
     year 1998 are the direct result of the Company s expansion of its
     international dealer network.  The Company expects international
     sales to continue strong growth into the future, hampered only by
     seesaw economic conditions in developing countries where the Company
     is expanding.

          COST OF PRODUCTS SOLD - The table below summarizes consolidated
     cost of products sold for the last two fiscal years:
                                     85 <PAGE>
                                                                      Cost of
                                                                Products Sold
                                                Cost of               as % of
                                          Products Sold             Net Sales

           Fiscal year 1998                 $55,557,988                 37.0%

           % Increase over                        18.1%
           fiscal year 1997

           Fiscal year 1997                 $47,027,428                 35.4%

           % Increase over                        23.6%
           fiscal year 1996

     The 18.1% increase in product costs during fiscal year 1998 includes
     $1,094,480 in inventory obsolescence and overhead revaluation
     charges recorded in the second quarter of fiscal 1998 associated
     with the relocation of manufacturing operations of MIC,
     Cardiotronics, PEPCO and PMP to Utah and Idaho.  Additional cost
     increases can be attributed to increased sales of lower margin
     product lines and to increases in material and labor costs.  Margins
     will continue to be impacted by the health care industry's focus on
     cost restraints, and on competitive pricing pressures.
       
          During the 1998 fiscal year, the Company continued to integrate
     the manufacturing processes of MIC, Cardiotronics, PEPCO, and PMP
     into its two manufacturing sites in Utah and Idaho.  Gross margins
     will continue to be impacted by this integration process, the
     objectives of which are more efficiencies in the manufacturing of
     acquired products resulting in lower costs and more competitive
     pricing structures.  Continued pricing pressures, additional new
     product acquisitions, and continued increases in labor and material
     costs may continue to impact margins negatively into the future.

          The following table summarizes sales by sales business unit
     (see description above) as a percentage of total net sales:

          Year ended September 30,           1998      1997      1996

          Critical Care                      55.5%     58.8%     60.8%

          Foam Care/Pain Management          11.0%     11.3%     11.4%

          Interventional                     33.5%     29.9%     27.8%

          The following table summarizes sales dollars by business unit
     (in thousands):

          Year ended September 30,           1998        1997        1996

          Critical Care                   $83,379     $77,962     $66,757

          Foam Care/Pain Management       $16,448     $15,057     $12,533

          Interventional                  $50,236     $39,724     $30,591

                                      86 <PAGE>
          Within Critical Care, sales of TRACH CARE related products
     increased 4.4% to $59,896,555 for fiscal year 1998.  Sales growth
     continues to be weakened due to extended product usage by the
     hospitals beyond recommended periods.  The closed suction catheters
     have a recommended usage period of 24 hours, but due to hospital
     cost constraints, period usage is increasing to as much as 72 hours.
     Growth within this segment was also impacted by a mild flu season,
     as well as to reduced pricing from contracts with group purchasing
     organizations.

          Sales of Cardiotronics  products increased 35.2% to $10,266,421
     due, in part, to increased sales to retail customers and, also in
     part, to increased sales to OEM customers.  The Company does not
     expect OEM sales to increase in fiscal year 1998.  The Company now
     better understands the manufacturing of these relatively new
     products, resulting in decreased product costs and more
     competitively priced products.

          Sales of other miscellaneous products within the Critical Care
     segment decreased 5.6% to $13,214,589.  These decreases are the
     result of continued pricing pressures from external competition.

          Sales of the Company's pain management product line increased
     37.6% to $5,468,651.  This growth can be attributed to lower, more
     competitive pricing resulting from the move of the products'
     manufacturing to Draper.

          FOAM CARE product sales decreased 0.9% to $10,979,582 in fiscal
     year 1998.  These decreases can be attributed to the products
     generally not being included in national buying group contracts, and
     competition from lower priced soap competitive products.

          OPERATING EXPENSES - Operating expenses consist of selling,
     general, and administrative expenses, research and development
     expenses, and royalties.  Total consolidated operating expenses for
     the year ended September 30, 1998 were $47,915,277, compared with
     $42,208,682 for fiscal year 1997 and $36,465,201 for fiscal year
     1996.  The following table is a summary of operating expenses by
     category as a percentage of net sales:

          Year ended September 30,           1998      1997      1996

          Selling, general, and
          administrative                     28.7%     28.3%     28.8%

          Research and development            1.9%      2.2%      2.9%

          Royalties                           1.3%      1.4%      1.5%

          Selling, general, and administrative expenses increased
     $5,589,245.  Included in these charges in 1998 were $681,000 for
     impairments to reduce the carrying value of intangible assets and
     $1,293,000 for severance and related restructuring costs associated
     with the closures of several duplicate manufacturing facilities. 
     These increases can also be attributed to increased sales volumes.  
     Consolidated expenses related to research and development and
     royalties for fiscal years 1998, 1997, and 1996, remained relatively
     consistent.
                                      87 <PAGE>
          OTHER INCOME - Other income generally consists of interest
     income from short-term investments, royalty income from the
     licensing of the TRACH CARE closed suction system, and the netting
     of insignificant gains and losses from the sale or retirement of
     property and equipment.

          The table below summarizes other income in the last three
     fiscal years:

          Year ended September 30,         1998          1997        1996

          Interest income            $2,609,864    $2,129,276  $1,917,925

          Royalty income              2,095,000     2,465,840   2,400,000

          Other income              1,173,308       944,696     991,455

          Increases to interest income are the result of increased cash
     and investments generated from operations.  Decreases in royalty
     income reflects decreasing unit sales of closed suction catheters by
     the Company's licensee.  Included in other income for fiscal year
     1998 are $1,135,813 in gains from the sale of Neuro (see
     Supplemental Disclosures of Noncash Investing and Financing
     Activities in the Consolidated Statements of Cash Flows).

          NET INCOME - Consolidated net income from operations for the
     year ended September 30, 1998 totaled $32,013,520, an increase of
     2.4% over fiscal year 1997.  The following table reflects net income
     as a percentage of net sales for each of the reporting periods
     shown:

          Year ended September 30,      1998      1997      1996

          Net Income                    21.3%     23.6%     23.6%

          INFLATION  - Inflation can be expected to have an effect on
     most of the Company's operating costs and expenses.  The extent to
     which inflationary cost increases can be offset by price increases
     depends on competition and other factors.  The effect of inflation
     has been insignificant during the periods reported herein.

     LIQUIDITY AND CAPITAL RESOURCES

          Effective December 23, 1998, the Company entered into a
     definitive merger agreement with Kimberly-Clark Corporation
     ("Kimberly-Clark").  Under the terms of the merger agreement, each
     stockholder of Ballard would receive $25 worth of Kimberly-Clark
     common stock (which would be valued at its average price over a ten
     day period preceding the merger) for each outstanding share of
     Ballard common stock.  The transaction was unanimously approved by
     Ballard's Board of Directors.  The transaction is expected to close
     in the second quarter of 1999, subject to approval by Ballard's
     stockholders, appropriate governmental approval and customary
     conditions.  It is expected that the merger will be tax-free to
     Ballard's stockholders.  In connection with the merger agreement,
     Ballard granted Kimberly-Clark an option to acquire 19.9% of
     Ballard's outstanding stock under certain circumstances.  In
                                      88 <PAGE>
     addition, under certain circumstances, Kimberly-Clark would be paid
     a cash termination fee of $15,000,000 by Ballard.

          The Consolidated Balance Sheets present the Company's financial
     position at the end of each of the last two fiscal years.  Each
     statement lists the Company's assets and liabilities, and the equity
     of its stockholders.  Major changes in the Company's financial
     position are summarized in the Consolidated Statement of Cash Flows. 
     This statement summarizes the changes in the Company's cash and cash
     equivalents balance for each of the last three years and helps to
     show the relationship between operations (presented in the
     Consolidated Statement of Operations) and liquidity and financial
     resources (presented in the Consolidated Balance Sheets).

          The table below summarizes some key factors related to
     liquidity:

          For the fiscal year ended
          September 30,                        1998           1997

          Cash provided from operating
          activities                    $35,503,232    $31,434,596

          Working capital               127,344,729     87,986,254

          Available cash*                70,558,861     48,252,355

          Current ratio                   18.6 to 1       7.8 to 1

     *    Includes cash, cash equivalents, and investments available for
          sale.

          In addition to its strong liquid position, the Company does not
     have any long-term debt nor does management intend to utilize debt
     to fund future expansion.  Ballard maintains a $5,000,000 unsecured
     line of credit with its bank but has not drawn on this line during
     either of the years ended September 30, 1998 or 1997.

          Continued growth in cash and investments provides the Company
     financial stability and flexibility to fund current operations, an
     aggressive acquisitions program, future internal growth and
     expansion, and the ability to continue its dividend payment policy.

          During the year ended September 30, 1998, the Company completed
     expansion of an office complex addition (approximately 14,500 square
     feet) at its Draper, Utah facility, at a total construction cost of
     approximately $1,300,000.  Various other remodelling projects (none
     of which was individually material) were also completed during the
     fiscal year in order to prepare portions of the Pocatello and Draper
     facilities for additional growth.  During fiscal 1998, the Company
     expended approximately $9,200,000 on capital assets, including the
     expansion noted above.

          During February 1997, the Company exercised its option to
     purchase the assets of Neuro at a total purchase price $4,245,422. 
     In March, 1997, the Company sold certain of the assets it acquired
     from Neuro to an unrelated party for $961,459, which approximated
     the purchased price of those assets.  In June, 1997 the Company
                                      89 <PAGE>
     determined that the remaining carrying value in its investment in
     Neuro was not entirely recoverable and an impairment loss of
     $4,900,000 was recorded against the book value of the investment. In
     September, 1998, the Company sold the remaining assets and
     technology acquired from Neuro, recognizing a gain of $1,135,813
     which has been included in "Other Income."

          A valuation allowance has not been provided on deferred tax
     asset balances due to the Company's projection of future taxable
     income in excess of such tax assets.

          In addition to capital expenditures, other items which affected
     cash flows during fiscal year 1998 included the net purchases of
     investments available for sale of $33,542,016, the payment of
     dividends of $3,323,594, the payment of debt of acquired
     subsidiaries of $6,725,000, purchases of intangible assets of
     $931,699, and the purchase of retired treasury stock for $856,922.

     YEAR 2000 ISSUES

          The Year 2000 Issue is the result of potential problems with
     computer systems or any equipment with computer chips that use dates
     where the date has been stored as just two digits (e.g., 97 for
     1997).  On January 1, 2000, any clock or date recording mechanism,
     including date sensitive software, which uses only two digits to
     represent the year, may recognize a date using 00 as the year 1900
     rather than the year 2000.  The Company has also been advised that
     some computer chips may not have the ability to function properly
     when reading certain dates in calendar year 1999 (e.g., 9/9/99). 
     These computer problems could result in a system failure or
     miscalculations causing disruption of operations, including among
     other things, a temporary inability to process transactions, send
     invoices, or engage in similar activities.

          There are several elements of the Company's Year 2000
     preparations:

           1.  INFORMATION TECHNOLOGY ("IT") SYSTEMS.  The Company
     determined some months ago that it is required to replace or convert
     portions of its business application software (materials management,
     resource planning, accounts payable, invoicing, accounts receivable,
     general ledger, payroll, etc.) so that its computer systems will
     properly recognize and utilize dates beyond December 31, 1999.  The
     Company began implementation of this conversion early in August,
     1998, and completed the conversion process for remaining
     applications during October, 1998.
      
          Another aspect of the Company's IT systems is Electronic Data
     Interchange ("EDI").  The Company shares information with a number
     of outside parties (including certain customers and certain vendors)
     via EDI.  Earlier this year, the Company made all necessary
     modifications so that its EDI capabilities are prepared for the year
     2000.

           2.  NON-IT SYSTEMS.  Non-IT systems include embedded
     technology such as microcontrollers.  The Company has determined
     that it has approximately 85 to 95 pieces of equipment with such
     embedded technology.  The Company is in the process of requesting
                                      90 <PAGE>
     and receiving information from various equipment manufacturers to
     determine whether repairs or replacements are needed.  As to
     approximately one-third of such machines so far, the Company has
     either completed needed repairs or has received information
     verifying that no repairs are needed.  The Company plans to complete
     assessment of Non-IT systems by the end of December, 1998, followed
     by repairs of Non-IT systems by the end of May, 1999.

           3.  THIRD PARTIES. It is critical to the Company's readiness
     for the Year 2000 that third parties with whom the Company deals are
     also prepared.  Such third parties include utility companies, banks
     (and the Federal Reserve), distributors, suppliers, vendors,
     customers, and shippers.

          The Company is only in the early stages of assessing the Year
     2000 readiness of such third parties.  The Company is in the process
     of sending surveys to third parties to certify their Year 2000
     compliance.

          The Company has retained an outside consultant to assist and
     advise the Company through a comprehensive, step by step approach to
     achieving Year 2000 readiness.  The written plan to accomplish this
     important goal outlines 450 tasks, of which the Company has
     completed only 83.  However, the Company is committed to completing
     all 450 tasks and achieving Year 2000 readiness well in advance of
     mid-1999.

          The most likely worst case Year 2000 scenarios include a
     possible inability:  (1) to receive power required for operation of
     the Company's facilities; (2) to access funds or make a payroll,
     because of the Company's banking connections or the Federal Reserve
     being unprepared; (3) to order and receive needed raw materials
     because of a vendor's or the Company's own systems being non-Year
     2000 compliant; (4) to receive, and fill, or ship customer orders
     because of a customer's, shipper's, or the Company's own systems
     being non-Year 2000 compliant; or (5) to meet production needs
     because of the non-Year 2000 compliance of its own IT and/or non-IT
     systems.

          The Company has not yet started to develop contingency plans
     for such worst-case scenarios.  The Company intends to create such
     contingency plans in the future only if any of such problems appear
     to be a real possibility as the Year 2000 comes closer.

          The Company will continue to utilize internal and external
     resources to implement, reprogram, or replace and test software and
     related assets affected by the Year 2000 Issue.  The Company hopes
     to complete the majority of its efforts in this area by early 1999
     leaving adequate time to assess and correct any significant issues
     that may materialize.  The total cost of the Year 2000 project is
     estimated at $300,000 to $435,000 and is being funded through
     operating cash flows.  The Company will be able to capitalize new
     purchases of software and hardware portions of this cost.  Thus far
     the Company has spent approximately $25,000 on Year 2000
     remediation.

          The costs of the project and the timetable in which the Company
     plans to complete the Year 2000 compliance requirements are based on
                                      91 <PAGE>
     management's best estimates, which were derived utilizing numerous
     assumptions of future events including the continued availability of
     certain resources, third party modification plans and other factors. 
     However, there can be no guarantee that these estimates will be
     achieved and actual results could differ materially from these
     plans.  Specific factors which might cause such material differences
     include, but are not limited to, the availability and cost of
     personnel trained in this area, the ability to locate and correct
     all relevant computer chip codes, and similar uncertainties.

          The Company periodically updates its current Year 2000 status
     on its website at www.bmed.com.

     CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

          Certain statements contained in this Annual Report and other
     written and oral statements made from time to time by the Company do
     not relate strictly to historical or current facts.  As such, they
     are considered "forward-looking statements" which provide current
     expectations or forecasts of future events.  Such statements can be
     identified by the use of terminology such as "anticipate,"
     "believe," "estimate," "expect," "intend," "may," "could,"
     "possible," "plan," "project," "will," "forecast" and similar words
     or expressions.  The Company's forward-looking statements generally
     relate to its growth strategies, financial results, product
     development and regulatory approval programs, and sales efforts. 
     One must carefully consider forward-looking statements and
     understand that such statements involve a variety of risks and
     uncertainties, known and unknown, and may be affected by inaccurate
     assumptions, including, among others, those discussed below.  See
     "Risk Factors."  Consequently, no forward-looking statement can be
     guaranteed and actual results may vary materially.

          The Company does not undertake to update any forward-looking
     statement, but investors are advised to consult any further
     disclosures by the Company on this subject in its filings with the
     Securities and Exchange Commission, especially on Forms 10-K, 10-Q,
     and 8-K (if any), in which the Company discusses in more detail
     various important factors that could cause actual results to differ
     from expected or historic results.  The Company notes these factors
     as permitted by the Private Securities Litigation Reform Act of
     1995.  It is not possible to foresee or identify all such factors. 
     As such, investors should not consider any list of such factors to
     be an exhaustive statement of all risks, uncertainties or
     potentially inaccurate assumptions.

                                 RISK FACTORS

          COMPETITION.  The medical device industry is characterized by
     rapidly evolving technology and increased competition.  There are a
     number of companies that currently offer, or are in the process of
     developing, products that compete with products offered by the
     Company, including the Company's flagship TRACH CARE closed suction
     catheter.  Some of these competitors have substantially greater
     capital resources, research and development staffs and experience in
     the medical device industry.  These competitors may succeed in
     developing technologies and products that are more effective than
     those currently used or produced by the Company or that would render
                                      92 <PAGE>
     some products offered by the Company obsolete or noncompetitive. 
     Competition based on price is becoming an increasingly important
     factor in customer purchasing patterns as a result of cost
     containment pressures on, and consolidation in, the health care
     industry.  Such competition has exerted, and is likely to continue
     to exert, downward pressure on the prices the Company is able to
     charge for its products.  The Company may not be able to offset such
     downward price pressure through corresponding cost reductions. 
     Price reductions could have an adverse impact on the business,
     results of operations, financial condition, or cash flows of the
     Company. 

          INTELLECTUAL PROPERTY RIGHTS.  From time to time, the Company
     has received, and in the future may receive, notices of claims with
     respect to possible infringement of the intellectual property rights
     of others or notices of challenges to the Company's intellectual
     property rights.  In some instances such notices have given rise to,
     or may in the future give rise to, litigation.  Any litigation
     involving the intellectual property rights of the Company may be
     resolved by means of a negotiated settlement or by contesting the
     claim through the judicial process.  There can be no assurance that
     the business, results of operations or the financial condition of
     the Company will not suffer an adverse impact as a result of
     intellectual property claims that may be commenced against the
     Company in the future.  The Company owns certain patents and
     proprietary information acquired while developing its products or
     through acquisitions, and the Company is the licensee of certain
     other technology.  As patents expire, more competing products may be
     released into the marketplace by other companies.  The ability of
     the Company to continue to compete effectively with other medical
     device companies may be materially dependent upon the protection
     afforded by its patents and the confidentiality of certain
     proprietary information.  There can be no assurance that patents
     will be issued for products and product improvements recently
     released into the marketplace or for products presently being
     developed.

          MANAGED CARE AND OTHER HEALTH CARE PROVIDER ORGANIZATIONS. 
     Managed care and other health care provider organizations have grown
     substantially in terms of the percentage of the population in the
     United States that receives medical benefits through such
     organizations and in terms of the influence and control that they
     are able to exert over an increasingly large portion of the health
     care industry.  These organizations are continuing to consolidate
     and grow, increasing the ability of these organizations to influence
     the practices and pricing involved in the purchase of medical
     devices, including the products sold by the Company.

          HEALTH CARE REFORM/PRICING PRESSURE.  The health care industry
     in the United States continues to experience change.  Health care
     reform proposals have been formulated by members of Congress.  In
     addition, state legislatures periodically consider various health
     care reform proposals.  Federal, state and local government
     representatives will, in all likelihood, continue to review and
     assess alternative health care delivery systems and payment
     methodologies, and ongoing public debate of these issues can be
     expected.  Cost containment initiatives, market pressures and
     proposed changes in applicable laws and regulations may have a
                                      93 <PAGE>
     dramatic effect on pricing or potential demand for medical devices,
     the relative costs associated with doing business and the amount of
     reimbursement by both government and third-party payors.  In
     particular, the industry is experiencing market-driven reforms from
     forces within the industry that are exerting pressure on health care
     companies to reduce health care costs.  These market-driven reforms
     are resulting in industry-wide consolidation that is expected to
     increase the downward pressure on product margins, as larger buyer
     and supplier groups exert pricing pressure on providers of medical
     devices and other health care products.  Both short-term and long-
     term cost containment pressures, as well as the possibility of
     regulatory reform, may have an adverse impact on the Company's
     results of operations and financial condition.  The Company's
     products consist primarily of disposable medical devices.  Cost
     containment pressures on hospitals are leading some facilities to
     use certain disposable devices longer than they have been used in
     the past, even longer than permitted by product labelling.  This
     phenomenon could result in a reduction in Company sales, because
     extended use and device reuse mean fewer unit purchases.

          GOVERNMENT REGULATION.  There has been a trend in recent years,
     both in the United States and outside the United States, toward more
     stringent regulation of, and enforcement of requirements applicable
     to, medical device manufacturers.  The continuing trend of more
     stringent regulatory oversight in product clearance and enforcement
     activities has caused medical device manufacturers to experience
     longer approval cycles, more uncertainty, greater risk and greater
     expense.  At the present time, there are no meaningful indications
     that this trend will be discontinued in the near-term or the long-
     term either in the United States or abroad.  The Company expects to
     continue to incur additional operating expenses associated with its
     ongoing regulatory compliance program, but the amount of these
     incremental costs cannot be completely predicted and will depend
     upon a variety of factors, including future changes in statutes and
     regulations governing medical device manufacturers.  There can be no
     assurance that such compliance requirements and quality assurance
     programs will not have an adverse impact on the business, results of
     operations or financial condition of the Company or that the Company
     will not experience problems associated with FDA regulatory
     compliance.

          NEW PRODUCT INTRODUCTIONS.  As the existing products of the
     Company become more mature and its existing markets more saturated,
     the importance of developing or acquiring new products will
     increase.  The development of any such products will entail
     considerable time and expense, including research and development
     costs and the time and expense required to obtain necessary
     regulatory approvals, which could adversely affect the business,
     results of operations or financial condition of the Company.  There
     can be no assurance that such development activities will yield
     products that can be commercialized profitably, or that any product
     acquisition can be consummated on commercially reasonable terms or
     at all.  Any failure to acquire or develop new products to
     supplement more mature products could have an adverse impact on the
     business, results of operations or financial condition of the
     Company.
                                      94 <PAGE>
          TECHNOLOGICAL CHANGE.  The medical technology as utilized by
     the Company has been subject to rapid advances.  While the Company
     feels that it currently possesses the technology necessary to carry
     on its business, its commercial success will depend on its ability
     to remain current with respect to such technological advances and to
     retain experienced technical personnel.  Furthermore, there can be
     no assurance that other technological advances will not render the
     Company's technology and certain products uneconomical or obsolete.

          PRODUCT LIABILITY EXPOSURE.  Because its products are intended
     to be used in health care settings on patients who are
     physiologically unstable and may also be seriously or critically
     ill, the Company is exposed to potential product liability claims. 
     From time to time, patients using the Company's products have
     suffered serious injury or death, which has led to product liability
     claims against the Company.  Some product liability claims have been
     inherited by the Company through business acquisitions.

          The Company maintains product liability coverage in the amount
     of $5,000,000 through Medmarc, 4000 Legato Road, Suite 800, Fairfax,
     Virginia.  This is a claims made policy, with a deductible of
     $10,000 per occurrence and $75,000 aggregate maximum per year.  The
     Company maintains excess liability coverage in the amount of
     $10,000,000 through American International Group Specialty Lines,
     Inc., 70 Pine Street, New York, New York.  The Company deems this
     coverage sufficient for its business.  However, there can be no
     assurance that such coverage will ultimately prove to be adequate,
     or that such coverage will continue to remain available on
     acceptable terms or any terms at all.

          ACQUISITIONS.  In order to continue increasing sales volume and
     profits, the Company relies heavily on a program of acquiring
     business and new product lines from other companies.  There is
     always a significant risk that a given acquisition by the Company
     will prove to be unsuccessful or end up not contributing
     sufficiently to sales and profit growth of the Company.  There is
     also a risk that undiscovered or contingent liabilities of an
     acquired company could negatively impact the Company's financial
     position or even the acquisition transaction itself.  The
     integration of any businesses that the Company might acquire could
     require substantial management resources.  The moving of acquired
     product lines can also result in interruptions in production and
     backorders.  There can be no assurance that any such integration
     will be accomplished without having a short or potentially long-term
     adverse impact on the business, results of operations or financial
     condition of the Company or that the benefits expected from any such
     integration will be fully realized.

          From time to time the Company issues its own common stock in
     order to acquire other companies.  Such increases in the number of
     outstanding Company shares could have a dilutive effect on the
     Company's earnings per share and on the Company's book value per
     share depending upon several factors including:  (1) the
     profitability of the acquired company; (2) the number of shares of
     Company common stock issued for the acquisition; and (3) whether the
     transaction can be treated as a pooling of interests.  The issuance
     of Company common stock for material acquisitions could also result
     in large blocks of Company stock being held by new voting groups and
                                       95 <PAGE>
     could therefore have an effect on the voting control of the Company.

          The Company prefers whenever possible to use its stock, rather
     than cash, to acquire other companies and intends to continue this
     acquisition policy.

          The Company continues to devote substantial management
     resources to looking for additional companies and product lines to
     acquire.  At almost any given point in time, the Company is in the
     process of a preliminary review of various potential target
     companies, or involved in more comprehensive due diligence, or
     involved in preliminary or final negotiations for the acquisition.  

          INTANGIBLES.  As of September 30, 1998, $38,327,628 (17.2%) of
     the Company's total assets consisted of intangible assets (cost in
     excess of fair value of net assets acquired and patents and other
     intangibles) net of amortization.  $26,524,776 of these intangible
     assets represent the difference between the purchase price paid by
     the Company for various acquisitions, and the fair market value of
     net assets purchased, net of amortization.  The approximate amount
     of amortization expense related to intangibles for fiscal year 1998
     was $4,089,000, and this of course reduces net income.  There can be
     no assurance that assets, businesses, and product lines purchased
     through acquisitions will retain their value.  If such acquired
     assets were to lose value, corresponding goodwill included in
     intangibles may have to be written off all at once, resulting in a
     possible significant charge to earnings and earnings per share.  The
     Company periodically reviews the carrying value of its intangible
     assets based on current and anticipated undiscounted cash flows and
     recognizes impairment when such cash flows will be less than the
     carrying values.

          DIVIDENDS.  Prior to January, 1990, no dividends had been paid
     by the Company on its shares of Common Stock.  The Company has paid
     dividends since January, 1990.  However, there can be no assurance
     that dividends will be paid on shares in the future, particularly
     since the Company prefers to reserve its cash and liquid assets for
     growth and possible business acquisitions.

          UNCERTAINTY OF FINANCIAL RESULTS AND CAPITAL NEEDS.  There may
     be substantial fluctuations in the Company's results of operations
     because of the timing and recording of revenues and market
     acceptance of existing Company products.  The ability of the Company
     to expand its manufacturing and marketing operations cannot be
     predicted with certainty.  If revenues do not continue to increase
     as rapidly as they have in the past few years, or if manufacturing,
     marketing, or research and development are not successful or require
     more money than is anticipated, the Company may have to scale back
     product marketing, development and production efforts and attempt to
     obtain external financing.  There can be no assurance that the
     Company would be able to obtain timely external financing in the
     amounts required or that such financing, if available, would be on
     terms advantageous to the Company. 

          SUPPLY OF RAW MATERIALS.  Certain of the Company's products are
     dependent upon raw materials for which there are few sources.  So
     far, the Company has not had any serious problems obtaining needed
     raw materials. 
                                       96 <PAGE>
          IMPACT OF CURRENCY FLUCTUATIONS; IMPORTANCE OF FOREIGN SALES. 
     Because certain sales of products by the Company outside the United
     States typically are denominated in local currencies, the results of
     operations of the Company are expected to continue to be affected by
     changes in exchange rates between certain foreign currencies and the
     United States Dollar.  There can be no assurance that the Company
     will not experience currency fluctuation effects in future periods,
     which could have an adverse impact on its business, results of
     operation or financial condition.  The operations and financial
     results of the Company also may be significantly affected by other
     international factors, including changes in governmental regulations
     or import and export restrictions, and foreign economic and
     political conditions generally.

          The Company's ability to continue to sell products into Europe
     is dependent to a large extent on its ability to maintain the
     important ISO 9001/EN 4601 certification and the CE marking of
     conformity.  If the Company were to lose such certifications, such
     loss would have a material, adverse impact on international sales
     and profits.

          For the fiscal year ending September 30, 1998, international
     sales ($18,221,425) were 12.1% of net sales of the Company. 

          POSSIBLE VOLATILITY OF STOCK PRICE.  The market price of the
     Company's stock is, and is expected to continue to be, subject to
     significant fluctuations in response to variations in quarterly
     operating results, trends in the health care industry in general and
     the medical device industry in particular, and certain other factors
     beyond the control of the Company.  In addition, broad market
     fluctuations, as well as general economic or political conditions
     and initiatives, may adversely impact the market price of the
     Company's stock, regardless of the Company's operating performance.

          YEAR 2000 ISSUES.  The approaching Year 2000 could result in
     challenges related to computer software, manufacturing and
     communications equipment, accounting records, and relationships with
     suppliers and customers.  The Company is in the process of
     addressing the Year 2000 Issue.  See "2000 ISSUES."

     GLOSSARY OF TECHNICAL AND MEDICAL TERMS

      1.  Ampulla of Vater is the point at which the pancreatic duct and
          common bile duct gains entry into the duodenum.

      2.  Biliary tree consists of the gallbladder, hepatic, cystic and
          common bile ducts.

      3.  Bronchoalveolar lavage is a medical procedure for obtaining
          samples from smaller airways in the lungs.  A catheter is
          wedged into the bronchus.  Then a lavage fluid is injected into
          the airways.  A fluid sample is withdrawn to determine whether
          infectious organisms are present in the airways or air sacs.

      4.  Biopsy is an excision of a small piece of living tissue for
          microscopic examination.

      5.  Cannulate is to introduce a cannula through a passageway.
                                      97 <PAGE>
      6.  Catheter is a flexible tube that is inserted into the body to
          deliver or remove fluid or act as a conduit to pass other
          devices.

      7.  Closed suction catheter is a sleeved catheter used to suction
          the endotracheal tube of a patient receiving mechanical
          ventilation.  The catheter keeps the patient oxygenated because
          the ventilator is not disconnected during the suctioning
          procedure.

      8.  Coagulate means to solidify or change from a fluid state to a
          semisolid mass.

      9.  Contrast medium in radiology is the use of a radiopaque
          substance to provide a contrast in density between the tissue
          or organ being filmed and the medium.

     10.  Cytology brush is a brush used to collect cell samples from the
          gastrointestinal or pulmonary tract.

     11.  Endoscope is an instrument consisting of a tube and optical
          system used in the examination of a hollow organ or cavity.

     12.  Endoscopic refers to a procedure performed by means of an
          endoscope.

     13.  Endoscopist is a physician who utilizes an endoscope for
          inspection of the gastrointestinal tract.

     14.  Endoscopy is an examination of organs or cavities by use of an
          endoscope.

     15.  Endotracheal tube is a tube inserted into the patient's upper
          airway allowing medical ventilatory support.

     16.  Enteral feeding catheter is a catheter used for the delivery of
          nutritional liquids into the stomach of the patient.

     17.  ERCP is an endoscopic technique for fluoroscopic examination of
          the biliary and/or pancreatic ducts.

     18.  Exogenous means originating outside an organ or part.

     19.  Fluoroscopy is the use of a fluoroscope for medical diagnosis
          or for testing various materials by roentgen rays.

     20.  Gastric means pertaining to the stomach.

     21.  Gastrointestinal means pertaining to the stomach and intestine.

     22.  Gastrostomy is an examination of the stomach and abdominal
          cavity by use of a gastroscope.

     23.  Helicobacter pylori, or H. pylori, is a bacterium which lives
          only in the lining of the stomach and is one of the most common
          chronic infections in humans. 
                                      98 <PAGE>
     24.  Jejunal means pertaining to the jejunum, the second portion of
          the small intestine extending from the duodenum to the ileum.

     25.  Jejunostomy is a surgical creation of a permanent opening
          through the skin into the jejunum.

     26.  Lesion is a circumscribed area of pathologically altered
          tissue.

     27.  Mucosa is a mucus membrane or the moist tissue layer that lines
          a hollow organ or body cavity.

     28.  Nebulizer is an apparatus for producing a fine spray or mist.

     29.  Nosocomial infection is an infection acquired while a patient
          is in a hospital.

     30.  Papilla is a small, nipple-like protuberance or elevation.

     31.  Percutaneous Endoscopic Gastrostomy (PEG) catheter is a
          flexible tube inserted through the mouth, esophagus, and
          stomach to the outside of the body with the aid of an
          endoscope.  Name refers to the placement procedure and is a
          variation of a gastrostomy tube.

     32.  Polyp means a tumor with a pedicle.

     33.  Polypectomy is a medical procedure for removal of polyps
          (growths).

     34.  Resection means a partial excision of a bone or other
          structure.

     35.  Septic means pertaining to pathogenic organisms or their
          toxins, i.e., putrid, rotten or decayed.

     36.  Stenosed means constricted.

     37.  Stimulation electrodes are disposable, pre-gelled pads which
          replace conventional defibrillation paddles or internal
          transvenous pacing leads to allow convenient, hands-free,
          noninvasive cardioshock and external pacing.

     38.  A surfactant is an agent that lowers surface tension.

     39.  Transgastric pertains to a bypass of the stomach.  Transgastric
          tubes are placed through the skin and into the stomach, with
          the distal tip terminating in the jejunum, or elsewhere in the
          digestive system.

     40.  Varix means an enlarged and tortuous vein or artery.

     41.  A ventilator is a life support device used to assist breathing.
                                      99 <PAGE>
                                   DIRECTORS

     NAME                     TITLE

     Dale H. Ballard          Chairman of the Board, Chief Executive
                              Officer, and President of Ballard Medical
                              Products

     John I. Bloomberg        General Partner of J.I.B. Associates,
                              Bricoleur Partners, Olympic Growth Fund,
                              and Utah Capital Corp., all private 
                              investment companies

     J. Dallas VanWagoner     Retired Physician

     Robert V. Petersen       Professor Emeritus of Pharmaceutics at the
                              University of Utah

     E. Martin Chamberlain    Vice President of Regulatory Affairs and
                              Corporate Secretary of Ballard Medical
                              Products

     Dale H. Ballard, Jr.     Owner of his own financial planning
                              business called Stratco

     Paul W. Hess             General Counsel of Ballard Medical Products


                                   OFFICERS

     NAME                     TITLE

     Dale H. Ballard          President, Chief Executive Officer, and
                              Chairman of the Board.

     Harold R. ("Butch")      Executive Vice President and 
     Wolcott                  General Manager

     E. Martin Chamberlain    Vice President of Regulatory Affairs and
                              Corporate Secretary

     Donald C. Eiring         Vice President of Sales for 
                              Critical Care Division

     Dennis B. Cox            Vice President of Sales for
                              Interventional Division

     Clyde H. Baker           Vice President of Sales for Primary 
                              Care Division

     Chris Thomas             Vice President of Corporate
                              Development

     R. Dennis Eyre           Vice President of Marketing for
                              Critical Care Division

                                      100 <PAGE>
     NAME                     TITLE

     Bradford D. Bell         Vice President of International
                              Division

     Kenneth R. Sorenson      Treasurer and Chief Financial Officer

     Paul W. Hess             General Counsel


                            SHAREHOLDER INFORMATION

     CORPORATE HEADQUARTERS

          Ballard Medical Products
          12050 Lone Peak Parkway
          Draper, Utah 84020
          Phone:  (801) 572-6800
          Fax:  (801) 572-6869
          Web site:  www.bmed.com

     TRANSFER AGENT

          Zions First National Bank
          P.O. Box 30880
          One South Main
          Salt Lake City, Utah 84130 

     ANNUAL MEETINGS

          The Annual Meeting of Stockholders of Ballard Medical Products
     has not yet been scheduled.

     FORM 10-K

          Any shareholder who sends a written request to the Company's
     Secretary, E. Martin Chamberlain, at Ballard Medical Products, 12050
     Lone Peak Parkway, Draper, Utah 84020, may obtain without charge a
     copy of the Company's Form 10-K for fiscal year 1998, including the
     financial statements and the financial schedules.

     SHAREHOLDER/ANALYST INQUIRIES

          Shareholders, analysts, and others seeking information about
     the Company are encouraged to contact Kenneth R. Sorenson, Chief
     Financial Officer, Ballard Medical Products, 12050 Lone Peak
     Parkway, Draper, Utah 84020, with any questions or comments.

                                      101 <PAGE>
     RESEARCH COVERAGE

          The following firms currently provide research coverage of
     Ballard Medical Products:

          Avalon Research Group - Providence, Rhode Island
          AG Edwards - St. Louis, Missouri
          Bear Stearns - New York, New York
          Select Equity Group, Inc. - New York, New York
          Southwest Securities - Dallas, Texas
          Sutro & Co. - Los Angeles, California
          Tucker Anthony - Boston, Massachusetts
          Volpe, Brown, Whelan & Company - San Francisco,
               California

     AUDITORS 

          Deloitte & Touche LLP
          50 South Main Street, Suite 1800
          Salt Lake City, Utah 84144 


















                                     102 <PAGE>
 
                                  EXHIBIT 21

                   SUBSIDIARIES OF BALLARD MEDICAL PRODUCTS


                    JURISDICTION OF     BUSINESS       PARENT
     SUBSIDIARY     INCORPORATION       NAME           CORPORATION 

     1194127        Canada              1194127        691555
     Ontario Inc.                       Ontario Inc.   Ontario
                                                       Limited

     691555 Ontario Canada              Preferred      Ballard
     Limited                            Medical        Medical
                                        Products       Products
                                                       (Canada)
                                                       Inc.

     Ballard        Virgin              Ballard        Ballard
     International, Islands             International, Medical
     Inc.                               Inc.           Products

     Ballard        Canada              Ballard        Ballard
     Medical                            Medical        Medical
     Products                           Products       Products
     (Canada)                           (Canada)
     Inc.                               Inc.

     Ballard        Utah                Ballard        Ballard
     Purchase                           Purchase       Medical
     Corporation                        Cororation     Products

     Ballard        Utah                Ballard        Ballard
     Real Estate                        Real Estate    Medical
     Holdings, Inc.                     Holdings, Inc. Products

     Cardiotronics  Colorado            Cardiotronics  Ballard
     Sytems, Inc.                       Systems, Inc.  Medical
                                                       Products

     Medical        California          Medical        Ballard
     Innovations                        Innovations    Medical
     Corporation                        Corporation    Products

     Mist Assist,   Delaware            Mist Assist,   Ballard
     Inc.                               Inc.           Medical
                                                       Products

     Plastic        Ohio                Plastic        Ballard
     Engineered                         Engineered     Medical
     Products                           Products       Products
     Company                            Company

                                     103 <PAGE>
                    JURISDICTION OF     BUSINESS       PARENT
     SUBSIDIARY     INCORPORATION       NAME           CORPORATION

     Preferred      New York            Preferred      691555
     Medical                            Medical        Ontario
     Products, Inc.                     Products       Limited

     R2 Medical     California          R2 Medical     Cardiotronics
     Systems, Inc.                      Systems, Inc.  Systems, Inc.

     Tri-Med        Kansas              Tri-Med        Ballard
     Specialties,                       Specialties,   Medical
     Inc.                               Inc.           Products































                                      104 <PAGE>