EXHIBIT 13

                            BALLARD MEDICAL PRODUCTS

                                  ANNUAL REPORT

                                      1997


                                ABOUT THE COMPANY

               Ballard Medical Products ("Ballard") is  a manufacturer
          and marketer of specialized  medical products.  Our strategy
          for maintaining  the Company's growth continues  to focus on
          the following four objectives:

               -    Developing     innovative     products     through
                    acquisitions  and  through  internal research  and
                    development. 

               -    Maintaining  the  highest   quality  possible   on
                    products.

               -    Increasing  sales through a  superior sales force,
                    through strategic accounts and  national contracts
                    with hospital buying groups, and through expansion
                    in the international marketplace.

               -    Reducing costs through production efficiencies.

               Ballard  has  seven wholly-owned  subsidiaries, MEDICAL
          INNOVATIONS   CORPORATION   ("MIC"),  BALLARD   REAL  ESTATE
          HOLDINGS,  INC.  ("BREH"),   BALLARD  PURCHASE   CORPORATION
          ("BPC"), BALLARD INTERNATIONAL, INC. ("BI"), BALLARD MEDICAL
          PRODUCTS  (CANADA)  INC.   dba  PREFERRED  MEDICAL  PRODUCTS
          ("PMP"), PLASTIC ENGINEERED PRODUCTS COMPANY ("PEPCO"), MIST
          ASSIST,  INC.  ("Mist Assist"),  and  CARDIOTRONICS SYSTEMS,
          INC. ("Cardiotronics").  (As  used in this report, the  term
          "Company"   refers  to  Ballard  Medical  Products  and  its
          subsidiaries.)

               The Company's headquarters and  principal manufacturing
          plant (378,000 square feet) is located in Draper, Utah.  The
          Company  has  a  separate  manufacturing  facility  (208,000
          square feet) in Pocatello, Idaho.    

               The Company's  products are  sold in 66  countries, and
          the  customers  purchasing  our products  include  more than
          15,000   hospitals   and  other   medical   care  facilities
          worldwide.     At  September  30,  1997,   Ballard  and  its
          subsidiaries employed over 1,145 people in 9 countries.  

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


                                 1997 IN REVIEW

               Fiscal year  1997 was  another record setting  year for
          the  Company.  Our net sales for the year were $125,307,178,
          compared to  $103,525,263 for fiscal year 1996, representing
          a  21.1% increase for the year.  Net income grew by an 18.9%
          growth  rate,  from  $25,603,039  in  fiscal  year  1996  to
          $30,426,287 in fiscal year 1997.  Earnings per share for the
          year were $1.04 cents,  up 18.2% over $0.88 for  fiscal year
          1996.   We continue to  be very pleased  with these results,
          particularly  in  view   of  the   increasing  pricing   and
          competitive pressures on many of our products.

               During fiscal year 1997, international sales of Company
          products  increased by 52.5%.   We now have 10 international
          sales  representatives  and  approximately 70  international
          distributors.   We  continue  to look  to the  international
          markets as an important growth opportunity for the Company. 

               In  December,  1996,  Ballard  acquired  Cardiotronics,
          located in  Carlsbad, California,  in a  merger transaction,
          for  a total  purchase  price of  approximately  $12,700,000
          ($3.75  per   common   share).     Cardiotronics   develops,
          manufactures,  and  markets medical  devices  for the  acute
          management  of  heart   rate  disorders.    Its   disposable
          stimulation  electrodes  replace  traditional  defibrillator
          paddles and facilitate  external defibrillation and  pacing,
          and  enable  hospitals  to standardize  using  Cardiotronics
          stimulation   electrodes,    regardless   of   defibrillator
          manufacturer.  Heart rate disorders are suffered by millions
          of patients each year who are experiencing a heart attack or
          who are undergoing an interventional heart procedure such as
          coronary angioplasty, cardiac  arrhythmia ablation, or  open
          heart surgery.  

               In  July, 1997,  we  completed the  monumental task  of
          relocating the manufacturing operations of MIC from Milpitas
          and San Jose, California to our Pocatello facility.  Earlier
          in  the year, we also moved the PEPCO operations (from Canal
          Fulton, Ohio) and the  PMP operations (from Thorold, Canada)
          to our  Draper,  Utah  facility.    We  believe  that  these
          consolidations  of   operations  will  help  us   to  reduce
          manufacturing costs, through increased efficiencies.  

               The Company  has been  aggressive  in seeking  national
          contracts with  major hospital  groups.  For  example during
          the past year the Company acquired two significant contracts
          with  Premier  and VHA  for  our TRACH  CARE  closed suction
          system, in which these groups have agreed to use the Company
          as the  sole source  for purchasing closed  suction systems.
          These two  groups consist of approximately  3,800 facilities
          and account for approximately 59% of the U.S. closed suction
          market. 

               In  addition to  the  above TRACH  CARE contracts,  the
          Company has  added contracts on our enteral feeding and FOAM
          CARE products,  which will allow  us to continue  our growth
          with these product segments.

               Our Strategic  Accounts  Department is  also  expanding
          into the extended  and home care  markets, and has  recently
          signed new contracts that will  allow for the utilization of
          our products through the continuum of medical care.


                                    PRODUCTS

               The  Company's  strong   commitment  to   acquisitions,
          research  and  development,  and  product  enhancements  has
          enabled the Company  to continue to be a  significant player
          in certain  domestic markets, such as  the closed suctioning
          market and the chronic enteral  feeding market, and now also
          in the  heart stimulation electrodes market.   The Company's
          products  are  described below  (for definitions  of various
          terms, see "Glossary of Technical and Medical Terms"):

          CARDIOTRONICS PRODUCTS

               *    The products acquired  from Cardiotronics  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 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 inside the new envelope material.  

               *    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  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 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  THERMAL OPTION  disposable biopsy/coagulating
          forcep is a unique dual-purpose device enabling endoscopists
          to obtain precision cut tissue samples as well  as providing
          "on demand" coagulating  capability for  patient safety  and
          cost efficiency.

               *    The  disposable  Cytology  Brush   incorporates  a
          unique  barium loaded "cap" at  the distal end  of the brush
          that  enables  an  endoscopist  to  obtain  "site  specific"
          cytological samples while maximizing cell retention.

               *    The CAN-OPT Disposable Dual-Lumen ERCP Catheter is
          an  endoscopic  accessory  used  to detect  gall  stones  by
          cannulating and  injecting contrast  media into  the biliary
          duct.

               *    The CAN-OPT Disposable Needle-Knife Papillotome is
          an  endoscopic  accessory  used  to remove  gall  stones  by
          incising stenosed papillas.

               *    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  operating room.   FOAM  CARE is  one of  our
          franchise products, affording us unique opportunities in the
          operating  room, and  providing additional  avenues for  the
          sale of MIC  products. FOAM CARE  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.

          OTHERS

               *    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  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.

               *    The MIST ASSIST  breaching 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 August,  1997, the Company completed construction of
          a separate warehouse facility  (102,000 square feet) west of
          its Draper, Utah  facility, at a total  construction cost of
          approximately $3,367,000.  

               Also during this past fiscal year, the Company expended
          approximately  $5,500,000, in  expanding and  remodeling its
          Pocatello facility, in preparation for the relocation of MIC
          from Milpitas and San  Jose, California to Pocatello, Idaho.
          Total  square  footage  at Pocatello  is  now  approximately
          208,000.

               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.


                               FOREIGN OPERATIONS

               The  following table  sets forth  the dollar  amount of
          sales by  the Company internationally during  the last three
          fiscal  years.   All  sales shown  are  denominated in  U.S.
          dollars and all payments  are received in U.S. dollars.   No
          foreign  currency is received by the Company.  The amount of
          export sales  to unaffiliated customers does  not exceed 10%
          of the Company's domestic consolidated net sales.

                    FISCAL YEAR            INTERNATIONAL SALES

                      9/30/97                  $12,002,960    

                      9/30/96                   $7,871,946    

                      9/30/95                   $6,172,904    


                                  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 1997 and 1996:  

                                FISCAL YEAR 1997    FISCAL YEAR 1996

           QUARTER                  HIGH     LOW       HIGH       LOW

           First Quarter          19 5/8  16 1/4     18 1/8    15 3/8

           Second Quarter         21 1/4  17 7/8     18 5/8    15 1/8

           Third Quarter          21 1/4  18 1/8     20 5/8    18    

           Fourth Quarter         25     19 9/16     19 1/2    16 1/4

               On  November 19,  1997, the  closing quotation  for the
          Company's  Common  Stock, as  reported  by  the WALL  STREET
          JOURNAL, was 23  1/2 high and  23 low.   As of November  19,
          1997,  there   were  approximately  1,119   holders  of  the
          Company's  common stock  (based  upon the  number of  record
          holders  and including  individual participants  in security
          position listings).  

          DIVIDENDS

               Ballard has  paid the following  cash dividends  during
          the two most recent fiscal years:

                                                      DIVIDEND 
           RECORD DATE             PAYMENT DATE       PER SHARE

           December 18, 1995       January 3, 1996    $.09

           December 16, 1996       January 3, 1997    $.05

           June 16, 1997           July 3, 1997       $.05


                              FINANCIAL HIGHLIGHTS

 SELECTED CONSOLIDATED FINANCIAL DATA (1)(2)
<TABLE>
<CAPTION>

                     1997          1996          1995          1994        1993

 <S>         <C>           <C>            <C>           <C>         <C>

 Net Sales   $125,307,178  $103,525,263   $84,152,967   $67,051,628 $66,532,017

 Other
 Income,
 Net            5,547,587     5,308,873     4,101,037     3,518,832   3,711,891

 Net Income    30,426,287    25,603,039    20,942,616    16,594,198  18,906,755

 Net
 Income
 Per
 Common
 Share 
 Assuming
 Full
 Dilution
 (3)                 1.04           .88           .74           .55         .69

 Total
 Assets       186,448,667   142,465,088   113,702,547    93,243,187  80,764,500

 Cash
 Dividends
 Declared 
 Per Share
 (4)                 .102          .095          .074          .060        .045

</TABLE>

          (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 and Cardiotronics.   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  and PEPCO was accounted for
               as a  pooling of interests.   The selected consolidated
               financial  data have  been prepared  as if  Ballard and
               PEPCO had been combined for all periods presented.

          (3)  Does  not include the cumulative effect  of a change in
               accounting for income taxes in fiscal year 1994.

          (4)  Includes dividends paid by PEPCO.


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

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

          <S>               <C>          <C>          <C>          <C>            

          Net Sales         $33,814,695  $32,218,086  $30,813,873  $28,460,524

          Gross Margin       11,837,375   11,508,282   10,855,360   10,232,965

          Net Income          8,173,788    7,851,476    7,476,352    6,924,671  

          Net Income Per
          Common Share
          Assuming Full
          Dilution                 .276         .267         .256         .239

          FISCAL YEAR 1996
          QUARTERS ENDED:       9/30/96      6/30/96      3/31/96     12/31/95

          Net Sales         $27,201,315  $26,845,811  $25,807,593  $23,670,544

          Gross Margin       17,627,601   17,609,148   16,988,822   15,565,514

          Net Income          6,764,594    6,676,160    6,445,696    5,716,589

          Net Income Per 
          Common Share
          Assuming Full
          Dilution                 .236         .232         .225         .200

</TABLE>

          (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."


                          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,  1997 and  1996, and the  related consolidated
          statements of  operations,  stockholders' equity,  and  cash
          flows  for each  of  the three  years  in the  period  ended
          September  30, 1997.    These financial  statements are  the
          responsibility   of   the   Company's   management.      Our
          responsibility is  to express an opinion  on these financial
          statements based on our audits.

               We conducted  our audits  in accordance  with 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 provide
          a reasonable basis for our opinion.  

               In  our opinion, such consolidated financial statements
          present  fairly, in  all  material respects,  the  financial
          position of Ballard Medical  Products and subsidiaries as of
          September  30,  1997  and 1996,  and  the  results of  their
          operations  and their cash flows for each of the three years
          in  the period ended  September 30, 1997  in conformity with
          generally accepted accounting principles.

               As discussed  in  Notes 1  and  2 to  the  consolidated
          financial statements, effective October  1, 1994 the Company
          changed its method  of accounting for  investment securities
          to conform with Statement of  Financial Accounting Standards
          No. 115.

          Deloitte & Touche LLP
          Salt Lake City, Utah

          November 13, 1997


          CONSOLIDATED BALANCE SHEETS
          SEPTEMBER 30, 1997 AND 1996

<TABLE>
<CAPTION>
          ASSETS                                           1997           1996

          <S>                                     <C>            <C>  

          CURRENT ASSETS:

          Cash and cash equivalents                $21,143,908    $14,164,103 

          Investments available for sale            26,628,312     26,662,598 

          Accounts receivable - trade
          (less allowance for doubtful
          accounts:  1997 - $838,000, 1996 -
          $182,000; and allowance
          for sales returns:  1997 -
          $1,660,000, 1996 - $805,000)              25,320,584     19,944,055 

          Royalties receivable                         375,673      1,351,885 

          Other receivables                            908,287        636,291 

          Inventories:

             Raw materials                          10,798,381      7,171,048 

             Work-in-process                         5,525,067      3,913,804 

             Finished goods                          4,306,858      2,760,008 

          Deferred income taxes                      2,233,042      1,057,303 

          Income tax refund receivable               1,830,946      3,274,000 

          Prepaid expenses                              50,639        169,431 

             Total current assets                   99,121,697     81,104,526 

          PROPERTY AND EQUIPMENT:

          Land                                         873,865      3,944,701   

          Buildings                                 28,922,203     20,131,728 

          Molds                                      4,891,734      3,608,228 

          Machinery and equipment                   10,969,531      9,192,269 

          Vehicles                                     785,440      1,039,175 

          Furniture and fixtures                     3,059,632      2,081,200 

          Leasehold improvements                        30,183        302,394 

          Construction in process                    4,142,563      3,053,296 

             Total                                  53,675,151     43,352,991 

          Less accumulated depreciation            (10,582,953)    (8,058,401)

             Property and equipment - net           43,092,198     35,294,590 

          INTANGIBLE ASSETS: 

          Cost in excess of purchase price
          (less accumulated amortization:
          1997 - $5,231,166; 1996 - $3,212,520)      28,557,783    15,644,651 

          Patents and other
          intangibles (less accumulated
          amortization:  1997 - $1,808,922;
          1996 - $711,431)                           8,280,488      5,012,157 

              Total intangible assets               36,838,271     20,656,808 

          DEFERRED INCOME TAXES                      2,139,902 

          OTHER ASSETS                               5,256,599      5,409,164 

          TOTAL                                   $186,448,667   $142,465,088 


          LIABILITIES AND STOCKHOLDERS' EQUITY             1997           1996
          CURRENT LIABILITIES:

          Accounts payable                          $2,874,529     $2,273,674 

          Accrued liabilities:

             Employee compensation                   3,003,609      1,985,135 

             Royalties                                 432,617        326,492 

             Other                                     449,394        845,183 

             Total current liabilities               6,760,149      5,430,484 

          DEFERRED INCOME TAXES                                     1,110,764 

             Total liabilities                       6,760,149      6,541,248 

          COMMITMENTS AND CONTINGENT
          LIABILITIES (Note 6)   
          STOCKHOLDERS' EQUITY:  

          Common stock - $.10 par value;
          75,000,000 shares authorized;
          issued and outstanding:
          1997 - 28,995,000 shares,
          1996 - 27,702,323 shares,                  2,899,500      2,770,232 

          Additional paid-in capital                55,039,439     38,935,892 

          Unrealized losses on investments
          available for sale                          (223,783)      (156,564)

          Retained earnings                        121,973,362     94,374,280 

             Total stockholders' equity            179,688,518    135,923,840 

          TOTAL                                   $186,448,667   $142,465,088 

</TABLE>

         See notes to consolidated financial statements.


         CONSOLIDATED STATEMENTS OF OPERATIONS
         FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995

<TABLE>
<CAPTION>
                                             1997           1996          1995

          <S>                        <C>            <C>            <C>

          NET SALES                  $125,307,178   $103,525,263   $84,152,967

          COST OF PRODUCTS SOLD        44,433,982     35,734,178    28,070,350

          GROSS MARGIN                 80,873,196     67,791,085    56,082,617

          OPERATING EXPENSES:

          Selling, general and 
          administrative               33,763,756     28,286,793    24,429,181

          Research and development      2,735,298      2,903,805     2,177,117

          Royalties                     1,711,442      1,539,200     1,385,841

             Total operating
             expenses                  38,210,496     32,729,798    27,992,139

          OPERATING INCOME             42,662,700     35,061,287    28,090,478

          OTHER INCOME:

          Interest income               2,129,276      1,917,925     1,923,257

          Royalty income                2,465,840      2,400,000     2,147,620

          Other                           952,471        990,948        30,160

             Total other income         5,547,587      5,308,873     4,101,037

          INCOME BEFORE 
          INCOME TAX EXPENSE           48,210,287     40,370,160    32,191,515

          INCOME TAX EXPENSE           17,784,000     14,767,121    11,248,899  

          NET INCOME                  $30,426,287    $25,603,039   $20,942,616

          NET INCOME PER SHARE:

          Common and common
          equivalent share                 $1.041         $0.895        $0.752

          Common share assuming
          full dilution                    $1.036         $0.884        $0.739

          WEIGHTED AVERAGE NUMBER 
          OF SHARES OUTSTANDING:

          Common and common
          equivalent share             29,222,488     28,614,136    27,844,111

          Common share assuming
          full dilution                29,375,620     28,968,855    28,339,946

</TABLE>

          See notes to consolidated financial statements.


          BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES

          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
          FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995

<TABLE>
<CAPTION>
                                                        Unrealized
                                           Additional    Losses on
                      Common                  Paid-in      Invest-     Retained
                      Shares      Amount      Capital        ments     Earnings

      <S>        <C>         <C>          <C>           <C>        <C>

      BALANCE                                                                  
      OCTOBER
      1, 1994    26,694,589  $2,669,459   $28,287,388              $59,959,522 

      Net                                                           20,942,616 
      income

      Cash
      dividends                                                     (1,983,343)
      paid

      Common                            
      stock                             
      issued 
      from
      exercise
      of stock
      options       205,425      20,543       432,869  

      Acquisi-
      tion and
      retire-
      ment of 
      treasury
      stock        (100,000)    (10,000)                            (1,464,985)

      Tax bene-
      fit
      attribu-
      able to
      apprecia-
      tion in
      value of
      stock 
      issued
      in con-
      junction 
      with the
      exercise
      and
      disqual-
      ifying
      disposi-
      tion of
      incentive
      stock 
      options                                 489,517

      Unre-
      alized
      losses on
      invest-
      ments -
      net of
      tax                                               $(142,728)

      BALANCE
      SEPTEMBER
      30,1995    26,800,014   2,680,002   29,209,774     (142,728)  77,453,810 

      Net
      income                                                        25,603,039 

      Cash
      divi-
      dends
      paid                                                          (2,556,148) 

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

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

      Tax
      benefit
      attri-
      butable
      to appre-
      ciation
      in value
      of stock
      issued in
      conjunc-
      tion with
      the exer-
      cise and
      disquali-
      fying
      dispo-
      sitions
      of incen-
      tive
      stock
      options                                 36,609 

      Unre-
      alized
      losses on
      invest-
      ments -
      net of
      tax                                                 (13,836)

      BALANCE
      SEPTEM-
      BER 30,
      1996       27,702,323   2,770,232    38,935,892    (156,564)  94,374,280 

      Net
      income                                                        30,426,287  

      Cash
      divi
      dends
      paid                                                          (2,827,205)

      Common
      stock
      issued
      from
      exer-
      cise
      of stock
      options     1,292,677    129,268     11,129,231

      Tax
      benefit
      attri-
      butable
      to appre-
      ciation
      in value
      of stock
      issued in
      conjunc-
      tion with
      the exer-
      cise and
      dis-
      quali-
      fying
      dispo-
      sitions
      of incen-
      tive
      stock
      options                               4,974,316

      Unre-
      alized
      losses on
      invest-
      ments                                               (67,219)

      BALANCE
      SEPTEM-
      BER 30,
      1997        28,995,000 $2,899,500   $55,039,439   $(223,783) $121,973,362

</TABLE>

     See notes to consolidated financial statements.

     BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF CASH FLOWS
     FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995  

<TABLE>
<CAPTION>
                                      1997              1996               1995

      <S>                     <C>               <C>                <C>

      CASH FLOWS FROM
      OPERATING
      ACTIVITIES:

      Net income              $30,426,287       $25,603,039        $20,942,616 

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

      Depreciation and
      amortization              6,858,106         3,932,373          3,116,862 

      (Gain) loss on
      disposal of
      property                 (6,253,835)         (446,320)             7,044 

      Impairment of
      investment                4,900,000 

      Tax benefit from
      disqualifying
      dispositions of
      incentive stock
      options                   4,974,316            36,609            489,517 

      Provision for
      losses on
      accounts
      receivable -
      trade and sales
      returns and
      rebates                   2,181,000           355,000            225,000 

      Deferred income
      taxes                      (373,168)          442,122            373,655 

      Changes in
      operating assets
      and liabilities-
      net of effects
      from purchase of
      subsidiaries:

      Accounts
      receivable -
      trade                    (7,072,476)       (6,150,608)           (29,707)

      Royalties and
      other receivables           704,216          (167,553)            52,484 

      Inventories              (6,029,686)       (1,323,492)        (1,398,153) 

      Income tax refund
      receivable                1,443,054        <1,170,430>           897,815 

      Prepaid expenses            254,470           105,898           (196,526)

      Accounts payable           (707,213)          807,483            156,861 

      Accrued
      liabilities                (866,251)           19,180          1,126,009 

         Total
         adjustments               12,533        (3,559,738)         4,820,861 

         Net cash
         provided by
         operating
         activities            30,438,820        22,043,301          25,763,477

      CASH FLOWS FROM
      INVESTING
      ACTIVITIES:
      Capital
      expenditures for
      property and
      equipment               (14,439,471)      (15,292,194)        (2,769,625)

      Proceeds from
      sales of property
      and equipment             6,514,131           564,418             45,250 

      Purchases of
      investments
      available for
      sale                    (46,959,814)      (30,569,641)       (38,534,828)

      Proceeds from
      maturities of
      investments 
      available for
      sale                     46,902,342        22,231,406         36,288,627 

      Investment in
      and advances to
      affiliates               (1,281,661)       (4,462,625)          (800,000)

      Purchases of
      intangible assets          (714,952)       (2,854,344)        (1,330,188)

      Purchases of
      other assets               (108,338)          (12,532)          (109,579)

      Payments for
      purchase of
      subsidiaries,
      net of cash
      acquired                (12,323,417)       (5,618,432)        (3,283,650) 

      Investment in 
      notes receivable            (34,134)

         Net cash used
         in investing
         activities           (22,445,314)      (36,013,944)       (10,493,993)

      CASH FLOWS FROM
      FINANCING
      ACTIVITIES:

      Cash dividends
      paid                     (2,827,205)       (2,556,148)        (1,983,343)

      Proceeds from
      issuance of
      common stock and
      exercise of
      options                  11,258,499         9,814,739            453,412 

      Purchase of
      treasury stock                             (6,161,421)        (1,474,985)

      Repayment of
      long-term debt
      assumed in
      acquisitions             (9,444,995)         (517,754)           (18,446)

         Net cash
         provided by  
         (used in)
         financing 
         activities            (1,013,701)          579,416         (3,023,362)

      NET INCREASE
      (DECREASE) IN
      CASH AND CASH
      EQUIVALENTS               6,979,805       (13,391,227)        12,246,122 

      CASH AND CASH
      EQUIVALENTS,
      BEGINNING OF YEAR        14,164,103        27,555,330         15,309,208 

      CASH AND CASH
      EQUIVALENTS, END
      OF YEAR                 $21,143,908       $14,164,103        $27,555,330 

      SUPPLEMENTAL
      DISCLOSURE OF
      CASH FLOW
      INFORMATION - 
      Cash paid during
      the year for
      income taxes             $11,993,115      $15,458,820         $9,487,912 

</TABLE>

     See notes to consolidated financial statements.  


          SUPPLEMENTAL  DISCLOSURES OF NONCASH INVESTING AND FINANCING
          ACTIVITIES:

               During  1997,  the Company  sold a  parcel of  land for
          $3,265,700 in cash and a promissory note of $3,973,920.

               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 two years in the period ended
          September 30, 1996 were restated as if  this transaction had
          occurred on October 1, 1994.

               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  $673,000  cash.    In  conjunction  with  the
          acquisition, liabilities were assumed as follows:

                    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

               *    On May 2, 1995, the Company acquired substantially
          all of the net  assets of Cox Medical Enterprises,  Inc. for
          approximately $3,313,000 cash (see  Note 8).  In conjunction
          with the acquisition, liabilities were assumed as follows:

               Fair value of assets acquired
               (including good will)                        $4,000,000

               Cash paid                                     3,313,310

               Liabilities assumed                             686,690

          See notes to consolidated financial statements.


          BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES

          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

          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  (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), and Cardiotronics  Systems,
          Inc. (Cardiotronics)  (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.

               INVESTMENTS AVAILABLE FOR  SALE - Investments available
          for sale  consist of tax-free municipal  bonds.  Investments
          are recorded  at fair  market value.   Effective October  1,
          1994, the Company adopted  Statement of Financial Accounting
          Standards   (SFAS)   No.   115,   "Accounting   for  Certain
          Investments in Debt  and Equity Securities."   SFAS No.  115
          requires  the  classification  of investment  securities  as
          either held to  maturity securities, trading securities,  or
          available for sale securities.   Upon adoption of  SFAS 115,
          the Company reclassified 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.

               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.

               INCOME  PER SHARE - Income per share is computed on the
          basis of  the weighted average number  of shares outstanding
          plus the common stock equivalents which would arise from the
          exercise of stock options.  

               STOCK-BASED COMPENSATION -  Effective October 1,  1996,
          the  Company adopted  SFAS No.  123, "Accounting  for Stock-
          Based  Compensation."    SFAS  No.   123  requires  expanded  
          disclosures of stock-based  compensation arrangements.   The
          Company  has  elected  to  continue  to  apply  APB  25  (as
          permitted  by  SFAS  No.  123).   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  - Impairment of long-lived assets is
          determined in accordance with  SFAS No. 121, "Accounting for
          the Impairment of Long-Lived Assets and of Long-Lived Assets
          to be Disposed Of," which was adopted on October 1, 1996.

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

          2.  INVESTMENTS

               Investments available  for sale  at September  30, 1997
          and 1996 consist of municipal bonds.

               The  amortized  cost  and  fair  value  of  investments
          available for sale  at September  30, 1997 and  1996 are  as
          follows:

                                             1997                1996

           Amortized cost            $26,972,594         $26,915,121 
           Gross unrealized                                          
           gains                             None                None

           Gross unrealized
           losses                       (344,282)           (252,523)

           Fair value                $26,628,312         $26,662,598 

               As  of September 30, 1997 and 1996, all municipal bonds
          had a contractual maturity of one year  or less.  During the
          years ended September 30, 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,  1997, the  Company had  an unsecured
          line of credit with a bank totaling $5,000,000 which expires
          February  15, 1998.  The line, if drawn upon, bears interest
          at the  bank's base rate (8.5%  at September 30, 1997).   No
          compensating cash  balances are  required.  As  of September  
          30,  1997  and during  the year  then  ended, there  were no
          borrowings under the line of credit.

          4.  INCOME TAXES

               The  Company  has  recorded  deferred  tax  assets  and
          liabilities at  September 30, 1997 and  1996 which consisted
          of thefollowing temporary differences andcarryforward items:

<TABLE>
<CAPTION>
                                       1997                     1996

                               Current      Long-Term     Current    Long-Term
      
          <S>               <C>          <C>          <C>          <C>     

          Deferred income
          tax assets:

          Allowance for 
          uncollectible
          accounts
          receivable          $320,513                    $69,111

          Allowance for
          sales returns,
          rebates, and
          allowances           664,785                    305,729

          Allowance
          for obsolete
          inventory            451,658                    185,277

          Accrued
          expenses             280,925                    168,549

          Unrealized
          losses on
          investments          120,498                     95,959

          Net operating
          loss carry-
          forwards of
          acquired 
          subsidiaries         394,663    $3,416,727      121,442     $99,562 

          Research and
          development
          credits                                         111,226

          Total             $2,233,042    $3,416,727   $1,057,303     $99,562 

          Deferred income
          tax liabilities-
          differences
          between tax
          basis and 
          financial
          reporting basis
          of property
          and equipment                   (1,276,825)              (1,210,326)

          Net               $2,233,042    $2,139,902   $1,057,303 $(1,110,764)

</TABLE>

              The components of income  tax expense (benefit) for the
          years  ended   September  30,  1997,  1996,   and  1995  are
          summarized as follows:

<TABLE>
<CAPTION>
                                       1997              1996             1995

          <S>                  <C>                <C>               <C>   

          Current:

          Federal              $16,243,278        $12,421,679       $9,425,942

          State                  1,913,890          1,903,320        1,449,302

                                18,157,168         14,324,999       10,875,244

          Deferred:

          Federal                 (324,388)           402,473          323,859

          State                    (48,780)            39,649           49,796

                                  (373,168)           442,122          373,655

          Total                $17,784,000        $14,767,121      $11,248,899

</TABLE>

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

<TABLE>
<CAPTION>
                                  1997           1996           1995

          <S>             <C>            <C>            <C>

          Computed
          Federal income
          tax expense at
          statutory rate  $16,873,600    $14,129,556    $11,082,432 

          State income
          tax expense,
          net of Federal
          benefit           1,590,940      1,317,054        990,493 

          Environmental
          tax                                 16,614         30,000 

          Tax exempt
          income             (410,736)      (553,876)      (624,750)  

          Foreign sales
          corporation        (429,833)      (236,250)      (121,756)

          Amortization
          of goodwill         642,986        335,763        316,969 

          Other              (482,957)      (241,740)      (424,489)

          Total           $17,784,000    $14,767,121    $11,248,899 

</TABLE>

               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 $9,964,000,  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, 1996 and 1995, the
          Company  repurchased  350,000  and  100,000  shares  of  its
          outstanding  common  stock  for $6,161,421  and  $1,474,985,
          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 key employees and reserved shares of common stock
          totaling approximately 2,380,780, 2,926,400 and 3,483,028 at
          September  30,  1997,  1996,  and  1995,  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 expire in seven years.

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


                                                     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


                                                          Price Range
           1995                            Shares           Per Share

           Outstanding at 
           beginning of year            2,898,253        $1.46-$13.50

           Granted                        740,000          9.38-14.25

           Exercised                    (205,425)          1.46-11.00

           Forfeited                    (101,666)          8.63-13.50

           Outstanding at end
           of year                      3,331,162          1.46-14.25

           Options
           exercisable at
           year end                     2,410,490


               The following table  summarizes information about stock
          options outstanding at September 30, 1997:  

<TABLE>
<CAPTION>
                       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

            <S>         <C>              <C>     <C>        <C>         <C> 

             $2.96-
             $4.36       92,002          2.1     $3.95      92,002      $3.95

             8.63-
             12.88      709,174          7.1      9.51     709,174       9.51

             13.50-
             19.88    1,212,275          9.5     18.76     255,800      16.57

             23.00-
             23.63        6,200         10.0    $23.43

             $2.96-
            $23.63    2,019,651          8.3    $14.85   1,056,976     $10.73

</TABLE>
               The Company accounts  for stock  options granted  using
          Accounting Principles  Board (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 and common equivalent share would have
          changed to the pro forma amounts indicated below:

                                             1997                1996

           Net income:

                As reported           $30,426,287         $25,603,039

                Pro forma              25,393,835          24,208,058

           Net income 
           per common and 
           common equivalent
           share:
                As reported                $1.041              $0.895

                Pro forma                   0.869               0.846

           Net income
           per common and
           common equivalent
           share assuming
           full dilution:
                As reported                $1.036              $0.884  

                Pro forma                   0.864               0.836

          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  1997   and  1996,  dividend  yield   of  0.5%;  expected
          volatility  of 33%;  risk-free interest  rate of  5.68%; and
          expected lives of approximately 8 years.

          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
          $810,123,  $671,010,  and  $456,990   for  the  years  ended
          September  30,  1997, 1996,  and  1995,  respectively.   The
          following represents the  Company's future commitments under
          such leases:

                    Year ending
                    September 30

                     1998                          $523,891

                     1999                           288,464

                     2000                           165,610

                     2001                            86,560

                     2002                           101,520

                     Thereafter                     397,620

                     Total                       $1,563,665

               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 Company.

               R2, a  wholly-owned subsidiary  of Cardiotronics,  is a
          co-defendant  in   an   ongoing  product   liability   case.
          Plaintiff  in this  case alleges,  among other  things, that
          defibrillation  pads manufactured  by R2 were  defective and
          seeks  damages of $20 million.  The Company believes that it
          has  valid  defenses;  however,  in  view  of  the  inherent
          uncertainties surrounding  the litigation, no  assurance can
          be  given that R2 will prevail  in this case.  Attorneys for
          R2 are  attempting to negotiate  an out-of-court  settlement  
          for an amount that will be covered by R2's product liability
          insurance  policy.   Management  believes that  a settlement
          will  be  reached that  does not  exceed  the amount  of the
          policy.

          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,
          1997, 1996,  and  1995, the  Company expensed  approximately
          $757,000,  $621,000, and $545,000, 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
          service.  Employees are allowed  to direct the investment of
          their  Plan  contributions  within  a  group  of  designated
          investment funds.

          8.  BUSINESS COMBINATIONS

               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 approxi-mately  $13,136,000,
          which is being amortized over 15 years.

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

                                              1997                1996

          Net sales                   $126,535,215        $113,035,252

          Net income                    29,866,731          20,936,803

          Net income per share  
          assuming full dilution             1.017               0.723

               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 approximately
          $400,000, which is being  amortized on a straight-line basis
          over 10 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 totally 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.

               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.

               On May 2, 1995,  the Company acquired substantially all
          of  the assets  of Cox  for a  purchase price  of $4,000,000
          consisting  of  $3,313,310 in  cash  and  the assumption  of
          liabilities  in  the   amount  of  $686,690.     Cox  is   a
          manufacturer   of  disposable   endoscopic  devices.     The
          acquisition has been accounted for using the purchase method  
          of  accounting; as  such, Cox's  results of  operations have
          been  included in  the  accompanying consolidated  financial
          statements from the date  of acquisition.  The cost  of this
          acquisition   exceeded  the  estimated  fair  value  of  the
          acquired  net assets  by $423,000  which is  being amortized
          over 10 years.

               On  November 14,  1995,  the  Company acquired  200,000
          shares  of   the  preferred  stock   of  Neuro  Navigational
          Corporation (Neuro) representing a  19.5% equity interest in
          Neuro for  $2,000,000.  In  addition, on November  14, 1995,
          the Company  paid Neuro $500,000  for an option  to purchase
          substantially all of its assets.   The Company exercised the
          option  on  February  28,  1997  and  acquired  all  of  the
          remaining  assets of Neuro  for $4,245,422.   The price paid
          for the option and amounts advanced to Neuro were applied to
          the purchase price.

          9.  SALES

               During the  years ended  September 30, 1997,  1996, and
          1995, the Company had  foreign export sales of approximately
          $12,000,000, 7,900,000, and $6,200,000, respectively.

          10.    EFFECT   OF  RECENTLY  ISSUED   FINANCIAL  ACCOUNTING
                 STANDARDS

               In February, 1997,  the Financial Accounting  Standards
          Board  issued SFAS  No.  128,  Earnings  Per  Share.    This
          standard establishes standards for computing  and presenting
          earnings  per  share (EPS).    SFAS No.  128  simplifies the
          approach for computing  earnings per share  previously found
          in  Accounting Principles Board Opinion No. 15.  It replaces
          the presentation of primary EPS with a presentation of basic
          EPS.    It also  requires  dual  presentation of  basic  and
          diluted  EPS on  the face  of the  income statement  for all
          entities with complex capital structures.

               Under  the new  structure, basic EPS  excludes dilution
          and  is  computed by  dividing  income  available to  common
          stockholders by the weighted-average number of common shares
          outstanding  for  the  period.   Diluted  EPS  reflects  the
          potential dilution  that could occur if  securities or other
          contracts to issue common  stock were exercised or converted
          into common stock.

               SFAS  No.  128 is  effective  for  financial statements
          issued  for periods  ending after  December 15,  1997.   The
          computation  of  basic EPS  under  SFAS No.  128  would have
          resulted in  net income per  common share of  $1.073, $0.933
          and  $0.788 for the  fiscal years ended  September 30, 1997,
          1996, and  1995, respectively.   Diluted EPS  computed under
          SFAS  No. 128 would have  resulted in net  income per common
          share  of $1.038, $0.886,  and $0.747  for the  fiscal years  
          ended September 30, 1997, 1996, and 1995, respectively.

          11.  OTHER INCOME

               During 1997, the  Company recorded  an impairment  loss
          totaling  approximately   $4,900,000  as  a  result  of  the
          Company's  assessment  that  the  carrying  amount   of  the
          remaining Neuro  assets, consisting primarily  of inventory,
          fixed  assets, and  intangible  assets, exceeded  their fair
          values  as estimated based on  analysis of cash  flows.  The
          Company also recorded a gain on the sale of a parcel of land
          totaling approximately $6,300,000.  The  impairment loss and
          the gain on the sale of land are included in other income in
          the accompanying consolidated statements of operations.


                    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, 1997, 1996, and  1995,
          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
          (see  Notes to Consolidated Financial Statements ).

               Fiscal year 1997 was a another record  setting year for
          the Company in  terms of sales  and income.  Net  sales were
          $125.3  million,  representing  an increase  of  21.1%  over
          fiscal 1996.  Net income and net income per share were $30.4
          million and $1.04, respectively, increasing 18.9% and 18.2%,
          respectively, over  fiscal year 1996.   The continued steady
          growth  in  sales and  income  is  the  result of  strategic
          acquisitions,   internal   development   of  new   products,
          acquisition  of national contracts,  rapid expansion  in the
          international  marketplace, and  the overall  efforts of  an
          outstanding  sales  force.   Income  growth  continues as  a
          result of stable, high margins and manufacturing expertise.

               With   a   continued   emphasis   on   growth   through
          acquisitions,   the   Company   acquired  Cardiotronics   in
          December,   1996.    Cardiotronics,   located  in  Carlsbad,
          California,  is a  manufacturer of  medical devices  for the
          acute  management of  heart rate  disorders.   Its principal
          product,   a   disposable   defibrillator    pad,   provided
          approximately $7.6 million in  net sales during fiscal 1997.
          The  Company expects  1998  sales from  this acquisition  to
          exceed $10.0 million.

               During fiscal  year 1997 the Company  focused its sales
          efforts  and internally  reported  based upon  two  separate
          business  units:   (1)  TRACH  CARE/EASI-LAV ("TRACH  CARE")
          which  includes  the TRACH  CARE  and  EASI-LAV families  of
          products  as  well  as  the  new  additions  from  the  1996  
          acquisitions of  Mist Assist,  PMP  and PEPCO  and the  1997
          acquisition of Cardiotronics; and (2) MIC/FOAM CARE  ("MIC")
          which  includes  the MIC,  FOAM  CARE  and Cox  families  of
          products as well as the product line additions acquired from
          Endovations in 1996.

          RESULTS OF OPERATIONS

               SALES  -  For  the   year  ended  September  30,  1997,
          consolidated net sales increased $21,781,915, or 21.1%, over
          fiscal  year 1996.  For  the year ended  September 30, 1996,
          consolidated net sales increased $19,372,296, or 23.0%, over
          fiscal year 1995.  The steady, solid growth in 1997 and 1996
          is  due principally  to  the Company s  ability to  increase
          volume, both internally and  through acquisitions.  Although
          prices  on   isolated  TRACH  CARE  and   MIC  products  and
          accessories increased  slightly, pricing for  other products
          during  1997 were reduced  in order to  meet competition and
          price  reductions  required by  hospitals  and  large buying
          groups.   The Company believes that the signing of exclusive
          long-term contracts with major hospital buying groups should
          stabilize prices for certain products over the next three to
          five years.

               The Company's MIC enteral feeding catheters and related
          products continue to contribute significantly to the overall
          growth  in net  sales,  as is  the  rapid expansion  of  the
          Company's  international operations.   Net sales  within the
          MIC product  line increased 33.2% in fiscal 1997 over fiscal
          1996 International net sales (all products) increased  52.5%
          during the same period.

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

          Year ended September 30,           1997      1996      1995

          Trach Care                         74.3%     64.8%     68.5%

          MIC                                25.7%     35.2%     31.5%

               The   table  below   summarizes   U.S.   sales   versus
          international sales as a percentage of total net sales:

          Year ended September 30,           1997      1996      1995

          Domestic                           91.4%     92.4%     92.6%

          International                       9.6%      7.6%      7.4%

          All  sales of the Company  and related receipts  are in U.S.
          dollars.  

               COST OF PRODUCTS  SOLD - For  the year ended  September
          30,  1997,  consolidated  cost  of  products  sold   totaled
          $44,433,982, compared with $35,734,178  for fiscal year 1996
          and $28,070,350 for fiscal year 1995, increases of 24.4% and
          27.3%, respectively.   As a  percent of net  sales, cost  of
          products sold was 35.5%  and 34.5% for fiscal year  1997 and
          1996, respectively.  The 1% increase in product costs during
          fiscal year  1997 can  be attributed  to the  acquisition of
          lower  margin product  lines,  the closure  and transfer  of
          Pepco s,   PMP s,  and  MIC s  manufacturing  operations  to
          Draper, Utah and  Pocatello, Idaho, and  continued increases
          in material  and labor  costs. Margins  also continue  to be
          impacted  by  the  health  care  industry's  focus  on  cost
          restraints and  competitive pricing pressures,  resulting in
          increased product rebates and price reductions.
            
               During  the year  the Company  continued to  refine and
          automate its  manufacturing processes as well  as expand its
          injection molding  capacity.  The Company  closed its PEPCO,
          PMP,  and  MIC  facilities  and  integrated  them  into  the
          Company s two manufacturing sites in  Utah and Idaho.  Gross
          margins will continue to be impacted  by these closures into
          the  first quarter  of  1998 but  the Company  expects these
          combinations to create manufacturing benefits in the future.
          Pricing pressures, new  product acquisitions, and  continued
          increases  in labor  and materials  will continue  to impact
          margins  in  1998.   Margins will  also  be impacted  by the
          Company's planned move of its Cardiotronics  operations from
          Carlsbad, California  to Pocatello,  Idaho during  the first
          quarter of fiscal year 1998.

               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, 1997
          were $38,210,496, compared with  $32,729,798 for fiscal year
          1996 and $27,992,139  for fiscal year  1995.  The  following
          table  is a summary of  operating expenses by  category as a
          percentage of net sales:

          Year ended September 30,           1997      1996      1995

          Selling, general, and
          administrative                     27.0%     27.3%     29.0%

          Research and development            2.2%      2.8%      2.6%

          Royalties                           1.4%      1.5%      1.6%

               Selling, general, and administrative expenses increased
          $5,476,963  during fiscal  year  1997 and  $3,857,612 during
          fiscal   year  1996.     These   increases  are   attributed
          principally  to  increased  sales  volumes, as  well  as  to
          increases in period costs  due to intangible write-offs from  
          acquisitions.  Consolidated expenses related to research and
          development and  royalties, as a  percentage of consolidated
          net sales  for fiscal years  1997, 1996, and  1995, remained
          fairly consistent.

               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.  Also included
          in other income during fiscal 1997 was the sale  of 61 acres
          of real estate  located south of the  Company s Draper plant
          for a net  gain of  $6,304,670 (see   Liquidity and  Capital
          Resources ) and   the impairment loss  of $4,900,000 related
          to  the Company s investment in the assets and technology of
          Neuro (see  Liquidity and Capital Resources ).

               Interest   and   royalty  income   remained  relatively
          consistent   between  the   periods,  bringing   a  combined
          $4,595,116,  $4,317,925,  and  $4,070,877 for  fiscal  years
          1997, 1996, and 1995, respectively.

               NET INCOME  - Consolidated net  income from  operations
          for the  year ended September 30,  1997 totaled $30,426,287,
          an increase of 18.9%  over fiscal year 1996.   The following
          table reflects net income  as a percentage of net  sales for
          each of the reporting periods:

          Year ended September 30,      1997      1996      1995

          Net Income                    24.3%     24.7%     24.9%

               The  overall  increase in  net  income  over the  prior
          period  and the  outstanding after-tax  margin  reflects the
          increased  sales  volume,   continued  strong  margins,  and
          management's efforts  to control the costs  of manufacturing
          and other operating costs.
           
               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

               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).

               For  the year  ended September  30, 1997  the Company's
          operating activities  provided $30,438,820 in cash  and cash
          equivalents,  comparable to the  $22,043,301 provided during
          fiscal year 1996.   At September  30, 1997, working  capital
          totaled $92,361,548  compared with $75,674,042  at September
          30, 1996.   The  Company's current ratio  was 14.7  to 1  at
          September 30, 1997 compared with 14.9 at September 30, 1996.
          Available cash, which includes cash and cash equivalents and
          investments  available  for  sale,  at  September  30,  1997
          totaled $47,772,220 compared  with $40,826,701 at  September
          30,  1996.  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.    The
          Company 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, 1997 or 1996.

               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,  1997, the Company
          completed  expansion  of   its  manufacturing  facility   in
          Pocatello,  Idaho.   See  discussion  of Pocatello  facility
          under  "Capital  Expenditures".      Total  development  and
          construction  costs  of  the  first phase  of  the  facility
          totaled approximately $7,243,000.  Completion of  the second
          phase cost  approximately $5,500,000.  The  Company expended
          an additional  $8,900,000 during fiscal year  1997 to expand
          and upgrade  existing facilities and operations  in order to
          meet the growing needs of present and new business.

               Cash outlay for the  acquisition of Cardiotronics,  net
          of cash acquired, was approximately $12,722,000.

               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  determined  that the
          remaining carrying value in its investment in Neuro  was not
          entirely recoverable  based upon expected  future cash flows
          from  the  sale  of  the  remaining  assets  and  technology
          acquired  from Neuro.   Although  the Company  believes that
          remaining  assets and  technology  of Neuro  have value,  an  
          impairment  loss  of  $4,900,000  has  been  recognized  and
          included  in  "Other  Income."   The  remaining  assets  and
          technology acquired  from Neuro are being  marketed for sale
          by the Company.

               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 and  acquisition expenditures,
          other  items which  affected cash  flows during  fiscal year
          1997 included  the payment  of dividends of  $2,827,205, and
          purchases of intangible assets of $714,952.

          YEAR 2000 ISSUES

               The approaching  Year 2000  could result  in challenges
          related  to  computer  software,  accounting   records,  and
          relationships with suppliers  and customers.  Management  of
          the Company is studying  Year 2000 issues, seeking to  avoid
          such problems.


                           FORWARD-LOOKING STATEMENTS

               From time to  time the Company may  report, through its
          press releases, its Annual  Report, and SEC filings, certain
          matters  that  could  be  characterized  as  forward-looking
          statements  subject to  risks and  uncertainties that  could
          cause  actual  results  to  differ  materially  from   those
          projected.  Such risks  and uncertainties may include, among
          other    things,   economic,    competitive,   governmental,
          technological, and other factors discussed  in the Company's
          filings  with the SEC  on Forms 10-K,  10-Q, and 8-K.   Such
          forward-looking statements  are  made pursuant  to the  safe
          harbor  provisions  of  the  Private  Securities  Litigation
          Reform Act of 1995.

          GLOSSARY OF TECHNICAL AND MEDICAL TERMS

           1.  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.

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

           3.  Cannulate  is   to  introduce  a   cannula  through   a
               passageway.

           4.  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.

           5.  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.

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

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

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

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

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

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

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

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

          14.  Exogenous means originating outside an organ or part.

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

          16.  Gastric means pertaining to the stomach.

          17.  Gastrointestinal  means pertaining  to the  stomach and
               intestine.

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

          19.  Jejunal  means pertaining  to the  jejunum, the  second
               portion  of  the  small  intestine  extending  from the
               duodenum to the ileum.

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

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

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

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

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

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

          26.  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.

          27.  Polyp means a tumor with a pedicle.

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

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

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

          31.  Stenosed means constricted.

          32.  Stimulation electrodes are 

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

          34.  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.

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

          36.  A ventilator  is a life  support device used  to assist
               breathing.


                                    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

          Bradford D. Bell         Vice President of Marketing and
                                   International

          Daniel Burman            Vice President of Sales

          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
               (801) 572-6800
               (801) 572-6869

          TRANSFER AGENT

               First Security Bank, N.A.
               79 South Main
               Salt Lake City, Utah 84111

          ANNUAL MEETINGS

               The Annual  Meeting of Stockholders of  Ballard Medical
          Products will  be  held Monday,  January  26, 1998,  at  the
          Company's   executive  offices,  12050  Lone  Peak  Parkway,
          Draper,  Utah, beginning  at 11:00  a.m.,  Mountain Standard
          Time.   Shareholders  of  record on  November  19, 1997  are
          entitled to notice of and to vote at the meeting.   A notice
          of meeting and proxy statement are enclosed with  the Annual
          Report.

          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 1997,  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.

          RESEARCH COVERAGE

               The following firms currently provide research coverage
          of Ballard Medical Products:

               AG Edwards - St. Louis, Missouri
               Bear Stearns - New York, New York
               Olde Discount - Detroit, Michigan
               Nutmeg Securities - Providence, Rhode Island
               Piper Jaffray - Minneapolis, Minnesota
               Select Equity Group, Inc. - New York, New York
               Southwest Securities - Dallas, Texas  
               Tucker Anthony - Boston, Massachusetts

          AUDITORS 

               Deloitte & Touche LLP
               50 South Main Street, Suite 1800
               Salt Lake City, Utah 84144