<PAGE>

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, DC  20549
                                      FORM 10-Q

          
          (MARK ONE)
          [X]  Quarterly Report Pursuant to Section 13 or 15(d) of the
               Securities Exchange Act of 1934
          
          For the quarterly period ended MARCH 31, 1998 or
          
          [ ]  Transition Report Pursuant to Section 13 or 15(d) of
               the Securities Exchange Act of 1934
          
          For the transition period from ___________ to ___________
          

Commission File Number:                33-26398
                                       --------


                              ALARIS MEDICAL, INC.
-------------------------------------------------------------------------------
            (Exact name of registrant as specified in its charter)

            Delaware                                       13-3492624
-----------------------------------         -----------------------------------
  (State or other jurisdiction of                       (I.R.S. Employer
   incorporation or organization)                      Identification No.)

                                          
        10221 Wateridge Circle, San Diego, CA                       92121
-------------------------------------------------------------------------------
     (Address of principal executive offices)                     (Zip Code)
                                          
        
                                   (619) 458-7000
-------------------------------------------------------------------------------
                (Registrant's telephone number, including area code)
                                          
                                          
-------------------------------------------------------------------------------
               (Former name, former address and former fiscal year, 
                           if changed since last report)


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

On May 7, 1998, 59,127,783 shares of Registrant's Common Stock were 
outstanding.

                                  Page 1 of 22

<PAGE>

                     ALARIS MEDICAL, INC. AND SUBSIDIARIES

                                      INDEX


PART I.  FINANCIAL INFORMATION

     Item 1 - Financial Statements:
                                                                        Page
          Condensed consolidated balance sheet at
          December 31, 1997 and March 31, 1998. . .  . . . . . . . . .    3

          Condensed consolidated statement of operations 
          for the three months ended March 31, 1997 and 1998 .. . . .     4

          Condensed consolidated statement of cash flows for the
          three months ended March 31, 1997 and 1998 . . . . .. . . .     5

          Condensed consolidated statement of changes in
          stockholders' equity for the period from
          December 31, 1997 to March 31, 1998 . . .  . . . . .. . . .     6

          Notes to the condensed consolidated financial statements. .     7


     Item 2 - Management's Discussion and Analysis of Financial
          Condition and Results of Operations . . .  . . . . .. . . .    12



PART II. OTHER INFORMATION


     Item 1 - Legal Proceedings. . . . . . . . . . .. . . . . . . . .    19

     Item 6 - Exhibits and Reports on Form 8-K . . .. . . . . . . . .    20

                                     - 2 -

<PAGE>

                                  FORM 10 - Q
                                PART 1 - ITEM 1
                             FINANCIAL INFORMATION

                    ALARIS MEDICAL, INC. AND SUBSIDIARIES
     
                     CONDENSED CONSOLIDATED BALANCE SHEET
      (DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

    
<TABLE>
<CAPTION>
                                       ASSETS

                                                                                    DECEMBER 31,     MARCH 31,
                                                                                       1997             1998     
                                                                                    ------------     ----------   
                                                                                                     (UNAUDITED)
<S>                                                                                 <C>            <C>
Current assets:

     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $   6,984      $     3,839
     Receivables, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       83,406           80,724
     Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       61,666           58,872
     Prepaid expenses and other current assets . . . . . . . . . . . . . . . . .       23,260           23,065
                                                                                    ---------      -----------
          Total current assets . . . . . . . . . . . . . . . . . . . . . . . . .      175,316          166,500

Net investment in sales-type leases, less current portion. . . . . . . . . . . .       30,404           27,792
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . .       55,365           55,888
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .       16,279           17,439
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      287,933          284,102
                                                                                    ---------      -----------
                                                                                    $ 565,297      $   551,721
                                                                                    ---------      -----------
                                                                                    ---------      -----------

     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . .    $  14,559      $    14,619
     Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       24,042           20,646
     Accrued expenses and other current liabilities. . . . . . . . . . . . . . .       52,668           55,462
                                                                                    ---------      -----------
          Total current liabilities. . . . . . . . . . . . . . . . . . . . . . .       91,269           90,727
                                                                                    ---------      -----------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      431,571          419,340
Other non-current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .       10,508            9,516
                                                                                    ---------      -----------
     Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . .      442,079          428,856
                                                                                    ---------      -----------

Contingent liabilities and commitments (Note 6)

Stockholders' equity:
     Common stock, authorized 75,000 shares at $.01 par value; issued and
        outstanding  - 59,102 shares and 59,122 shares at December 31, 1997
        and March 31, 1998, respectively . . . . . . . . . . . . . . . . . . . .          591              591
     Capital in excess of par value. . . . . . . . . . . . . . . . . . . . . . .      148,341          148,382
     Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (111,330)        (111,123)
     Treasury stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (2,027)          (2,027)
     Equity adjustment for foreign currency translation. . . . . . . . . . . . .       (3,626)          (3,685)
                                                                                    ---------      -----------
          Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . .       31,949           32,138
                                                                                    ---------      -----------
                                                                                    $ 565,297      $   551,721
                                                                                    ---------      -----------
                                                                                    ---------      -----------
</TABLE>

               THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE 
                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       -3-
<PAGE>

                        ALARIS MEDICAL, INC. AND SUBSIDIARIES
                                           
             CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
           (DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED MARCH 31,
                                                                                   ----------------------------
                                                                                       1997            1998
                                                                                       ----            ----
<S>                                                                                 <C>              <C>
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $  81,995        $  86,971
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       46,970           44,854
                                                                                    ---------        ---------


Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       35,025           42,117
                                                                                    ---------        ---------

Selling and marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . .       15,495           17,129
General and administrative expenses. . . . . . . . . . . . . . . . . . . . . . .        9,254            9,902
Research and development expenses. . . . . . . . . . . . . . . . . . . . . . . .        4,068            4,340
Integration and other non-recurring charges. . . . . . . . . . . . . . . . . . .        3,652                -
                                                                                    ---------        ---------

     Total operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . .       32,469           31,371
                                                                                    ---------        ---------

Lease interest income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1,162            1,162
                                                                                    ---------        ---------

     Income from operations. . . . . . . . . . . . . . . . . . . . . . . . . . .        3,718           11,908
                                                                                    ---------        ---------

Other income (expenses):
     Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          158               62
     Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (10,693)         (11,156)
     Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (98)            (357)
                                                                                    ---------        ---------

Total other expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (10,633)         (11,451)
                                                                                    ---------        ---------

(Loss) income before income taxes. . . . . . . . . . . . . . . . . . . . . . . .       (6,915)             457
(Benefit from) provision for income taxes. . . . . . . . . . . . . . . . . . . .       (2,600)             250
                                                                                    ---------        ---------

Net (loss) income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $  (4,315)     $       207
                                                                                    ---------        ---------
                                                                                    ---------        ---------

     Net loss per common share assuming no dilution. . . . . . . . . . . . . . .    $    (.07)     $         -
                                                                                    ---------        ---------
                                                                                    ---------        ---------

     Net loss per common share assuming dilution . . . . . . . . . . . . . . . .    $    (.07)     $         -
                                                                                    ---------        ---------
                                                                                    ---------        ---------

Weighted average common shares outstanding assuming no dilution. . . . . . . . .       59,026           58,658
                                                                                    ---------        ---------
                                                                                    ---------        ---------

Weighted average common shares outstanding assuming dilution . . . . . . . . . .       59,026           60,196
                                                                                    ---------        ---------
                                                                                    ---------        ---------
</TABLE>
     
                THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE 
                    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                      -4-
<PAGE>

                     ALARIS MEDICAL, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                    THREE MONTHS ENDED MARCH 31,
                                                                                    ----------------------------
                                                                                       1997            1998
                                                                                       ----            ----
<S>                                                                                  <C>             <C>
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . .     $  9,065        $  14,113
                                                                                     --------        ---------

Cash flows from investing activities:
     Net decrease in restricted cash and investments . . . . . . . . . . . . . .        2,332                -
     Net capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . .       (4,868)          (5,002)
                                                                                     --------        ---------

Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . .       (2,536)          (5,002)
                                                                                     --------        ---------

Cash flows from financing activities:
     Principal payments on long-term debt. . . . . . . . . . . . . . . . . . . .       (3,309)          (6,072)
     Proceeds under revolving credit facility. . . . . . . . . . . . . . . . . .        4,300           10,300
     Repayments under revolving credit facility. . . . . . . . . . . . . . . . .            -          (16,500)
     Debt issue costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (109)               -
     Proceeds from exercise of stock options . . . . . . . . . . . . . . . . . .          147               41
                                                                                     --------        ---------

Net cash provided by (used in) financing activities. . . . . . . . . . . . . . .        1,029          (12,231)
                                                                                     --------        ---------

Effect of exchange rate changes on cash. . . . . . . . . . . . . . . . . . . . .         (375)             (25)
                                                                                     --------        ---------

Net increase (decrease) in cash. . . . . . . . . . . . . . . . . . . . . . . . .        7,183           (3,145)
Cash at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . .       12,084            6,984
                                                                                     --------        ---------

Cash at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ 19,267        $   3,839
                                                                                     --------        ---------
                                                                                     --------        ---------
</TABLE>
     
                THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE 
                    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                      -5-
<PAGE>

                        ALARIS MEDICAL, INC. AND SUBSIDIARIES
                                           
                    CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
                           STOCKHOLDERS' EQUITY (UNAUDITED)
                       (DOLLAR AND SHARE AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                            EQUITY
                                                                                                          ADJUSTMENT
                                     COMMON STOCK      CAPITAL IN                       TREASURY STOCK   FOR FOREIGN
                                  -----------------     EXCESS OF     ACCUMULATED    -------------------   CURRENCY
                                  SHARES     AMOUNT     PAR VALUE       DEFICIT      SHARES       AMOUNT  TRANSLATION   TOTAL  
                                  ------     ------    ----------     -----------    ------       ------  -----------   -----
<S>                               <C>        <C>       <C>            <C>            <C>          <C>       <C>         <C>
Balance at December 31, 1997      59,102      $591       $148,341      $(111,330)      453        $(2,027)  $(3,626)    $31,949

Exercise of stock options             20                       41                                                            41

Equity adjustment for foreign
  currency translation                                                                                          (59)        (59)

Net income for the period                                                    207                                            207
                                  ------      ----       --------      ---------       ---        -------   -------     -------

Balance at March 31, 1998         59,122      $591       $148,382      $(111,123)      453        $(2,027)  $(3,685)    $32,138
                                  ------      ----       --------      ---------       ---        -------   -------     -------
                                  ------      ----       --------      ---------       ---        -------   -------     -------
</TABLE>
     
                THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE 
                    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                      -6-

<PAGE>
                       ALARIS MEDICAL, INC. AND SUBSIDIARIES
                                          
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 
                                          
          (DOLLARS AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------



NOTE 1 -- BUSINESS AND STATEMENT OF ACCOUNTING POLICY

THE COMPANY:  

ALARIS Medical, Inc. ("ALARIS Medical"), formerly Advanced Medical, Inc., 
operating through its consolidated subsidiaries, designs, manufactures, 
distributes and services intravenous infusion therapy and vital signs 
measurement instruments and related disposables and accessories.  On November 
26, 1996, IMED Corporation ("IMED"), then a wholly-owned subsidiary of 
Advanced Medical, Inc., ("Advanced Medical") acquired all of the outstanding 
stock of IVAC Holdings, Inc. ("IVAC Holdings") and its subsidiaries including 
IVAC Medical Systems, Inc. (Note 2).  In connection with the acquisition, 
IMED and IVAC Medical Systems, Inc. were merged into IVAC Holdings (the 
"Merger"), which then changed its name to ALARIS Medical Systems, Inc. 
("ALARIS Medical Systems"). ALARIS Medical and its subsidiaries are 
collectively referred to as the "Company."  The acquisition was accounted for 
as a purchase.

STATEMENT OF ACCOUNTING POLICY: The accompanying financial statements have 
been prepared by the Company without audit pursuant to the rules and 
regulations of the Securities and Exchange Commission.  Certain information 
and footnote disclosures normally included in financial statements prepared 
in accordance with generally accepted accounting principles have been 
condensed or omitted pursuant to those rules and regulations, although the 
Company believes that the disclosures herein are adequate to make the 
information not misleading.

In the opinion of the Company, the accompanying financial statements contain 
all adjustments, consisting of normal recurring adjustments, necessary for a 
fair statement of the Company's financial position as of March 31, 1998, and 
the results of its operations and its cash flows for the three months ended 
March 31, 1997 and 1998.

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

NET INCOME (loss) PER COMMON SHARE:
The Company's net income (loss) per common share assuming no dilution is
computed using the weighted average number of common shares outstanding. The
Company's net income (loss) per common share assuming dilution is computed using
the weighted average number of common shares outstanding plus dilutive potential
common shares using the treasury stock method at the average market price during
the reporting period (Note 5).

                                       -7-
<PAGE>

NOTE 2 -- THE MERGER

On November 26, 1996, IMED acquired all of the outstanding stock of IVAC 
Holdings and its subsidiaries including IVAC Medical Systems, Inc., in 
exchange for $390,000 plus acquired cash of $7,225 less total debt assumed 
aggregating $173,314 plus related expenses. The Merger was financed with 
$204,200 in bank debt and $200,000 in senior subordinated notes. Subsequent 
to the acquisition, IVAC Medical Systems, Inc. and IMED were merged into IVAC 
Holdings, which subsequently changed its name to ALARIS Medical Systems, Inc.

In connection with the Merger, ALARIS Medical contributed $19,588 to IMED 
(the "Capital Contribution"). The Capital Contribution was funded in part 
through the sale to Decisions Incorporated ("Decisions"), a corporation 
wholly owned by ALARIS Medical's principal stockholder, of 13,333 shares of 
its common stock for aggregate proceeds of $40,000 (the "Decisions 
Contribution"). The balance of the Capital Contribution was funded with 
existing cash balances of ALARIS Medical. The portion of the net proceeds of 
the Decisions Contribution not applied to make the Capital Contribution was 
used by ALARIS Medical to redeem $21,924 principal amount of its 15% 
subordinated debentures due 1999 and fund the redemption of ALARIS Medical's 
outstanding preferred stock. In connection with the Decisions Contribution, 
Decisions exchanged an aggregate of $37,500 in principal amount of 
convertible promissory notes previously issued by ALARIS Medical for 29,416 
shares of ALARIS Medical common stock, including 3,333 shares issued as an 
inducement to convert. 

The acquisition was accounted for as a purchase, whereby the purchase price, 
including related expenses, was allocated to identified assets, including 
intangible assets, purchased research and development and liabilities based 
upon their respective fair values. The excess of the purchase price over the 
value of identified assets and liabilities, in the amount of $132,482, was 
recorded as goodwill and is being amortized over its estimated life of thirty 
years.

NOTE 3 -- INVENTORIES

Inventories comprise the following:

<TABLE>
<CAPTION>
                                         DECEMBER 31,    MARCH 31,
                                             1997          1998
                                         ------------    ----------
     <S>                                  <C>            <C>
     Raw materials . . . . . . . . . . .  $ 24,144       $ 25,266
     Work-in-process . . . . . . . . . .     8,363          7,610
     Finished goods. . . . . . . . . . .    29,159         25,996
                                          --------       --------
                                          $ 61,666       $ 58,872
                                          --------       --------
                                          --------       --------
</TABLE>

NOTE 4 -- COMPREHENSIVE INCOME

Effective January 1, 1998, the Company adopted Statement of Financial 
Accounting Standards No. 130, "Reporting Comprehensive Income."  This 
Statement requires that all items recognized under accounting standards as 
components of comprehensive earnings be reported in an annual financial 
statement that is displayed with the same prominence as other annual 
financial statements. This Statement also requires that an entity classify 
items of other comprehensive earnings by their nature in an annual financial 
statement.  For example, other comprehensive earnings may include foreign 
currency translation adjustments, minimum pension liability adjustments, and 
unrealized gains and losses on marketable securities classified as 
available-for-sale. Annual financial statements for prior periods will be 
reclassified, as required.  ALARIS Medical's total comprehensive earnings 
were as follows:

                                       -8-

<PAGE>

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED MARCH 31,
                                                 ----------------------------
                                                     1997             1998
                                                 -----------      -----------
<S>                                               <C>              <C>
Net (loss) income. . . . . . . . . . . . . . . .  $  (4,315)       $    207

Other comprehensive loss:
   Foreign currency translation adjustments. . .     (1,332)            (59)
                                                  ---------        --------
Other comprehensive (loss) income. . . . . . . .  $  (5,647)       $    148
                                                  ---------        --------
                                                  ---------        --------
</TABLE>

NOTE 5 -- EARNINGS PER SHARE


In February, 1997 the Financial Accounting Standards Board issued the 
Statement of Financial Accounting Standards No. 128, "Earnings per Share" 
("SFAS 128") which specifies the computation, presentation, and disclosure 
requirements for earnings per share. The earnings per share information 
contained in these financial statements, including those presented for prior 
periods, conform with SFAS 128.

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED MARCH 31,
                                                  -----------------------------------------
                                                         1997                    1998
                                                  -------------------    ------------------
                                                    BASIC   DILUTED       BASIC    DILUTED
                                                  -------- ----------    -------  ---------

<S>                                               <C>       <C>          <C>       <C>
Net (loss) income as reported. . . . . . . . .    $ (4,315) $ (4,315)    $   207   $   207
                                                  -------- ----------    -------  ---------
                                                  -------- ----------    -------  ---------

Weighted average common shares outstanding . .      59,026    59,026      58,658    58,658

Weighted average common stock options as
 determined by application of the treasury
 stock method. . . . . . . . . . . . . . . . .            -         -          -     1,538
                                                  -------- ----------    -------  ---------
Weighted average common and common
 equivalent shares outstanding . . . . . . . .       59,026    59,026     58,658    60,196
                                                  -------- ----------    -------  ---------
                                                  -------- ----------    -------  ---------

Net loss per common share. . . . . . . . . . .    $   (.07) $    (.07)   $     -   $     -
                                                  -------- ----------    -------  ---------
                                                  -------- ----------    -------  ---------
</TABLE>

Net loss per common share assuming no dilution and dilution are the same for the
three months ended March 31, 1997, as the Company experienced a net loss. The
7.25% convertible debentures and options outstanding at March 31, 1997 were
excluded due to their antidilutive nature. Had such options been included, the
weighted average shares would have increased by 1,453.

The Company's 7.25% Debentures were not included in the calculation of 
diluted earnings per share in 1998 as they are antidilutive.  The $16,152 of 
convertible debentures, if converted at an exercise price of $18.14 per 
share, would result in an increase of 890 common shares and an increase of 
$176, net of taxes, to net income, due to the reduction in interest expense.

                                       -9-

<PAGE>

NOTE 6 -- CONTINGENCIES AND LITIGATION

FIELD CORRECTION

The Company has initiated a voluntary field correction of approximately 
50,000 of its Gemini model PC-1 and PC-2 infusion pumps because failure of 
specific electrical components on the power regulator printed circuit board 
may result in improper regulation of the battery charge voltage, which can 
cause the battery to overheat.  Such overheating could result in product 
failure and discharge of hydrogen gas which may accumulate within the 
instrument's case.  As an interim measure, the Company has advised its 
customers of simple precautions that can be taken to minimize the potential 
for an adverse incident pending completion of the field correction. The 
Company is not aware of any injuries sustained in known battery overcharging 
incidents.

As a result of this decision,  the Company recorded a charge of $2,500 to 
cost of sales during the first quarter of 1997.  Based on management's 
current understanding of these incidents, the Company believes it has 
adequately accrued for this matter.  However, since the Company's analysis of 
this matter is ongoing, there can be no assurances that it can be resolved 
for an amount consistent with management's estimated cost.

LITIGATION

The Company is a defendant in a lawsuit filed in June 1996 by Sherwood 
Medical, Inc. against IVAC which alleges infringement of two patents by 
reason of certain activities including the sale by IVAC of disposable probe 
covers for use with the Company's infrared tympanic thermometer. The lawsuit 
seeks injunctive relief, treble damages and the recovery of costs and 
attorney fees. The Company believes it has sufficient defenses to all claims, 
including the defenses of noninfringement and invalidity and intends to 
vigorously defend this action. However, there can be no assurance that the 
Company will successfully defend all claims made by Sherwood and the failure 
of the Company to successfully prevail in this lawsuit could have a material 
adverse effect on the Company's operations, financial condition and cash 
flows.

The Company is a defendant in a QUI TAM lawsuit filed by a former IMED 
employee in the United States District Court for the Northern District of 
Illinois. On November 15, 1996, an amended complaint was filed which alleges 
fraud in the inducement, breach of employment contract, common law fraud and 
violations of the Federal False Claims Act and Medicare Fraud and Abuse Act. 
To date, the United States has declined to intervene in this action. The 
Company believes it has sufficient defenses to all claims by the plaintiff. 
However, there can be no assurance that the Company will successfully defend 
all claims made in this lawsuit and the failure of the Company to prevail in 
this lawsuit could have a material adverse effect on the Company's 
operations, financial condition and cash flows.

UNITED STATES CUSTOMS SERVICE MATTER

During the years 1988 through 1995, Cal Pacifico acted as the Company's United
States customs broker and importer of record with respect to the importation
into the United States of finished products ("Finished Products") assembled at
the Company's two maquiladora assembly plants in Tijuana, Mexico.  In May 1995,
Cal Pacifico received a pre-penalty notice from the United States Customs
Service ("Customs") to the effect that Customs intended to assess additional
duties and substantial penalties against Cal Pacifico for its alleged failure,
during the years 1988 through 1992, to comply with certain documentary
requirements regarding the importation of goods on behalf of its clients,
including the Company.  Customs recently assessed additional duties with respect
to Cal Pacifico's importation of 

                                       -10-

<PAGE>

goods on behalf of its clients, including the importation of the Company's 
Finished Products, for the years 1993 and 1994, and it is anticipated that 
Customs will issue a pre-penalty notice to Cal Pacifico in respect of these 
years as well (collectively with the amounts referred to in the immediately 
preceding sentence, the "Disputed Amounts").  The Company has been advised by 
its special Customs counsel that, under applicable law, no person, by fraud, 
gross negligence or negligence, may (i) import merchandise into the commerce 
of the United States by means of any material and false document, statement 
or act, or any material omission, or (ii) aid or abet any other person to 
import merchandise in such manner.  No proceeding has been initiated by 
Customs against the Company in respect of the matters which are the subject 
of the proceeding against Cal Pacifico.  Since Cal Pacifico was the Company's 
United States customs broker and importer of record during each of the 
foregoing years, the Company believes that it is unlikely that Customs will 
assess against the Company any portion of the Disputed Amounts.

Cal Pacifico is contesting Customs' assessment of the Disputed Amounts.  Cal 
Pacifico's challenge to the assessment of the Disputed Amounts is in its 
preliminary stages.  Given the present posture of Cal Pacifico's challenge, 
and the inherent uncertainty of contested matters such as this, it is not 
possible for the Company to express an opinion as to the likelihood that Cal 
Pacifico will prevail on its challenge.  The Company has not been informed by 
Cal Pacifico or Customs as to the specific amount of the Disputed Amounts.

Cal Pacifico has advised the Company that, should Cal Pacifico's challenge to 
the assessment of the Disputed Amounts prove to be unsuccessful, it will seek 
recovery from the Company, through arbitration, for any portion of the 
Disputed Amounts which it is required to pay to Customs.  As part of the 
settlement agreement which resolved the Company's contract dispute with Cal 
Pacifico during the second quarter of 1997, the Company paid Cal Pacifico 
$550, which is to be applied toward Cal Pacifico's payment of Disputed 
Amounts.  The $550 payment by the Company is to be credited toward any 
portion of the Disputed Amounts which the arbitrator determines the Company 
owes to Cal Pacifico. The actual amount so determined by the arbitrator may 
be less or greater than $550.  Although the ultimate outcome of such an 
arbitration proceeding cannot be guaranteed, the Company believes that it has 
meritorious defenses to claims with respect to Disputed Amounts which Cal 
Pacifico might raise against the Company.  These defenses would be based, 
among other factors, on the contractual relationship between the Company and 
Cal Pacifico (including a defense with respect to the availability of 
indemnification under the agreements between Cal Pacifico and the Company), 
the conduct of Cal Pacifico with respect to both the Company and Customs, and 
the compliance obligations of Cal Pacifico under applicable customs laws. 
Inasmuch as Cal Pacifico's challenge before Customs is still pending and any 
claim against the Company for indemnification would be based on Cal 
Pacifico's ultimate lack of success in that challenge, and inasmuch as any 
arbitration proceeding by which Cal Pacifico might seek indemnification has 
not been filed nor has Cal Pacifico committed itself to the theories under 
which it might seek indemnification or the recovery of damages from the 
Company, it is not possible for the Company to express an opinion at this 
time as to the likelihood of an unfavorable outcome in such a proceeding.

OTHER

The Company is also a defendant in various actions, claims, and legal 
proceedings arising from its normal business operations. Management believes 
they have meritorious defenses and intends to vigorously defend against all 
allegations and claims. As the ultimate outcome of these matters is 
uncertain, no contingent liabilities or provisions have been recorded in the 
accompanying financial statements for such matters. However, in management's 
opinion, based on discussions with legal counsel, liabilities arising from 
such matters, if any, will not have a material adverse effect on consolidated 
financial position, results of operations or cash flows.                      

                                       -11-

<PAGE>


                                 PART I - ITEM 2
                                          
     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                                     OPERATIONS


GENERAL

ALARIS Medical is a holding company for ALARIS Medical Systems.  ALARIS 
Medical also identifies and evaluates potential acquisitions and investments, 
and performs various corporate functions. As a holding company, ALARIS 
Medical currently has no revenues to fund its operating and interest expense 
and relies on its existing cash and cash generated from operations of ALARIS 
Medical Systems, external borrowings and other external sources of funds to 
meet its obligations.  Capitalized terms used but not defined herein have the 
meaning ascribed to them in the Notes to the Condensed Consolidated Financial 
Statements.

The Company sells and services infusion systems primarily in the United 
States, Western Europe, Canada, Australia, Latin America and the Middle East. 
 The Company generates revenues from the sale and/or lease of infusion pumps, 
and sales of associated proprietary disposable administration sets.  
Additionally, the Company generates revenue from the sale of patient 
monitoring products.

In recent years, the Company's results of operations have been affected by 
the cost containment pressures applicable to health care providers. In 
particular, in order to reduce costs, certain hospitals have adopted a 
protocol increasing the maximum time between disposable administration set 
changes from every 24 hours to as much as every 72 hours. Notwithstanding 
this change in protocol, unit sales volume of the Company's disposable 
administration sets increased in every year since 1993, primarily as a result 
of the growth in its installed base of infusion pumps. However, uncertainty 
remains with regard to future changes within the healthcare industry.  The 
trend towards managed care and economically motivated buyers in the U.S. may 
result in continued pressure on selling prices of products and compression on 
gross margins.  The U.S. marketplace is increasingly characterized by 
consolidation among healthcare providers and purchasers of medical products.  
The Company's profitability is affected by the increasing use of Group 
Purchasing Organizations ("GPOs") which are better able to negotiate 
favorable pricing from providers of infusion systems, such as the Company, 
and which police compliance with exclusive buying arrangements for their 
members. These buying arrangements, in certain situations, also may result in 
the GPO requiring removal of the Company's existing infusion pumps. The 
Company expects that such GPOs will become increasingly more common and may 
have an adverse effect on the Company's future profitability.

                                       -12-

<PAGE>

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, selected financial 
information expressed as a percentage of sales:

<TABLE>
<CAPTION>

                                                  THREE MONTHS ENDED MARCH 31,
                                                  ----------------------------
                                                     1997              1998
                                                  -----------      -----------
<S>                                                 <C>              <C>
Sales. . . . . . . . . . . . . . . . . . . . . . .    100.0%             100.0%
Cost of sales. . . . . . . . . . . . . . . . . . .     57.3               51.6
                                                   --------           --------
Gross margin . . . . . . . . . . . . . . . . . . .     42.7%              48.4%

Selling and marketing expenses . . . . . . . . . .     18.9               19.7
General and administrative expenses. . . . . . . .     11.3               11.4
Research and development expenses. . . . . . . . .      5.0                5.0
Integration and other non-recurring charges. . . .      4.4                  -
Lease interest income. . . . . . . . . . . . . . .      1.4                1.3
                                                   --------           --------

Income from operations . . . . . . . . . . . . . .      4.5               13.6
Interest expense . . . . . . . . . . . . . . . . .    (13.0)             (12.8)
Other, net . . . . . . . . . . . . . . . . . . . .       .1                (.3)
                                                   --------           --------

(Loss) income before income taxes. . . . . . . . .     (8.4)                .5
(Benefit from) provision for income taxes. . . . .     (3.2)                .3
                                                   --------           --------

Net (loss) income. . . . . . . . . . . . . . . . .     (5.2%)               .2%
                                                   --------           --------
                                                   --------           --------
OTHER DATA:
  Adjusted EBITDA. . . . . . . . . . . . . . . . .     21.1%              23.2%

</TABLE>


<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED MARCH 31,
                                                  ----------------------------
                                                     1997              1998
                                                  -----------      -----------
<S>                                                 <C>              <C>

ADJUSTED EBITDA (1). . . . . . . . . . . . . . . . $  17,262       $    20,192
Inventory purchase price allocation adjustment(2)     (1,607)               -
Integration and other non-recurring charges. . . .    (3,652)               -
Depreciation and amortization (3). . . . . . . . .    (8,285)          (8,284)
Interest income. . . . . . . . . . . . . . . . . .       158               62
Interest expense . . . . . . . . . . . . . . . . .   (10,693)         (11,156)
Other, net . . . . . . . . . . . . . . . . . . . .       (98)            (357)
Benefit from (provision for) income taxes. . . . .     2,600             (250)
                                                   ---------       ----------

     Net (loss) income . . . . . . . . . . . . . . $  (4,315)      $      207
                                                   ---------       ----------
                                                   ---------       ----------
</TABLE>
-------------------------


  (1)     Adjusted EBITDA represents income from operations before
          restructuring, integration and other non-recurring charges, non-cash
          purchase accounting charges and depreciation and amortization.
          Adjusted EBITDA does not represent net income or cash flows from
          operations, as these terms are defined under generally accepted
          accounting principles, and should not be considered as an alternative
          to net income as an indicator of the Company's operating performance
          or to cash flows as a measure of liquidity. ALARIS Medical has
          included information concerning Adjusted EBITDA herein because it
          understands that such information is used by investors as one measure
          of an issuer's historical ability to service debt. Restructuring and
          other one-time non-recurring charges are excluded from Adjusted EBITDA
          as ALARIS Medical believes that the inclusion of these items would not
          be helpful to an investor's understanding of


                                       -13-

<PAGE>

          ALARIS Medical's ability to service debt. ALARIS Medical's computation
          of Adjusted EBITDA may not be comparable to similar titled measures of
          other companies.

  (2)     Amount represents that portion of the purchase accounting adjustments
          made to adjust the acquired IVAC inventory to its estimated fair value
          on the Merger date which was charged to cost of sales during the first
          quarter of 1997.
  
  (3)     Depreciation and amortization excludes amortization of debt discount
          and issuance costs included in interest expense.


The following table summarizes sales to customers located in the United States
and international locations:

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED MARCH 31, 
                                                   ----------------------------
                                                       1997           1998 
                                                   ------------    ------------
<S>                                                <C>             <C>
U.S. sales . . . . . . . . . . . . . . . . . . . . $      51.4     $       52.6
International sales. . . . . . . . . . . . . . . .        30.6             34.4
                                                   ------------    ------------
     Total sales . . . . . . . . . . . . . . . . . $      82.0     $       87.0
                                                   ------------    ------------
                                                   ------------    ------------
</TABLE>

For purposes of this discussion and analysis, the three months ended March 
31, 1997 and 1998 are referred to as 1997 and 1998, respectively.

SALES Sales increased $5.0 million during 1998 as compared to 1997. 
International sales increased $3.8 million, or 12.4% while United States 
sales increased $1.2 million, or 2.3%. The increase in international sales is 
primarily due to increases in drug infusion instrument revenue of $2.1 
million and drug infusion disposable administration set revenue of $1.1 
million. The majority of the Company's international sales are denominated in 
foreign currency.  Due to a stronger U.S. dollar in 1998 as compared to the 
actual foreign currency exchange rates in effect during 1997, translation of 
1998 international sales were adversely impacted by $1.5 million. The 
increase in U.S. sales in 1998 as compared to 1997 is primarily due to 
increases in drug infusion disposable administration set revenue of $1.3 
million and patient monitoring revenue of $0.7 million.  These increases were 
offset by a decrease in drug infusion instrument revenue of $0.7 million.

GROSS MARGIN The gross margin percentage increased from 42.7% in 1997 to 
48.4% in 1998 primarily due to $4.1 million of non-recurring costs included 
in 1997 cost of sales. Exclusive of $1.6 million of non-recurring purchase 
accounting inventory adjustments and $2.5 million related to a voluntary 
field correction of certain Gemini PC-1 and PC-2 infusion pumps charged to 
cost of sales during 1997, the gross margin percentage for 1997 was 47.7%. 
This improvement is due to the benefits realized from ongoing cost reduction 
efforts and purchasing synergies.

SELLING AND MARKETING EXPENSES Selling and marketing expenses increased $1.6 
million, or 10.5%, during 1998 as compared to 1997. As a percentage of sales, 
selling and marketing expenses increased from 18.9% in 1997 to 19.7% in 1998. 
Domestic expenses increased by $0.5 million, or 5.7%, from 1997. 
International expenses increased $1.1 million, or 16.4%, from 1997. These 
increases were due to additional corporate investment in international direct 
operations and personnel in this area.

                                       -14-

<PAGE>

GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses 
increased $0.6 million, or 7.0%, during 1998 as compared to 1997. As a 
percentage of sales, general and administrative expenses increased from 11.3% 
in 1997 to 11.4% in 1998. Domestic expenses increased $0.2 million due to (i) 
the creation of a corporate development function to assess product and 
company acquisitions, distribution alliances and joint ventures which will 
expand Company technologies into unserved markets and (ii) increased costs 
related to performing general holding company functions, including the 
communication and meeting costs of shareholder and investor relations. 
International expenses increased by $0.4 million, or 22.2%, primarily as a 
result of the conversion of certain European dealer operations into direct 
operations.

RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses increased 
approximately $0.3 million, or 6.7%, during 1998 as compared to 1997 
primarily due to increased activities associated with the later development 
stages of various domestic and international engineering projects for 
infusion systems and disposable administration sets.

INTEGRATION AND OTHER NON-RECURRING CHARGES The Company incurred $3.7 million 
in costs to integrate the IMED and IVAC operations during 1997. These costs 
are in addition to restructuring and integration charges of $15.3 million 
recorded in the fourth quarter of 1996. The 1997 expense consists primarily 
of severance of $1.1 million, management consulting fees of $1.0 million, 
sales force integration expense of $0.9 million and information systems 
conversion costs of $0.5 million.

INCOME FROM OPERATIONS Income from operations increased $8.2 million during 
1998 as compared to 1997 primarily due to the 1997 operating results 
including significant integration charges, non-recurring purchase accounting 
charges and expenses related to the field correction on the Gemini pumps as 
discussed above which were not incurred in 1998.

ADJUSTED EBITDA Adjusted EBITDA increased $2.9 million during 1998 as 
compared to 1997. As a percentage of sales, Adjusted EBITDA increased from 
21.1%, or $17.3 million, for 1997 to 23.2%, or $20.2 million, for 1998 due to 
the reasons discussed above. Excluding the $2.5 million charge to cost of 
sales during the first quarter of 1997, Adjusted EBITDA for 1997 would have 
increased to $19.8 million. Adjusted EBITDA represents income from operations 
before non-recurring non-cash purchase accounting charges, integration 
charges and depreciation and amortization. Adjusted EBITDA does not represent 
net income or cash flows from operations, as these terms are defined under 
generally accepted accounting principles, and should not be considered as an 
alternative to net income or to cash flows as an indicator of the Company's 
operating performance or to cash flows as a measure of liquidity. The Company 
has included information concerning Adjusted EBITDA herein because it 
understands that such information is used by investors as a measure of an 
issuer's historical ability to service debt. Integration and other one-time 
non-recurring charges are excluded from Adjusted EBITDA as the Company 
believes that the inclusion of these items would not be helpful to an 
investor's understanding of the Company's ability to service debt. The 
Company's computation of Adjusted EBITDA may not be comparable to similar 
titled measures of other companies.

INTEREST EXPENSE Interest expense increased $0.5 million during 1998 
primarily due to a higher average balance on the Company's revolving credit 
facility in 1998 and higher interest rates on the Company's bank term debt in 
1998 due to the interest rate protection agreement entered into during the 
second quarter of 1997 (see Liquidity and Capital Resources).

                                       -15-

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Management currently believes that sufficient cash will be available through 
ALARIS Medical Systems, based upon current operations, to satisfy debt 
service and other corporate expenses of ALARIS Medical in the foreseeable 
future. In particular, ALARIS Medical Systems' credit facility permits ALARIS 
Medical Systems to transfer to ALARIS Medical up to $1.5 million annually to 
fund ALARIS Medical's operating expenses and additional amounts sufficient to 
meet interest expense requirements. 

The Company expects to continue to meet its liquidity needs, including 
capital expenditure requirements with cash flow from operations and 
borrowings under the credit facility.  In addition to operating expenses, the 
Company's primary future use of funds will be to fund capital expenditures 
and strategic acquisitions and to pay debt service on outstanding 
indebtedness. 

During 1998, the Company made cash payments of approximately $0.8 million
related to merger and integration costs accrued at December 31, 1997.

At March 31, 1998, the Company's outstanding indebtedness was $434.0 million, 
which includes $195.8 million of bank term debt under the credit facility and 
$200.0 million of Senior Subordinated Notes due 2006 (the "Notes"), which 
were issued in connection with the Merger.  The bank debt bears interest at 
floating rates based, at the Company's option, on Eurodollar or prime rates.  
During the second quarter of 1997, the Company entered into an interest rate 
protection agreement covering 50% of its term loan borrowings. Such agreement 
fixed the interest rate charged on such borrowings resulting in a weighted 
average fixed rate of 9.6% on the principal balance covered.  As a result, a 
one percent increase in the rate of interest charged on indebtedness 
outstanding under the credit facility at March 31, 1998 would result in 
additional annual interest expense of approximately $1.0 million. During 
March 1998, the credit facility was amended and the interest rates on the 
bank debt reduced. As a result, the weighted average interest rate, including 
the effect of the interest rate protection agreement, was reduced to 8.5% 
based on the amounts outstanding at the time of the amendment.  The Company 
incurred fees of approximately $0.4 million related to such interest rate 
reductions. Included in total consolidated debt, at March 31, 1998, ALARIS 
Medical had outstanding $16.2 million of 71/4% Convertible Debentures. 

In connection with obtaining the Merger financing, the Company also obtained 
a $50.0 million revolving credit line as part of the credit facility.  At 
March 31, 1998, $19.0 million in borrowings and $0.5 million under letters of 
credit were outstanding under this line of credit and $30.5 million was 
available.

In connection with the Merger, the Company assumed IVAC's obligations to 
Siemens Infusion Systems Ltd. ("SIS"). These obligations relate to the 
payment of additional purchase consideration related to the acquisition of 
the MiniMed product line (the predecessor product line to MS III).  The 
Company's remaining obligation to SIS is the greater of $3.0 million or 8% of 
the prior year's MS III sales in 1999.  The Company made the minimum 1998 
payment of $3.0 million during the first quarter of 1998.

As a result of the Company's significant indebtedness, the Company expects to 
incur significant interest expense in future periods. The Company believes 
that cash provided by operations will be sufficient to meet its interest 
expense obligations. 

Annual amortization of the Company's indebtedness is $8.7 million for the 
remaining nine months of 1998 and $15.6 million and $13.7 million for 1999 
and 2000, respectively.

                                       -16-

<PAGE>

The Convertible Debentures provide for semi-annual interest payments of 
approximately $0.6 million and mature on January 15, 2002. The Notes and the 
credit facility permit ALARIS Medical Systems to fund interest payments on 
the Convertible Debentures and to make limited distributions to ALARIS 
Medical to fund operating expenses and to pay income taxes; provided that, 
with respect to the credit facility, there exists no default or event of 
default under the credit facility. The Notes and the credit facility, 
however, restrict distributions to ALARIS Medical to fund the repayment of 
the Convertible Debentures at maturity. 

The Company made capital expenditures of approximately $5.1 million during 
1998 and anticipates additional capital expenditures of approximately $20.0 
million during the remainder of 1998.

In addition to routine capital expenditures, and in connection with the 
Merger, the Company has made significant expenditures for the acquisition of 
enterprise-wide information system software and hardware and the related 
design, testing and implementation.  The worldwide project is scheduled for 
completion in 1999. The system is year 2000 compliant and also designed to 
properly process transactions denominated in euro currency. Euro currency is 
a new monetary unit which certain European countries can begin using in 1999.

During fiscal year 1997 and the three months ended March 31, 1998, the 
Company made combined capital and operating expenditures of approximately 
$6.0 million and $1.4 million, respectively, related to this project. To 
complete the identified phases of the project, the Company anticipates 
additional expenditures for the remainder of 1998 and for 1999 of 
approximately $3.7 million and $1.5 million, respectively.

During the first quarter of 1998, the Company created a corporate development 
function to assess product and company acquisitions, distribution alliances 
and joint ventures which would expand Company technologies into unserved 
markets. While there can be no assurances that the Company will complete any 
acquisitions, depending on the value of potential acquisitions, the Company 
might fund such transactions through a variety of sources, including existing 
or new debt facilities or through the sale of equity securities.

The Company believes that it will generate sufficient cash flow from 
operations to fund its operations, make planned capital expenditures and make 
required payments of principal and interest under its credit facility and 
interest on the Notes; however, the Company may not generate sufficient cash 
flow from operations to repay the Notes at maturity. Accordingly, the Company 
may have to refinance the Notes at or prior to maturity or sell assets or 
raise equity capital to repay the principal amount of the Notes. In addition, 
the Company's ability to fund its operations, to make planned capital 
expenditures and to make scheduled principal and interest payments will be 
dependent on the Company's future operating performance, which is itself 
dependent on a number of factors, many of which the Company cannot control, 
including conditions affecting the Company's foreign operations, prevailing 
economic conditions, availability of other sources of liquidity, and 
financial, business, regulatory and other factors affecting the Company's 
business and operations.

SEASONALITY Infusion instrument sales are typically higher in the fourth 
quarter due to sales compensation plans which reward the achievement of 
annual quotas and the seasonal characteristics of the industry, including 
hospital purchasing patterns.  First quarter sales are traditionally not as 
strong as the fourth quarter.  The Company anticipates that this trend will 
continue but is unable to predict the effect, if any, from health care reform 
and increased competitive pressures.

BACKLOG The backlog of orders, believed to be firm, at March 31, 1998 was 
$5.9 million.

                                       -17-

<PAGE>

FOREIGN OPERATIONS As a result of the Merger, the Company has significant 
foreign operations. Accordingly, the Company is subject to various risks, 
including without limitation, foreign currency risks. Historically, the 
Company has not entered into foreign currency contracts to hedge such 
exposure and such risk.  Due to changes in foreign currency exchange rates 
during 1998, primarily a strengthening of the U.S. dollar against many 
European currencies, the Company recognized a foreign currency transaction 
loss of approximately $0.2 million during 1998. The Company will evaluate 
hedging programs during 1998 to limit the exposure to the Company resulting 
from changes in foreign currency exchange rates.

HEALTH CARE REFORM Heightened public awareness and concerns regarding the 
growth in overall health care expenditures in the United States may result in 
the enactment of legislation affecting payment mechanisms and health care 
delivery.  Legislation which imposes limits on the number and type of medical 
procedures which may be performed or which has the effect of restricting a 
provider's ability to select specific devices or products for use in 
administrating medical care may adversely impact the demand for the Company's 
products.  In addition, legislation which imposes restrictions on the price 
which may be charged for medical products may adversely affect the Company's 
results of operations.  It is not possible to predict the extent to which the 
Company or the health care industry in general may be adversely affected by 
the aforementioned in the future.

FORWARD-LOOKING STATEMENTS Forward-Looking Statements in this report are made 
pursuant to the Safe Harbor Provisions of the Private Securities Litigation 
Reform Act of 1995.  Persons reading this report are cautioned that such 
forward-looking statements involve risks and uncertainties, including, 
without limitation, the effect of legislative and regulatory changes 
effecting the health care industry; the potential of increased levels of 
competition; technological changes; the dependence of the Company upon the 
success of new products and ongoing research and development efforts; 
restrictions contained in the instruments governing the Company's 
indebtedness; the significant leverage to which the Company is subject; and 
other matters referred to in this report.

                                       -18-

<PAGE>

                                    PART II

                               OTHER INFORMATION
-------------------------------------------------------------------------------

ITEM 1.  LEGAL PROCEEDINGS

See Note 6 to the Condensed Consolidated Financial Statements.


                                       -19-

<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits


10.1  -- Amendment No. 3 to the Bank Credit Agreement dated as of March 4, 1998.

27    -- Financial Data Schedule

                                           
                     -----------------------------------------


(b) Reports on Form 8-K

None.


                                       -20-

<PAGE>


                                      SIGNATURES
                                      ----------


     Pursuant to the requirements of the Securities Exchange Act of 1934, the 
registrant has duly caused this report to be signed on its behalf by the 
undersigned, thereunto duly authorized.


                                                       ALARIS MEDICAL, INC.
                                                       --------------------
                                                               (REGISTRANT)





      Date:   May 12, 1998                 By:      /s/ DOUGLAS C. JEFFRIES
                                              -----------------------------
                                                        Douglas C. Jeffries
                                 Vice President and Chief Financial Officer

                                        - 21 -

<PAGE>


                                    EXHIBIT INDEX
-------------------------------------------------------------------------------



Exhibit
  No.  
-------

10.1  -- Amendment No. 3 to the Bank Credit Agreement dated as of March 4, 1998.

27    -- Financial Data Schedule



                                        - 22 -