worldwide. Our manufacturing operations, and the operations of the transportation companies on which we depend, may be adversely affected by natural disasters or significant human events, such as a war, terrorist attack, riot, strike, slowdown or similar event. Any disruption in our manufacturing or transportation could materially adversely affect our ability to meet customer demands or our operations.

Limits on reimbursement imposed by governmental and other programs may adversely affect our business.

The cost of a significant portion of medical care is funded by governmental, social security or other insurance programs. Limits on reimbursement imposed by such programs may adversely affect the ability of hospitals and others to purchase our products. In addition, limitations on reimbursement for procedures which utilize our products could adversely affect sales.

Item 2. Properties.

The Company owns approximately 23 acres of real property situated in the City of South Jordan, Utah, surrounding an additional ten acres of leased real property on which is located the Company’s 175,000 square foot principal office and manufacturing facility. The Company sold the ten-acre site to an unrelated developer in order to facilitate construction of such facility and entered into a 25-year lease agreement (beginning in 1995) to finance the new facility. Monthly lease payments attributable to the ten-acre parcel are approximately $138,000. The Company also holds an option to purchase the facility, exercisable at market value after 25 years. During 2004, the Company acquired an additional four acres of property south of and adjacent to its current property in South Jordan, Utah. During 2005 the Company acquired an additional seven acres of property just west of its current facility in South Jordan, Utah. The acquisition of these additional properties would potentially enable the Company to expand its operations in the future as property surrounding the Company is limited due to increased development over the past few years. At the end of 2004, the Company completed a 47,000 square foot facility in South Jordan, Utah. This facility is used primarily for research, development and pilot production clean rooms. The Company also intends to use this ancillary facility to relocate its production of sensors from Santa Clara, California. The Company completed a 140,000 square foot facility located in South Jordan, Utah in September of 2005. This facility is used for injection and insert molding production, an automated finished goods warehouse, and management information system employees. The completion of the new facilities in South Jordan, Utah are designed to increase Merit’s clean room production capacity and administrative office space to meet current and projected demand the Company anticipates it will experience over the next several years.

The Company owns a building of approximately 65,000 square feet with approximately three acres of land, in Galway, County Galway, Republic of Ireland, which serves as its principal office and manufacturing facility for the Company’s European operations. The facility houses a research and development team, which developed Merit’s diagnostic guide wire, and is working to develop other new products. The Company also manufactures other products at the Galway facility, including custom kits, BASIX® inflation devices, and hemostasis valve products. During 2004, the Company completed a 40,000-square-foot expansion of its Galway facility. This expansion is designed to provide additional production capacity and office space to meet the Company’s current and anticipated needs. The Company’s Galway property has been improved and equipped on terms favorable to the Company in connection with economic development incentives and grants provided by the Irish Government.

The Company leases a manufacturing facility of approximately 69,000 square feet comprised of nine units, located in Murray, Utah. The Murray facility is used for production of several of the Company’s products. The leases related to three of the units at the Murray facility expired in 2004, and leases related to six of these units will expire in 2007. The aggregate monthly lease payments on these Murray facilities are approximately $36,000 and will expire in 2007.

The Company also leases 8,500 square feet of manufacturing and office space located in Santa Clara, California for the production of sensors. This lease runs through August 2006 at a monthly cost of approximately $14,000. The Company does not currently plan to renew its Santa Clara, California lease as it currently intends to relocate its sensor operations to a new facility built in South Jordan, Utah during 2004. The Company currently anticipates that this move will begin during the second half of 2006 and be completed in 2007. The Company intends to upgrade its wafer fabrication production to improve capacity and quality and reduce costs at its South Jordan facility prior to closing its Santa Clara, California operation.

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