##### Table of Contents






SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---

FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 1999

Commission File Number: 0-24635

HYPERTENSION DIAGNOSTICS, INC.

(Exact name of small business issuer as specified
in its charter)


|                                  |  |                                               
|--------------------------------- |  | ----------------------------------------------
|                                 
|                                 
|                                 
|                                 
|MINNESOTA(State of incorporation) |  | 41-1618036(I.R.S. Employer Identification No.)

2915 WATERS ROAD, SUITE 108

EAGAN, MINNESOTA 55121-1562


(651) 687-9999


(Address of issuers principal executive
offices and telephone number)


Check whether the issuer
(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 
[   ]

The number of shares of Common
Stock outstanding as of October 29, 1999 was 5,109,235.

Transitional Small Business
Disclosure Format:

Yes 
[   ]       No 
 [X]



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---

TABLE OF CONTENTS



|                              |                                                                                               |                               |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------- |  |  |  |  |  | 
|INDEX TO FORM 10-QSB         
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              |                                                                                               | Balance Sheets               
|                              |                                                                                               | Statements of Operations     
|                              |                                                                                               | Statements of Cash Flows     
|                              |                                                                                               | Notes to Financial Statements
|                              | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|PART II. OTHER INFORMATION   
|                              | Item 2. Use of Proceeds                                                                      
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                   
|EXHIBIT INDEX                



---



HYPERTENSION DIAGNOSTICS, INC.






INDEX TO FORM 10-QSB


|                                                                                                                                             |  |          |    | 
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | -- | 
|                                                                                                                                             |  | Page No.
|                                                                                                                                             |  |         
|PART I. FINANCIAL INFORMATION:                                                                                                               |  |          |    | 
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Item 1. Financial Statements                                                                                                                 |  |          | 3  | 
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Balance
	Sheets  June 30, 1999 and September  30,
	1999                                                                                     |  |          | 3  | 
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Statements
	of Operations  Three Months Ended September 30,
	1998 and 1999 and Period From July 19, 1988 (Inception) to
	September 30, 1999 |  |          | 4  | 
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Statements
	of Cash Flows  Three Months Ended September 30,
	1998 and 1999 and Period From July 19, 1988 (Inception) to
	September 30, 1999 |  |          | 5  | 
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Notes to
	Financial Statements                                                                                                               |  |          | 6  | 
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Item 2. Managements Discussion and Analysis of
	Financial Condition and Results of Operations                                               |  |          | 7  | 
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|PART II. OTHER INFORMATION:                                                                                                                  |  |          |    | 
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Item 2. Use of Proceeds                                                                                                                      |  |          | 11 | 
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Item 6. Exhibits and Reports on Form 8-K                                                                                                     |  |          | 11 | 
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|SIGNATURES                                                                                                                                   |  |          | 12 | 
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|EXHIBIT INDEX                                                                                                                                |  |          | 13 | 

2



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##### Table of Contents








PART I. FINANCIAL INFORMATION







Item 1. Financial Statements


Hypertension Diagnostics, Inc.

(A Development Stage Company)







Balance Sheets


|                                                                                                                 |                                                  |                                                                            |                                            |               |        |           |         |            |        |           | 
|---------------------------------------------------------------------------------------------------------------- | ------------------------------------------------ | -------------------------------------------------------------------------- | ------------------------------------------ | ------------- | ------ | --------- | ------- | ---------- | ------ | --------- | 
|                                                                                                                 |                                                  | June 30,                                                                   |                                            | September 30,
|                                                                                                                 |                                                  | 1999                                                                       |                                            | 1999         
|                                                                                                                 |                                                  |                                                                            |                                            |              
|                                                                                                                 |                                                  |                                                                            |                                            | (Unaudited)  
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Assets                                                                                                           |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Current Assets:                                                                                                  |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Cash and cash equivalents                        |                                                                            | $                                          | 7,684,525     |        |           | $       | 6,695,847  |       
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Accounts receivable                              |                                                                            |                                            | 182,728       |        |           |         | 232,819    |       
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Interest receivable                              |                                                                            |                                            | 49,753        |        |           |         | 54,343     |       
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Inventory                                        |                                                                            |                                            | 375,497       |        |           |         | 637,076    |       
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Prepaid expenses                                 |                                                                            |                                            | 4,720         |        |           |         | 28,634     |       
|                                                                                                                 |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                 |                                                  |                                                                            | Total Current Assets                       |               |        | 8,297,223 |         |            |        | 7,648,719 | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Property and Equipment:                                                                                          |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Leasehold improvements                           |                                                                            |                                            | 17,202        |        |           |         | 17,202     |       
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Furniture and equipment                          |                                                                            |                                            | 458,999       |        |           |         | 498,392    |       
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Less accumulated depreciation                    |                                                                            |                                            | (92,119       | )      |           |         | (115,239   | )     
|                                                                                                                 |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                 |                                                  |                                                                            | 384,082                                    |               |        |           | 400,355 |           
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Patents, net of accumulated amortization of $21,605 and $23,305
	at June 30 and September 30, 1999, respectively |                                                  |                                                                            | 23,800                                     |               |        |           | 22,100  |           
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Others Assets                                                                                                    |                                                  |                                                                            | 6,730                                      |               |        |           | 6,730   |           
|                                                                                                                 |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                 |                                                  |                                                                            | Total Assets                               |               | $      | 8,711,835 |         |            | $      | 8,077,904 | 
|                                                                                                                 |                                                  |                                                                            |                                            |               |        |           |         |           
|Liabilities and Shareholders Equity                                                                             |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Current Liabilities:                                                                                             |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Accounts payable                                 |                                                                            | $                                          | 113,397       |        |           | $       | 127,229    |       
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Accrued payroll and payroll taxes                |                                                                            |                                            | 98,356        |        |           |         | 109,683    |       
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Other accrued expenses                           |                                                                            |                                            | 10,856        |        |           |         | 2,666      |       
|                                                                                                                 |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                 |                                                  |                                                                            | Total Current Liabilities                  |               |        | 222,609   |         |            |        | 239,578   | 
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|Shareholders Equity:                                                                                            |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Preferred Stock, $.01 par value:                 |                                                                            |                                            |               |        |           |         |            |       
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 |                                                  | Authorized shares  5,000,000; Issued and outstanding shares
	  none      |                                            |               |       |           |         |            |       |          
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Common Stock, $.01 par value:                    |                                                                            |                                            |               |        |           |         |            |       
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 |                                                  | Authorized shares  25,000,000; Issued and outstanding
	shares  5,109,235 |                                            |               | 51,092 |           |         |            | 51,092 |          
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Additional paid-in capital                       |                                                                            |                                            | 14,083,028    |        |           |         | 14,083,028 |       
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Deferred compensation                            |                                                                            |                                            | (154,550      | )      |           |         | (136,715   | )     
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                
|                                                                                                                 | Deficit accumulated during the development stage |                                                                            |                                            | (5,490,344    | )      |           |         | (6,159,079 | )     
|                                                                                                                 |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                 |                                                  |                                                                            | Total Shareholders Equity                 |               |        | 8,489,226 |         |            |        | 7,838,326 | 
|                                                                                                                 |                                                  |                                                                            |                                            |               |        |           |         |           
|                                                                                                                 |                                                  |                                                                            | Total Liabilities and Shareholders Equity |               | $      | 8,711,835 |         |            | $      | 8,077,904 | 
|                                                                                                                 |                                                  |                                                                            |                                            |               |        |           |         |           

See accompanying notes.

3



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##### Table of Contents



Hypertension Diagnostics, Inc.

(A Development Stage Company)







Statements of Operations


(Unaudited)


|                                      |                                     |                                                               |           |                |          |      |           |         |          |   |            |           |            |  
|------------------------------------- | ----------------------------------- | ------------------------------------------------------------- | --------- | -------------- | -------- | ---- | --------- | ------- | -------- | - | ---------- | --------- | ---------- | -
|                                      |                                     |                                                               |           | Period From   
|                                      |                                     | Three Months Ended                                            |           | July 19, 1988 
|                                      |                                     | September 30                                                  |           | (Inception) to
|                                      |                                     |                                                               |           | September 30, 
|                                      |                                     | 1998                                                          |           | 1999           |          | 1999
|                                      |                                     |                                                               |           |                |          |     
|Revenue:                              |                                     |                                                               |           |                |          |      |           |         |          |   |            |          
|                                     
|                                     
|                                     
|                                     
|                                      | Equipment sales                     |                                                               | $         |               |          |      | $         | 71,498  |          |   | $          | 452,745   |           
|                                     
|                                     
|                                     
|                                     
|Cost and Expenses:                    |                                     |                                                               |           |                |          |      |           |         |          |   |            |          
|                                     
|                                     
|                                     
|                                     
|                                      | Cost of equipment sales             |                                                               |           |               |          |      |           | 17,533  |          |   |            | 156,321   |           
|                                     
|                                     
|                                     
|                                     
|                                      | Research and development            |                                                               |           | 169,043        |          |      |           | 63,271  |          |   |            | 2,198,215 |           
|                                     
|                                     
|                                     
|                                     
|                                      | Selling, general and administrative |                                                               |           | 404,562        |          |      |           | 750,711 |          |   |            | 4,918,578 |           
|                                      |                                     |                                                               |           |                |          |      |           |         |          |   |            |          
|                                      |                                     | Total Cost and Expenses                                       |           |                | 573,605  |      |           |         | 831,515  |   |            |           | 7,273,114  |  
|                                      |                                     |                                                               |           |                |          |      |           |         |          |   |            |          
|Operating Loss                        |                                     |                                                               | (573,605  | )              |          |      | (760,017  | )       |          |   | (6,820,369 | )        
|                                     
|                                     
|                                     
|                                     
|Other Income (Expense):               |                                     |                                                               |           |                |          |      |           |         |          |   |            |          
|                                     
|                                     
|                                     
|                                     
|                                      | Interest income                     |                                                               |           | 92,600         |          |      |           | 91,282  |          |   |            | 708,321   |           
|                                     
|                                     
|                                     
|                                     
|                                      | Interest expense                    |                                                               |           |               |          |      |           |        |          |   |            | (47,031   | )         
|                                      |                                     |                                                               |           |                |          |      |           |         |          |   |            |          
|                                      |                                     |                                                               | 92,600    |                |          |      | 91,282    |         |          |   | 661,290    |          
|                                      |                                     |                                                               |           |                |          |      |           |         |          |   |            |          
|                                      |                                     | Net Loss and Deficit Accumulated During the Development Stage |           | $              | (481,005 | )    |           | $       | (668,735 | ) |            | $         | (6,159,079 | )
|                                      |                                     |                                                               |           |                |          |      |           |         |          |   |            |          
|Basic and Dilutive Net Loss per Share |                                     | $                                                             | (.11      | )              |          | $    | (.13      | )       |          | $ | (4.63      | )        
|                                     
|                                     
|                                     
|                                     
|Weighted Average Shares Outstanding   |                                     |                                                               | 4,560,936 |                |          |      | 5,109,235 |         |          |   | 1,329,252  |          

See accompanying notes.

4



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##### Table of Contents



Hypertension Diagnostics, Inc.

(A Development Stage Company)







Statements of Cash Flows


(Unaudited)


|                                                                             |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |         |          |            |  
|---------------------------------------------------------------------------- | ----------------------------------------------------------- | --------------------------------- | ------------------------------------------------ | -------------- | -------- | --------- | --------- | ------ | -------- | --------- | ---------- | ------- | -------- | ---------- | -
|                                                                             |                                                             |                                   |                                                  | Period From   
|                                                                             |                                                             | Three Months Ended                |                                                  | July 19, 1988 
|                                                                             |                                                             | September 30                      |                                                  | (Inception) to
|                                                                             |                                                             |                                   |                                                  | September 30, 
|                                                                             |                                                             | 1998                              |                                                  | 1999           |          | 1999     
|                                                                             |                                                             |                                   |                                                  |                |          |          
|Operating Activities:                                                        |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Net loss                                                                     |                                                             | $                                 | (481,005                                         | )              |          | $         | (668,735  | )      |          | $         | (6,159,079 | )      
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Adjustments to reconcile net loss to net cash used in operating
	activities: |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Value of stock options granted in lieu of cash compensation |                                   |                                                  |               |          |           |           | 17,835 |          |           |            | 590,738 |         
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Depreciation                                                |                                   |                                                  | 9,737          |          |           |           | 23,120 |          |           |            | 151,708 |         
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Amortization                                                |                                   |                                                  | 2,323          |          |           |           | 1,700  |          |           |            | 24,355  |         
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Write-off of property and equipment                         |                                   |                                                  |               |          |           |           |       |          |           |            | 42,702  |         
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Change in operating assets and liabilities:                 |                                   |                                                  |                |          |           |           |        |          |           |            |         |         
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                             | Accounts receivable               |                                                  |                |         |           |           |        | (50,091  | )         |            |         | (232,819 | )         
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                             | Interest receivable               |                                                  |                | (57,073  | )         |           |        | (4,590   | )         |            |         | (54,343  | )         
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                             | Inventory                         |                                                  |                | (143,415 | )         |           |        | (261,579 | )         |            |         | (637,076 | )         
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                             | Prepaid expenses                  |                                                  |                | 126,593  |           |           |        | (23,914  | )         |            |         | (28,634  | )         
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                             | Other assets                      |                                                  |                |         |           |           |        |         |           |            |         | (6,730   | )         
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                             | Accounts payable                  |                                                  |                | 4,118    |           |           |        | 13,832   |           |            |         | 127,229  |           
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                             | Accrued payroll and payroll taxes |                                                  |                | 36,000   |           |           |        | 11,327   |           |            |         | 109,683  |           
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                             | Other accrued expenses            |                                                  |                |         |           |           |        | (8,190   | )         |            |         | 2,840    |           
|                                                                             |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |        
|                                                                             |                                                             |                                   | Net cash used in operating activities            |                |          | (502,722  | )         |        |          | (949,285  | )          |         |          | (6,069,426 | )
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Investing Activities:                                                        |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Purchase of property and equipment                                           |                                                             |                                   | (138,514                                         | )              |          |           | (39,393   | )      |          |           | (594,765   | )      
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Payment of patent costs                                                      |                                                             |                                   |                                                 |                |          |           |          |        |          |           | (46,455    | )      
|                                                                             |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |        
|                                                                             |                                                             |                                   | Net cash used in investing activities            |                |          | (138,514  | )         |        |          | (39,393   | )          |         |          | (641,220   | )
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Financing Activities:                                                        |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Proceeds from notes payable                                                  |                                                             |                                   |                                                 |                |          |           |          |        |          |           | 315,500    |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Payments of notes payable                                                    |                                                             |                                   |                                                 |                |          |           |          |        |          |           | (49,000    | )      
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Issuance of Common Stock                                                     |                                                             |                                   | 9,188,464                                        |                |          |           |          |        |          |           | 13,140,293 |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Redemption of Common Stock                                                   |                                                             |                                   |                                                 |                |          |           |          |        |          |           | (300       | )      
|                                                                             |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |        
|                                                                             |                                                             |                                   | Net cash provided by financing activities        |                |          | 9,188,464 |           |        |          |          |            |         |          | 13,406,493 |  
|                                                                             |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |        
|Net increase (decrease) in cash and cash equivalents                         |                                                             |                                   | 8,547,228                                        |                |          |           | (988,678  | )      |          |           | 6,695,847  |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                             |                                   | Cash and cash equivalents at beginning of period |                |          | 1,239,804 |           |        |          | 7,684,525 |            |         |          |           |  
|                                                                             |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |        
|Cash and cash equivalents at end of period                                   |                                                             | $                                 | 9,787,032                                        |                |          | $         | 6,695,847 |        |          | $         | 6,695,847  |        
|                                                                             |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |        
|Supplemental Schedule of Noncash Financing Activities:                       |                                                             |                                   |                                                  |                |          |           |           |        |          |           |            |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Conversion of note payable and accrued interest into Common Stock            |                                                             | $                                 |                                                 |                |          | $         |          |        |          | $         | 266,674    |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Cash paid for interest                                                       |                                                             |                                   |                                                 |                |          |           |          |        |          |           | 12,526     |        

See accompanying notes.

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Hypertension Diagnostics, Inc.

(A Development Stage Company)







Notes to Financial Statements


(Unaudited)


September 30, 1999

1.  Interim Financial Information

The accompanying unaudited financial statements have been
prepared in accordance with the instructions to Form 10-QSB
and do not include all the information and notes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, these unaudited
financial statements reflect all adjustments, consisting only of
normal and recurring adjustments necessary for a fair
presentation of the financial statements. The results of
operations for the three months ended September 30, 1999,
are not necessarily indicative of the results that may be
expected for the full year ending June 30, 2000. The
June 30, 1999 balance sheet was derived from audited
financial statements. For further information, refer to the
financial statements and notes included in the Companys
Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1999. The policies described in that report are
used for preparing quarterly reports.

2.  Shareholders Equity

In July and August 1998, the Company raised $9,188,414 (net
of underwriting discounts and offering expenses), through an
initial public offering of 2,587,500 units (which included
337,500 additional units to cover over-allotments) at
$4.125 per unit. Each unit consists of one share of Common
Stock and one redeemable Class A Warrant which entitles the
holder to purchase one share at an exercise price of
$5.50 per Warrant, subject to adjustment. The Class A
Warrants are subject to redemption by the Company for $.01 per
Warrant at any time commencing 90 days after the Effective
Date (July 23, 1998), provided that the closing bid price of
 the Common Stock exceeds $6.50 (subject to adjustment) for 14
consecutive trading days. The Class A Warrants expire on
July 22, 2002.

6



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##### Table of Contents








|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
	Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of
1934. In addition, forward-looking statements may be made orally
in the future by or on behalf of the Company. When used in this
report, the words believe, expect,
will, can, estimate,
anticipate and similar expressions are intended to
identify such forward-looking statements.

Overview

The Company was founded in July 1988 to develop its blood
pressure waveform analysis technology into a clinically
acceptable, non-invasive method for conducting cardiovascular
profiling. From inception, the majority of the Companys
efforts have been focused on incorporating this technology into
an instrument that is intended to allow physicians to reliably
and effectively screen, diagnose and monitor the treatment of
patients with cardiovascular disease. While the Company has
developed and tested commercial models of the Product and in
April 1998 commenced marketing the Model CR-2000 for
research use only, it expects to incur substantial net operating
losses until it achieves a significant level of revenue following
 FDA clearance to Market the Model DO-2020.

The Company plans to market three models: the Model CR-2000,
 the Model DO-2020, and the Model DO-2020i. Management
believes that the Model CR-2000, intended for research use only
(that is, not for screening, diagnosing, monitoring or
determining treatment of patients), does not require FDA
clearance to market, and marketing activities have commenced
worldwide. The Model DO-2020, intended for use by physicians
 to screen, diagnose and monitor the treatment of patients with
vascular disease, is an FDA regulated medical device. Although a
510(k) Application has been submitted to the FDA, the Company is
unable to market the Model DO-2020 in the United States
until FDA clearance to market is obtained. Following receipt of a
 medical device CE Mark, the Company intends to pursue
foreign registrations and approvals that will allow marketing of
a similar product, the DO-2020i, in foreign markets.

The Company wishes to caution readers not to place undo reliance
on any forward-looking statements and to recognize that the
statements are not predictions of actual future results. Actual
results could differ materially from those anticipated in the
forward-looking statements due to the risks and uncertainties set
 forth in the Companys 1999 Annual Report on
Form 10-KSB under the caption Risk Factors, as
well as others not now anticipated. These risks and uncertainties
 include, without limitation, the Companys ability to
receive regulatory approval for its Model DO-2020 product
and its anticipated Model DO-2020i product; the availability of
third-party reimbursements; market acceptance of the
Companys products; the ability to operate and maintain the
Central Data Management Facility (CDMF) on a
commercial scale; the ability to manufacture the Companys
products on a commercial scale and in compliance with regulatory
requirements; the availability of integral components for the
Companys products; the Companys ability to develop
distribution channels; increased competition; changes in
government regulation; health care reforms; exposure to potential
 product liability; and the Companys ability to protect its
 proprietary technology.

Development Stage Results of Operations

The Company is a development stage company and is not presently
generating any significant revenues. There can be no assurance
that the Company will ever be able to generate significant
revenues, attain or maintain profitable operations or
successfully implement its business plan or its current
development opportunities. As of September 30, 1999, the
Company had a deficit accumulated during

7



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##### Table of Contents



the development stage of $(6,159,079), attributable primarily to
research and development and general and administrative expenses.
 Until it is able to generate significant revenues from its
activities, the Company expects to continue to incur operating
losses.

The Company has developed proprietary cardiovascular profiling
technology that analyzes non-invasively derived arterial pulse
pressure waveform data as a means of providing parameters that
are useful in assessing the cardiovascular system. The Company
has developed two models of the HDI/ PulseWave
CardioVascular Profiling Instrument: (1) CR-2000 which is
currently in use by physician scientists for research purposes
only; and (2) the DO-2020 which is intended to assist
physicians and other health care professionals in screening,
diagnosing and monitoring the treatment of patients with
cardiovascular disease. Following receipt of a medical device CE
Mark, the Company intends to pursue foreign registrations and
approvals that will allow marketing of a similar model, the
DO-2020i, in foreign markets. The Company has not yet received
permission to market the DO-2020 from the FDA. Although FDA
clearance on the Model DO-2020 is taking longer than the Company
had originally anticipated, the Company continues to believe that
 a FDA 510(k) clearance is the correct approach and that the
process will be completed within the fiscal year ending
June 30, 2000.

Three Months Ended September 30, 1998 Compared to Three
Months Ended September 30, 1999

For the three months ended September 30, 1999, the Company
recorded revenue of $71,198 relating to sales of the HDI/ PulseWave CR-2000 Research CardioVascular Profiling
Instrument. There was no revenue for the three months ended
September 30, 1998.

Total cost and expenses for the three months ended
September 30, 1998 were $573,605 compared to $831,515 for
the three months ended September 30, 1999. Approximately 29%
 of the $573,605 and 8% of the $831,515 total cost and expenses
were related to research and development expenses. A further
breakdown of research and development expenses is as follows:

|                                                                                              |                                         |                    |        |         |  |   |        |        | 
|--------------------------------------------------------------------------------------------- | --------------------------------------- | ------------------ | ------ | ------- |  | - | ------ | ------ | 
|                                                                                              |                                         |                   
|                                                                                              |                                         | Three Months Ended
|                                                                                              |                                         | September 30      
|                                                                                              |                                         |                   
|                                                                                              |                                         | 1998               |        | 1999   
|                                                                                              |                                         |                    |        |        
|Design and development of prototype devices and other
	enhancements and improvements          |                                         | $                  | 77,147 |         |  | $ | 45,436 |       
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Design and development of a Central Data Management Facility
	(CDMF)                          |                                         |                    | 91,896 |         |  |   |       |       
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Recognized compensation cost for value of stock options granted
	in lieu of cash compensation |                                         |                    |       |         |  |   | 17,835 |       
|                                                                                              |                                         |                    |        |         |  |   |        |       
|                                                                                              | Total research and development expenses |                    | $      | 169,043 |  |   | $      | 63,271 | 
|                                                                                              |                                         |                    |        |         |  |   |        |       

The design and development of the CDMF was completed in the
fiscal year ended June 30, 1999. The CDMF is capable of
handling multiple simultaneous transmissions by the DO-2020
integrated with the Companys tracking, billing and
production systems and capable of storing and retrieving several
hundred thousand patient records.

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##### Table of Contents



The following is a summary of the major categories included in
selling, general and administrative expenses:

|                                                             |                                                    |                    |         |         |  |   |         |         | 
|------------------------------------------------------------ | -------------------------------------------------- | ------------------ | ------- | ------- |  | - | ------- | ------- | 
|                                                             |                                                    |                   
|                                                             |                                                    | Three Months Ended
|                                                             |                                                    | September 30      
|                                                             |                                                    |                   
|                                                             |                                                    | 1998               |         | 1999   
|                                                             |                                                    |                    |         |        
|Wages, related expenses and benefits                         |                                                    | $                  | 176,592 |         |  | $ | 239,301 |        
|                                                            
|                                                            
|                                                            
|                                                            
|Patents and related expenses                                 |                                                    |                    | 7,838   |         |  |   | 29,382  |        
|                                                            
|                                                            
|                                                            
|                                                            
|Outside consultants                                          |                                                    |                    | 69,428  |         |  |   | 92,994  |        
|                                                            
|                                                            
|                                                            
|                                                            
|Rent-building and utilities                                  |                                                    |                    | 21,617  |         |  |   | 22,478  |        
|                                                            
|                                                            
|                                                            
|                                                            
|Insurance-general and directors/officers liability           |                                                    |                    | 19,518  |         |  |   | 11,203  |        
|                                                            
|                                                            
|                                                            
|                                                            
|Selling, marketing and promotion, including applicable wages |                                                    |                    | 22,137  |         |  |   | 216,525 |        
|                                                            
|                                                            
|                                                            
|                                                            
|Depreciation and amortization                                |                                                    |                    | 12,060  |         |  |   | 24,820  |        
|                                                            
|                                                            
|                                                            
|                                                            
|Other-general and administrative                             |                                                    |                    | 75,372  |         |  |   | 114,008 |        
|                                                             |                                                    |                    |         |         |  |   |         |        
|                                                             | Total selling, general and administrative expenses |                    | $       | 404,562 |  |   | $       | 750,711 | 
|                                                             |                                                    |                    |         |         |  |   |         |        

The Companys number of employees increased from seven in
the three months ended September 30, 1998 to fifteen in the
three months ended September 30, 1999. In April 1999,
the Company hired Dennis L. Sellke to serve as its Chief
Executive Officer.

The increase in outside consultants expense from $69,428 for the
three months ended September 30, 1998 to $92,994 for the
three months ended September 30, 1999 was mainly
attributable to additional work relating to the Companys
FDA 510(k) application, efforts concerning an approach for
obtaining physician reimbursement from insurance coverage and
third party payers, and the Companys ISO 9002
certification and CE Mark for the Model CR-2000.

Selling marketing and promotion expense increased from $22,137
for the three months ended September 30, 1998 to $216,525
for the three months ended September 30, 1999. This category
 includes wages and commissions paid by the Company relating to
its sales and marketing efforts as well as travel and convention
expenses. In this regard, the Company added the following
individuals: Director of Sales (during March 1998), Director
 of Marketing (during May 1998) and Northeast regional sales
 manager (during July 1999).

Interest income was $92,600 and $91,282 for the three months
ended September 30, 1998 and 1999, respectively. In July and
 August 1998, the Company raised $9,188,414 (net of
underwriting discounts and offering expenses) through an initial
public offering of 2,587,500 units (which included 337,500
additional units to cover over-allotments) at $4.125 per
unit.

Net loss was $(481,005) and $(668,735) for the three months ended
 September 30, 1998 and 1999, respectively. For the three
months ended September 30, 1998, basic and dilutive net loss
 per share was $(.11), based on weighted average shares
outstanding of 4,560,936. For the three months ended
September 30, 1999, basic and dilutive net loss per share
was $(.13), based on weighted average shares outstanding of
5,109,235.

Liquidity and Capital Resources

Cash and cash equivalents had a net increase of $8,547,228 for
the three months ended September 30, 1998. The significant
elements of this change were as follows: net cash used in
operating activities  net loss, as adjusted for
non-cash items, of $(468,945); decrease in prepaid
expenses  $126,593; increase in inventory 
$143,415; net cash used in investing activities
  purchase of property

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##### Table of Contents



and equipment  $138,514; net cash provided by
financing activities  issuance of Common
Stock  $9,188,464. For the three months ended
September 30, 1999, cash and cash equivalents had a net
decrease of $988,678. The significant elements of this change
were as follows: net cash used in operating activities
  net loss, as adjusted for non-cash items, of
$(626,080); increase in inventory  $261,579.

In July 1998, the Company completed its initial public
offering (IPO) in which it sold 2,250,000 units at $4.125 per
unit, each unit consisting of one share of Common Stock and one
redeemable Class A Warrant. In August 1998, the
underwriter exercised in full an overallotment option to purchase
 an additional 337,500 units. Total net proceeds from the
IPO were $9,188,414. As of September 30, 1999, the Company
has cash and cash equivalents of $6,695,847, and anticipates that
 these funds should allow it to pursue the different elements of
the Companys business development strategy for at least the
 next 15 to 21 months. The Companys business plan
 and financing needs are subject to change depending on, among
other things, market conditions, timing of the receipt of
clearance from the FDA to market the Model DO-2020, business
 opportunities and cash flow from operations. Pending application
 of the net proceeds, such proceeds will be invested in
short-term, high quality, interest-bearing instruments.

Although not assured, in addition to the net proceeds from the
IPO, the Company may derive over a period of time up to
$14,231,250 from the exercise of the Class A Warrants
included in the units. Each Class A Warrant entitles the
holder to purchase one share at an exercise price of
$5.50 per Warrant, subject to adjustment. The Class A
Warrants are subject to redemption by the Company for
$.01 per Warrant at any time commencing October 21,
1998, provided that the closing bid price of the shares exceeds
$6.50 (subject to adjustment) for 14 consecutive trading
days. The Class A Warrants expire on July 22, 2002. The
 amounts, if any, that the Company derives from the exercise of
such Class A Warrants will be used in connection with the
Companys development opportunities, business plan
activities and/or working capital requirements.

Year 2000 Compliance

The Company has considered the potential impact of the Year 2000
for its internal information systems, external integration
problems, the various models of its Product and the CDMF. The
Company believes that its internal information systems and
current Product and the CDMF are Year 2000 compliant. The
Companys Product and the CDMF have been designed and
developed to be Year 2000 compliant. In addition, the Product and
 the CDMF have been tested to ensure that their performance and
functionality are not affected by the Year 2000 compliance
issues. There can be no assurance, however, that the Company will
 not experience unexpected costs and delays in achieving Year
2000 compliance, which could result in a material adverse effect
on the Companys future results of operations.

10



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##### Table of Contents








PART II.  OTHER INFORMATION







Item 2. Use of Proceeds


The following table sets forth the Companys use of the net
proceeds from its initial public offering, from July 28,
1998 through September 30, 1999:

|                                                                                                                                                                |  |   |           | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | --------- | 
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|Temporary investments (U.S. Government obligations/notes and U.S.
	 Government money market fund; other short-term high quality,
	interest-bearing instruments) |  | $ | 6,695,847 | 
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|Central Data Management Facility                                                                                                                                |  |   | 318,194   | 
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|Purchase of property and equipment                                                                                                                              |  |   | 365,480   | 
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|Sales, marketing and promotion                                                                                                                                  |  |   | 374,239   | 
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|Wages, related expenses and benefits                                                                                                                            |  |   | 731,005   | 
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|Outside consultants                                                                                                                                             |  |   | 181,910   | 
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|                                                                                                                                                               
|Inventory                                                                                                                                                       |  |   | 521,739   | 
|                                                                                                                                                                |  |   |           | 
|                                                                                                                                                                |  | $ | 9,188,414 | 
|                                                                                                                                                                |  |   |           | 






Item 6. Exhibits and Reports on Form 8-K


(a)  The following Exhibits are furnished pursuant to
Item 601 of Regulation S-B:

|        |    |             |  |                                                                   
|------- | -- | ----------- |  | ------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 27 |             |  | Financial Data Schedule for the quarter ended September 30,
	1999.

(b)  Reports on Form 8-K.

No reports on Form 8-K were filed during the quarter ended
September 30, 1999.

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SIGNATURES


In accordance with the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.



| |                               
| | ------------------------------
| | HYPERTENSION DIAGNOSTICS, INC.



| |    |                    
| | -- | -------------------
| | By | /s/ JAMES S. MURPHY

| |                              
| | -----------------------------
| |                              
| | James S. Murphy              
| | Vice President-Finance and   
| | Chief Financial Officer      
| | (principal financial officer)

Date: November 12, 1999

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EXHIBIT INDEX


|        |    |             |  |                                                                   
|------- | -- | ----------- |  | ------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 27 |             |  | Financial Data Schedule for the quarter ended September 30,
	1999.

13