<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                    FORM 10-Q

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

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

                For the quarterly period ended September 30, 2000

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


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


                         Commission file number 0-21982

                            Diametrics Medical, Inc.
                 Incorporated pursuant to the Laws of Minnesota


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


        Internal Revenue Service-- Employer Identification No. 41-1663185

                  2658 Patton Road, Roseville, Minnesota 55113
                                 (651) 639-8035

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


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

The total number of shares of the registrant's Common Stock, $.01 par value,
outstanding on October 31, 2000, was 26,686,943.


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<PAGE>

                            Diametrics Medical, Inc.

                                                                            Page
                                                                            ----

Part I -- FINANCIAL INFORMATION

       Item 1.  Consolidated Financial Statements (unaudited)

                Consolidated Statements of Operations:
                   Three and Nine Months Ended September 30, 2000 and 1999.....3

                Consolidated Balance Sheets as of September 30, 2000
                 and December 31, 1999.........................................4

                Consolidated Statements of Cash Flows:
                   Nine Months Ended September 30, 2000 and 1999...............5

                Notes to Consolidated Financial Statements.....................6

       Item 2.  Management's Discussion and Analysis of Results of Operations
                and Financial Condition........................................7

       Item 3.  Quantitative and Qualitative Disclosure About Market Risk.....11


Part II -- OTHER INFORMATION

       Item 1.  Legal Proceedings.............................................11
       Item 2.  Changes in Securities.........................................11
       Item 3.  Defaults Upon Senior Securities...............................11
       Item 4.  Submission of Matters to a Vote of Security Holders...........11
       Item 5.  Other Information.............................................11
       Item 6.  Exhibits and Reports on Form 8-K..............................11
       Signatures.............................................................12

                                       2
<PAGE>

                            DIAMETRICS MEDICAL, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                    Three Months Ended              Nine Months Ended
                                                      September 30,                   September 30,
                                                  2000            1999            2000            1999
                                              ------------    ------------    ------------    ------------
<S>                                           <C>             <C>             <C>             <C>
Net sales                                     $  6,580,956    $  4,694,294    $ 18,342,193    $ 13,577,227

Cost of sales                                    4,593,081       4,090,404      13,304,547      11,523,683
                                              ------------    ------------    ------------    ------------

    Gross profit                                 1,987,875         603,890       5,037,646       2,053,544
                                              ------------    ------------    ------------    ------------

Operating expenses:
    Research and development                     1,249,809         968,693       3,612,766       3,849,777
    Selling, general and administrative          1,272,306       1,619,021       4,088,429       6,642,552
                                              ------------    ------------    ------------    ------------

    Total operating expenses                     2,522,115       2,587,714       7,701,195      10,492,329
                                              ------------    ------------    ------------    ------------

Operating loss                                    (534,240)     (1,983,824)     (2,663,549)     (8,438,785)

Other income (expense), net                         46,969           2,637         140,249        (232,317)
                                              ------------    ------------    ------------    ------------

Net loss                                      $   (487,271)   $ (1,981,187)   $ (2,523,300)   $ (8,671,102)
                                              ============    ============    ============    ============

Basic and diluted net loss per common share   $      (0.02)   $      (0.08)   $      (0.10)   $      (0.36)
                                              ============    ============    ============    ============

Weighted average number of
common shares outstanding                       26,661,162      25,551,450      26,423,504      24,405,066
                                              ============    ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                            DIAMETRICS MEDICAL, INC.
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   September 30,     December 31,
                                                                       2000              1999
                                                                   -------------    -------------
<S>                                                                <C>              <C>
ASSETS
    Current assets:
      Cash and cash equivalents                                    $   1,406,099    $   2,786,162
      Marketable securities                                            9,106,493       11,339,009
      Accounts receivable                                              6,387,414        6,790,673
      Inventories                                                      3,448,121        4,116,348
      Prepaid expenses and other current assets                          510,398          285,336
                                                                   -------------    -------------

         Total current assets                                         20,858,525       25,317,528
                                                                   -------------    -------------

    Property and equipment                                            21,698,550       19,455,298
      Less accumulated depreciation and amortization                 (14,333,676)     (13,680,801)
                                                                   -------------    -------------

                                                                       7,364,874        5,774,497
                                                                   -------------    -------------

    Other assets                                                         523,496          880,171
                                                                   -------------    -------------

                                                                   $  28,746,895    $  31,972,196
                                                                   =============    =============

LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                                             $   2,155,144    $   2,438,550
      Accrued expenses                                                 1,642,061        2,414,785
      Other current liabilities                                        2,717,498        5,454,725
                                                                   -------------    -------------

         Total current liabilities                                     6,514,703       10,308,060
                                                                   -------------    -------------

    Long-term liabilities:
      Long-term liabilities, excluding current portion                 7,576,255        7,813,796
      Other liabilities                                                    9,684            9,684
                                                                   -------------    -------------

         Total liabilities                                            14,100,642       18,131,540
                                                                   -------------    -------------

    Shareholders' equity:
      Common stock, $.01 par value: 35,000,000 authorized
         26,681,336 and 25,778,499 shares issued and outstanding         266,813          257,785
      Additional paid-in capital                                     147,150,117      143,463,332
      Accumulated other comprehensive loss                              (883,423)        (516,507)
      Accumulated deficit                                           (131,887,254)    (129,363,954)
                                                                   -------------    -------------

         Total shareholders' equity                                   14,646,253       13,840,656
                                                                   -------------    -------------

                                                                   $  28,746,895    $  31,972,196
                                                                   =============    =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                            DIAMETRICS MEDICAL, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     Nine Months Ended
                                                                       September 30,
                                                                   2000            1999
                                                               ------------    ------------
<S>                                                            <C>             <C>
Cash flows from operating activities:
    Net loss                                                   $ (2,523,300)   $ (8,671,102)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
      Depreciation and amortization                               1,490,319       1,709,848
      Other                                                            (102)          4,200
      Changes in operating assets and liabilities:
        Accounts receivable                                         403,259        (175,770)
        Inventories                                                 668,227         153,027
        Prepaid expenses and other current assets                  (225,062)         61,572
        Accounts payable                                           (283,406)        540,909
        Accrued expenses                                           (772,724)        601,856
        Deferred credits and revenue                             (2,802,987)      4,640,667
                                                               ------------    ------------
           Net cash used in operating activities                 (4,045,776)     (1,134,793)
                                                               ------------    ------------

Cash flows from investing activities:
    Purchases of property and equipment                          (2,942,443)     (1,084,375)
    Sale of evaluation and demonstration instruments                     --       1,031,430
    Purchases of marketable securities                          (15,355,231)    (14,074,620)
    Proceeds from maturities of marketable securities            17,587,747       4,101,443
    Other                                                               702             600
                                                               ------------    ------------
           Net cash used in investing activities                   (709,225)    (10,025,522)
                                                               ------------    ------------
Cash flows from financing activities:
    Principal payments on borrowings                               (276,379)     (1,157,872)
    Proceeds from borrowings                                        115,846              --
    Net proceeds from the issuance of common stock                3,695,813      12,462,087
                                                               ------------    ------------
           Net cash provided by financing activities              3,535,280      11,304,215
                                                               ------------    ------------


Effect of exchange rate changes on cash and cash equivalents       (160,342)       (240,521)
                                                               ------------    ------------

           Net decrease in cash and cash equivalents             (1,380,063)        (96,621)

Cash and cash equivalents at beginning of period                  2,786,162       3,432,614
                                                               ------------    ------------

Cash and cash equivalents at end of period                     $  1,406,099    $  3,335,993
                                                               ============    ============

Supplemental disclosure of cash flow information:
    Cash paid during the period for interest                   $    443,914    $    477,219
                                                               ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                            DIAMETRICS MEDICAL, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2000
                                   (Unaudited)

(1)  UNAUDITED FINANCIAL STATEMENTS

     The interim consolidated financial statements of Diametrics Medical, Inc.
     (the "Company") are unaudited and have been prepared by the Company in
     accordance with accounting principles generally accepted in the United
     States of America for interim financial information, pursuant to the rules
     and regulations of the Securities and Exchange Commission. Pursuant to such
     rules and regulations, certain financial information and footnote
     disclosures normally included in the financial statements have been
     condensed or omitted. However, in the opinion of management, the financial
     statements include all adjustments, consisting of normal recurring
     accruals, necessary for a fair presentation of the interim periods
     presented. Operating results for these interim periods are not necessarily
     indicative of results to be expected for the entire year, due to seasonal,
     operating and other factors.

     These statements should be read in conjunction with the financial
     statements and related notes which are incorporated by reference in the
     Company's Annual Report on Form 10-K for the year ended December 31, 1999.
     Certain 1999 amounts have been reclassified from prior reported balances to
     conform to the 2000 presentation. The reclassifications had no impact on
     the net loss or loss per share as reported in 1999.

(2)  COMPREHENSIVE LOSS

<TABLE>
<CAPTION>
                                                        Three Months Ended            Nine Months Ended
                                                          September 30,                 September 30,
                                                       2000           1999           2000           1999
                                                   -----------    -----------    -----------    -----------
<S>                                                <C>            <C>            <C>            <C>
     Net loss                                      $  (487,271)   $(1,981,187)   $(2,523,300)   $(8,671,102)
     Change in cumulative translation adjustment       (90,585)       106,111       (366,916)      (331,410)
                                                   -----------    -----------    -----------    -----------
     Comprehensive loss                            $  (577,856)   $(1,875,076)   $(2,890,216)   $(9,002,512)
                                                   -----------    -----------    -----------    -----------
</TABLE>

(3)  INVENTORIES

                                             September 30,      December 31,
                                                 2000               1999
                                              ----------         ----------
     Raw materials                            $1,646,917         $2,260,586
     Work-in-process                           1,313,239            658,983
     Finished goods                              487,965          1,196,779
                                              ----------         ----------
                                              $3,448,121         $4,116,348
                                              ----------         ----------

(4)  OTHER CURRENT LIABILITIES

                                                  September 30,  December 31,
                                                       2000         1999
                                                    ----------   ----------
     Deferred research and development funding      $1,333,334   $2,833,334
     Deferred royalty payments                         710,000    2,260,000
     Current portion of long-term debt                 415,271      349,511
     Other                                             258,893       11,880
                                                    ----------   ----------
                                                    $2,717,498   $5,454,725
                                                    ----------   ----------

     The Company's distribution agreement with Agilent Technologies, Inc.
     ("Agilent") provides for prepaid funding of research and development costs
     and royalty payments over the initial term of the agreement. These
     prepayments are being recognized over the periods benefited.

(5)  SHAREHOLDERS' EQUITY

     On March 13, 2000, the Company called the warrants issued in connection
     with a private equity placement completed in June 1997, resulting in the
     issuance during the nine months ended

                                       6
<PAGE>

     September 30, 2000, of 355,556 shares of Common Stock at $6.75 per share.
     The remaining increase in shareholders' equity during this period is
     primarily due to the issuance of 300,569 shares of Common Stock in
     connection with employee stock plans, partially offset by a year-to-date
     net loss.

(6)  RELATED PARTY TRANSACTIONS

     One of the Company's directors is also a director of DVI, Inc., a
     healthcare finance company with which the Company has a credit line and
     notes payable. As of September 30, 2000, there were no outstanding advances
     against the $1,000,000 receivable backed credit line and the outstanding
     balance of the notes payable totaled $604,661.

     The Company's exclusive distributors, Agilent and CODMAN, a Johnson &
     Johnson company, are shareholders of the Company. Sales to these parties
     were approximately $6 million and $16.2 million for the three and nine
     months ended September 30, 2000, respectively. As of September 30, 2000,
     outstanding accounts receivable for these distributors represented 89% of
     total outstanding accounts receivable. One of the Company's directors is
     also an executive officer of Agilent.

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

     The Company's discussion and analysis of results of operations and
     financial condition, including statements regarding the Company's
     expectations about new and existing products, future financial performance,
     market risk exposure and other forward looking statements are subject to
     various risks and uncertainties, including, without limitation, demand and
     acceptance of new and existing products, technological advances and product
     obsolescence, competitive factors, stability of domestic and international
     financial markets and the availability of capital to finance growth. These
     and other risks are discussed in greater detail in Exhibit 99 to the
     Company's Form 10-K filed with the U.S. Securities and Exchange Commission,
     with respect to the Company's fiscal year ended December 31, 1999. When
     used in the Form 10-Q, and in future filings by the Company with the
     Securities and Exchange Commission, in the Company's press releases,
     presentations to securities analysts or investors, in oral statements made
     by or with the approval of an executive officer of the Company, the words
     or phrases "believes," "may," "will," "expects," "should," "continue,"
     "anticipates," "intends," "will likely result," "estimates," "projects,"
     "targets," or similar expressions and variations thereof are intended to
     identify such forward-looking statements.

     SUMMARY
     -------

     Diametrics Medical, Inc., which began operations in 1990, is engaged in the
     development, manufacturing and commercialization of critical care blood and
     tissue analysis systems, which provide immediate or continuous diagnostic
     results at the point-of-patient care.

     Since its commencement of operations in 1990, the Company has transitioned
     from a development stage company to a full-scale development, manufacturing
     and marketing organization. As of September 30, 2000, the primary funding
     for the operations of the Company has been approximately $147 million
     raised through public and private sales of its equity securities and
     issuance of convertible promissory notes.

     The Company's strategy for distribution and commercialization of its
     products includes partnerships with Agilent and CODMAN. In October 1998,
     the Company entered into an exclusive distribution agreement with CODMAN
     for worldwide market development and distribution of the Company's
     Neurotrend(TM) Cerebral Tissue Monitoring System ("Neurotrend"). CE Mark
     approval for Neurotrend was received in the second quarter 1998, allowing
     the system to be marketed in Europe, and the Company received clearance
     from the Food and Drug Administration in November 1999, allowing the system
     to be marketed in the United States. Sales of Neurotrend to CODMAN began in
     the fourth quarter 1998. In June 1999, the Company entered into an
     exclusive distribution agreement with Hewlett Packard Company ("HP"). Under
     the terms of the distribution agreement, the Company transferred full
     responsibility for marketing, sales and distribution of the Company's
     leading critical care products, the IRMA(R)SL blood analysis system and the
     Trendcare(R) continuous blood gas monitoring systems, including
     Paratrend(R) and Neotrend(TM), to HP. The agreement also provides for
     minimum purchase commitments, market development commitments, research and
     development funding and royalty payments over the initial three and a
     half-year term. In November 1999, HP assigned the distribution agreement to
     Agilent, a leading provider of test and measurement solutions and
     communications components, which was formed as a new company

                                       7
<PAGE>

     and subsidiary of HP. HP completed the spin-off of its ownership in Agilent
     to HP shareholders in June 2000.

     RESULTS OF OPERATIONS
     ---------------------

     Sales. Sales of the Company's products were $6,580,956 and $18,342,193 for
     the three and nine months ended September 30, 2000, compared to $4,694,294
     and $13,577,227 for the same periods in the prior year, increases of 40%
     and 35%, respectively. The increase in sales for the three and nine months
     ended September 30, 2000 over the prior year reflects a 29% and 34%
     respective increase in instrument sales. This increase was partially offset
     during the year-to-date period by a general decrease in product pricing
     under the Agilent distribution agreement. The significant increase in
     instrument sales between periods was impacted primarily by sales to Agilent
     and CODMAN. While unit sales of disposable cartridges and sensors grew 27%
     between the first nine months of 1999 and 2000, related revenues remained
     relatively flat due to the impact of the lower average sales prices
     described above. The impact of reduced pricing was partially mitigated by
     the recognition of royalty revenue from the Agilent distribution agreement
     of $600,000 and $1,550,000 for the three and nine months ended September
     30, 2000. The Company's direct sales to Agilent and CODMAN comprised
     approximately 91% and 89% of total sales for the three and nine months
     ended September 30, 2000, respectively, compared to 71% and 65% for the
     same periods in the prior year.

     Intermittent blood testing products represented 46% and 43% of total sales
     for the three and nine months ended September 30, 2000, compared to 42% and
     39% for the comparable periods in 1999. Continuous monitoring products
     comprised the remaining sales in each period.

     Intermittent blood testing products revenue was comprised of 71% and 67%
     instrument related revenue and 29% and 33% disposable cartridge related
     revenue for the three and nine months ended September 30, 2000,
     respectively. Continuous monitoring products revenue was comprised of 78%
     and 79% instrument related revenue and 22% and 21% disposable sensor
     revenue for the three and nine months ended September 30, 2000,
     respectively. The high concentration of instrument related revenue was
     impacted primarily by sales to Agilent and CODMAN.

     The Company's revenues are affected principally by the number of
     instruments, both monitors and IRMA analyzers, placed with customers and
     the rate at which disposable sensors and cartridges are used in connection
     with these products. As of September 30, 2000, the Company has sold
     approximately 6,900 instruments. Unit sales of instruments for the three
     and nine months ended September 30, 2000, increased approximately 36% and
     41%, respectively, over unit sales for the same periods in 1999, while
     disposable sensor and cartridge unit sales increased 35% and 27%,
     respectively, over the same periods in 1999. As the Company grows, it is
     expected that the Company's growing end-user customer base will increase
     the usage and rate of usage of disposable products, with the result that
     overall disposable product sales will exceed that of instrument sales.

     The Company has targeted continued revenue growth during the fourth quarter
     of 2000, as a result of further planned expansion of its blood and tissue
     analysis product lines and continued commercialization of these products by
     market leading distribution partners.

     Cost of Sales. Cost of sales totaled $4,593,081 and $13,304,547, or 70% and
     73% of revenue for the three and nine months ended September 30, 2000,
     compared to $4,090,404 and $11,523,683 or 87% and 85% of revenue for the
     same periods in the prior year. The period-to-period improvement in the
     Company's cost of sales as a percentage of revenue reflects increased unit
     sales volumes, a higher mix of instrument sales, improved cartridge yields,
     a reduction in instrument material costs, and the impact of operational
     efficiencies and process improvements, partially offset by lower average
     sales prices. The impact of lower pricing was partially mitigated by
     royalty revenue from Agilent. The Company is targeting continued
     improvements in gross profit in the fourth quarter of 2000.

     Operating Expenses. Research and development expenditures totaled
     $1,249,809 and $3,612,766 for the three and nine months ended September 30,
     2000, compared to $968,693 and $3,849,777 for the same periods in 1999.
     Additional investments were made during 2000 to support new research and
     development projects, the impact of which was reduced by the recognition of
     $500,000 and $1,500,000 during the third quarter and year-to-date periods,
     respectively, of research and development funding received from Agilent as
     part of the distribution agreement. The comparable research and development
     funding amounts recognized in 1999 were $500,000 and $666,667 for the third
     quarter and year-to-date periods, respectively.

                                       8
<PAGE>

     Selling, general and administrative expenses totaled $1,272,306 and
     $4,088,429 for the three and nine months ended September 30, 2000, compared
     to $1,619,021 and $6,642,552 for the same periods in 1999. The
     period-to-period decreases in expenses were primarily impacted by funding
     of sales activities by Agilent from June 1999 through October 1999 and the
     transfer in November 1999 of most of the Company's sales and marketing
     functions to Agilent.

     Operating expense run rates for fourth quarter of 2000 are expected to
     approximate levels experienced in the third quarter of 2000.

     Other Income (Expense). Net other income totaled $46,969 and $140,249 for
     the three and nine months ended September 30, 2000, compared to net other
     income of $2,637 and net other expense of $232,317 for the same periods in
     1999. The Company realized interest income of $211,248 and $629,842 for the
     three and nine months ended September 30, 2000, compared to $218,643 and
     $312,295 for the same periods in 1999. The year-to-date increase reflects
     the impact of higher average cash and investment balances, primarily due to
     the timing of the Company's financing activities, funding received from
     Agilent and improved cash flows from operations.

     Interest expense totaled $146,468 and $443,914 for the three and nine
     months ended September 30, 2000, compared to $155,492 and $477,219 for the
     same periods in 1999. The period-to-period decrease reflects the impact of
     lower average debt balances.

     Net Loss. The net loss for the three and nine months ended September 30,
     2000 was $487,271 and $2,523,300, compared to $1,981,187 and $8,671,102 for
     the same periods in 1999. Compared to the three and nine months ended
     September 30, 1999, the net loss decreased by 75% and 71%, respectively,
     for the same periods in 2000. These decreases reflect revenue growth;
     improved margins, influenced by higher unit volumes, changes in product mix
     and improved manufacturing yields; and reduced operating expenses due
     primarily to research and development funding received from Agilent and the
     transfer of the Company's sales and marketing functions to Agilent. The
     Company is targeting continued improvement in net loss during the fourth
     quarter of 2000.

     LIQUIDITY AND CAPITAL RESOURCES
     -------------------------------

     At September 30, 2000, the Company had working capital of $14,343,822, a
     decrease of $665,646 from the working capital reported at December 31,
     1999. The decrease is impacted primarily by purchases of property and
     equipment of approximately $2.9 million and net cash used in operating
     activities, partially offset by proceeds from exercises under employee
     stock plans and warrants of approximately $3.7 million.

     Net cash used in operating activities totaled $4,045,776 for the nine
     months ended September 30, 2000, compared to $1,134,793 for the same period
     in 1999. This was the result of net losses of $2,523,300 and $8,671,102 for
     these same periods in 2000 and 1999, respectively, adjusted by changes in
     key operating assets and liabilities, primarily accounts receivable,
     inventories, accounts payable, accrued expenses and deferred credits and
     revenue.

     Net accounts receivable decreased $403,259 for the nine months ended
     September 30, 2000, compared to a $175,770 increase for the same period in
     1999. The reduction in accounts receivable in the first nine months of 2000
     relative to the increase for the same period in 1999 occurred in spite of a
     significantly larger increase in sales between periods primarily due to an
     improvement in days sales outstanding and to the timing of sales.

     Inventories decreased $668,227 and $153,027 for the nine months ended
     September 30, 2000 and 1999, respectively, reflecting significant sales of
     instruments in both periods. The larger decrease in inventories during 2000
     relative to 1999 also reflects an improvement in inventory turnover, due to
     improved inventory management.

     Accounts payable and accrued expenses decreased $1,056,130 for the nine
     months ended September 30, 2000, compared to an increase of $1,142,765 for
     the same period in 1999. The increase in 1999 was primarily due to accrued
     financing and other costs associated with the Agilent distribution
     agreement. The decrease in 2000 was primarily due to the payment of most of
     these accrued costs during 2000.

     Deferred credits and revenue decreased $2,802,987 during the nine months
     ended September 30, 2000, compared to an increase of $4,640,667 for the
     same period in 1999. The decrease in 2000 represents the recognition of
     funding from Agilent for research and development and royalties of
     $3,050,000, partially offset by customer advance payments. The increase
     during 1999 primarily

                                       9
<PAGE>

     reflects the receipt of $7,500,000 of prepaid funding from HP under the
     terms of the distribution agreement, partially offset by the recognition of
     approximately $2,900,000 of the funding as a reduction of 1999 expenses.

     Net cash used in investing activities totaled $709,225 for the nine months
     ended September 30, 2000, compared to $10,025,522 for the same period in
     1999. This change was affected primarily by the amounts and timing of
     equity funding, which affected the amount of cash available for the
     purchase of marketable securities. Purchases of property and equipment,
     totaling $2,942,443 in 2000 and $1,084,375 in 1999, also affected net cash
     used in investing activities in each period. In 2000, the Company expects
     capital expenditures and new lease commitments to approximate $3 million,
     primarily reflecting investments to support new product development and
     production.

     Net cash provided by financing activities totaled $3,535,280 for the nine
     months ended September 30, 2000, compared to $11,304,215 for the same
     period in 1999. In 2000, net cash provided by financing activities
     consisted primarily of proceeds from employee stock plans and warrant
     exercises. Net cash provided by financing activities in 1999 was primarily
     due to proceeds of approximately $4 million from the issuance of common
     stock as a result of the exercise of a Put Option under a Put Option and
     Stock Purchase Agreement with Johnson & Johnson Development Corporation and
     a $9.5 million private equity placement with HP, partially offset by
     principal payments on borrowings and capital lease obligations.

     At September 30, 2000, the Company had U.S. net operating loss and research
     and development tax credit carryforwards for income tax purposes of
     approximately $115.4 million and $1.2 million, respectively. Pursuant to
     the Tax Reform Act of 1986, use of a portion of the Company's net operating
     loss carryforwards are limited due to a "change in ownership." The Company
     estimates that U.S. net operating loss carryforwards of $2.9 million are
     not currently available due to these annual limitations. Net operating
     losses incurred since August 4, 1995 are not currently subject to the
     "change in ownership" limitations. If not used, these net operating loss
     carryforwards begin to expire in 2005.

     The Company's foreign subsidiary also has net operating loss carryforwards
     of approximately $47 million, which can be carried forward indefinitely.

     As part of an exclusive distribution agreement with HP completed in June
     1999, HP agreed to acquire $9.5 million of the Company's Common Stock at
     $7.00 per share, with a warrant to purchase 452,381 shares of Common Stock
     at $8.40 per share, providing additional funding potential of $3.8 million.
     In addition, HP agreed to minimum purchase commitments, market development
     commitments, research and development funding and royalty payments over the
     initial term of the agreement. In November 1999, HP assigned the
     distribution agreement and its equity investment with the Company to
     Agilent, which was formed as a new company and was spun off to HP
     shareholders during the first six months of 2000. The Company believes
     currently available funds and cash generated from projected operating
     revenues, supplemented by proceeds from employee stock plans, warrant
     exercises and asset based credit, along with proceeds from the funding
     agreements with Agilent, will meet the Company's working capital needs. If
     the amount or timing of funding from these sources or cash requirements
     vary materially from those currently planned, the Company could require
     additional capital. The Company's long-term capital requirements will
     depend upon numerous factors, including the rate of market acceptance of
     the Company's products and the level of resources devoted to expanding the
     Company's business, manufacturing capabilities and research and development
     activities. While there can be no assurance that adequate funds will be
     available when needed or on acceptable terms, management believes that the
     Company will be able to raise adequate funding if needed.

     NEW ACCOUNTING PRONOUNCEMENTS
     -----------------------------

     SFAS No. 133, "Accounting for Derivative Instruments and Hedging
     Activities," (as amended by SFAS No. 137 with respect to the effective date
     and SFAS No. 138 with respect to certain hedging activities) will be
     effective for the Company in January 2001. SFAS No. 133 requires all
     derivatives to be recognized as assets or liabilities on the balance sheet
     and measured at fair value on a mark-to-market basis. This applies whether
     the derivatives are stand-alone instruments, such as forward currency
     exchange contracts and interest rate swaps or collars, or embedded
     derivatives, such as call options contained in convertible debt
     investments. Along with the derivatives, the underlying hedged items are
     also to be marked-to-market on an ongoing basis. These market value
     adjustments are to be included either in net earnings or loss in the
     statement of operations or in other comprehensive income (and accumulated
     in shareholders' equity), depending on the nature of the transaction. The
     Company is currently evaluating SFAS No. 133, but does not expect that it
     will have a material effect on its financial statements.

                                       10
<PAGE>

     In December 1999, the Securities and Exchange Commission ("SEC") issued
     Staff Accounting Bulletin ("SAB") No. 101 which provides the staff's views
     in applying generally accepted accounting principles to selected revenue
     recognition issues. As amended, SAB 101 is now effective no later than the
     fourth fiscal quarter of all fiscal years beginning after December 15,
     1999. The Company will be required to adopt the guidance of this bulletin
     no later than the fourth quarter of 2000. In October 2000, the Office of
     the Chief Accountant issued guidance on frequently asked questions and
     answers regarding SAB 101. The Company is taking this guidance into
     consideration during its evaluation of SAB 101. The Company believes that
     its revenue recognition policies are in compliance with SAB 101, and does
     not expect it to have a material impact on its financial condition or
     results of operations.

     Item 3. Quantitative and Qualitative Disclosure About Market Risk
     -----------------------------------------------------------------

     The Company's primary market risk exposure is foreign exchange rate
     fluctuations of the British pound sterling to the U.S. dollar as the
     financial position and operating results of the Company's U.K. subsidiary,
     Diametrics Medical, Ltd., are translated into U.S. dollars for
     consolidation. The Company's exposure to foreign exchange rate fluctuations
     also arises from transferring funds to its U.K. subsidiary in British
     pounds sterling. Effective November 1, 1999 most of the Company's sales are
     made to distributors and denominated in U.S. dollars, thereby significantly
     mitigating the risk of exchange rate fluctuations on trade receivables. The
     Company does not currently use derivative financial instruments to hedge
     against exchange rate risk. The Company's exposure to interest rate risk is
     limited to short-term borrowings under its $1,000,000 receivable backed
     credit line. Based upon currently available information, management does
     not believe that the effect of foreign exchange rate fluctuations and
     interest rate risk will have a material impact on the Company's financial
     condition or overall trends in results of operations. There have been no
     material changes in market risk faced by the Company from what has been
     previously reported in the Company's Annual Report on Form 10-K for the
     year ended December 31, 1999.

                           PART II - OTHER INFORMATION

     Item 1.      Legal Proceedings

         None

     Item 2.      Changes in Securities

         None

     Item 3.      Defaults Upon Senior Securities

         None

     Item 4.      Submission of Matters to a Vote of Security Holders

         None

     Item 5.      Other Information

         None

     Item 6.      Exhibits and Reports on Form 8-K

         a.       Exhibits


         Exhibit                                                     Method
         No.                       Description                      of Filing
         -------                   -----------                      ---------


         27             Financial Data Schedule                   Filed herewith


         b.       Reports on Form 8-K.

                  None

                                       11
<PAGE>

                            DIAMETRICS MEDICAL, INC.



     SIGNATURE
     ---------

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



     DIAMETRICS MEDICAL, INC.




     By: /s/ Laurence L. Betterley
         -----------------------------------------------------
             Laurence L. Betterley
             Senior Vice President
             and Chief Financial Officer
             (and Duly Authorized Officer)






     Dated:       November 14, 2000

                                       12
<PAGE>

                            DIAMETRICS MEDICAL, INC.
                                  EXHIBIT INDEX



        Exhibit
        No.                       Description
        -------                   -----------


        27             Financial Data Schedule