SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                 FORM 10-KSB/A-1
                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the fiscal year ended:                               Commission file number:
    December 31, 1999                                             0-18900


                           EVEREST MEDICAL CORPORATION
                 (Name of small business issuer in its charter)

      Minnesota                                             41-1454928
(State of Incorporation)                    (I.R.S. Employer Identification No.)
                            13755 First Avenue North
                          Minneapolis, Minnesota 55441
                    (Address of principal executive offices)

                    Issuer's telephone number: (612) 473-6262


        Securities registered pursuant to Section 12(b) of the Act: None

           Securities registered pursuant to Section 12(g) of the Act:

                     Common Stock, par value $.01 per share


Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the Issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes X
No___

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]

The Issuer's revenues for fiscal year 1999 were $12,608,863.

As of February 18, 2000, there were 7,669,127 shares of Common Stock of the
Issuer outstanding.

The aggregate market value of the Common Stock of the Issuer (based upon the
closing sale price of the Common Stock on February 18, 2000, as reported by
NASDAQ), excluding shares owned beneficially by executive officers and
directors, was approximately $29,986,287.

Part III of this Annual Report on Form 10-KSB incorporates by reference
information (to the extent specific sections are referred to herein) from the
Issuer's Proxy Statement to be filed by April 29, 2000 (the "2000 Proxy
Statement").

Transitional Small Business Disclosure Format (check one)  Yes         No  X




<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

The financial statements immediately follow the signature page of this Form
10-KSB at the pages set forth below:

                                                                           Page
Report of Independent Auditors dated January 7, 2000........................F-1

Balance Sheets as of December 31, 1999 and 1998.............................F-2

Statements of Operations for Years Ended December 31, 1999, 1998 and 1997...F-3

Statements of Cash Flows for Years Ended December 31, 1999, 1998 and 1997...F-4

Statements of Changes in Shareholders' Equity for Years Ended
December 31, 1999, 1998 and 1997............................................F-5

Notes to Financial Statements...............................................F-6

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits: The exhibits to this Report are listed in the Exhibit Index
         immediately following the financial statements following the signature
         pages to this Report.

         A copy of any of the exhibits listed or referred to above will be
         furnished at a reasonable cost to any person who was a shareholder of
         the Company as of February 18, 2000, upon receipt from any such person
         of a written request for any such exhibit. Such request should be sent
         to Everest Medical Corporation, 13755 First Avenue North, Minneapolis,
         Minnesota 55441, Attention: Shareholder Information.

(b)      Reports on Form 8-K: None filed during the fourth quarter of the fiscal
         year ended December 31, 1999.



<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Issuer has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.

Dated:   March 13, 2000              EVEREST MEDICAL CORPORATION


                                     By  /s/ John L. Shannon, Jr.
                                         John L. Shannon, Jr.
                                         President, Chief Executive Officer and
                                         Chairman of the Board


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Issuer and in the capacities indicated.

         Signature                   Title                           Date

  /s/ John L. Shannon, Jr.      Chief Executive Officer,        March 13, 2000
John L. Shannon, Jr.            President (Principal Executive
                                Officer) and Chairman of the
                                Board

  *                             Director
David D. Koentopf

  /s/ Thomas F. Murphy          Vice President of Finance       March 13, 2000
Thomas F. Murphy                and Administration
                                (Principal Financial and
                                Accounting Officer)

  *                             Director
Donald R. Brattain

  *                             Director
Richard J. Migliori, M.D.

  *                             Director
Anthony Badolato

* /s/ John L. Shannon, Jr.                                      March 13, 2000
John L. Shannon, Jr., Attorney-in-Fact
  Pursuant to Power of Attorney


<PAGE>


                         Report of Independent Auditors


To the Board of Directors
Everest Medical Corporation


We have audited the accompanying balance sheets of Everest Medical Corporation
as of December 31, 1999 and 1998, and the related statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Everest Medical Corporation at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States.



                /s/ Ernst & Young LLP

Minneapolis, Minnesota
January 7, 2000, except for Note 11 as
  to which date is February 22, 2000


<PAGE>


                           EVEREST MEDICAL CORPORATION
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                            December 31,
                                                                                                     1999                 1998
<S>                                                                                <C>                <C>
ASSETS
Current assets
     Cash and cash equivalents                                                     $    482,531       $    217,488
     Accounts receivable, less allowances (1999 - $91,750; 1998 - $61,750)            2,034,342          1,745,512
     Inventories                                                                      1,892,034          1,751,946
     Prepaid insurance and deposits                                                     125,098             76,689
                                                                                   ------------       ------------
Total current assets                                                                  4,534,005          3,791,636

Equipment
     Office and display equipment                                                       513,925            414,315
     Research and development equipment                                                 188,224            188,224
     Production equipment                                                             1,292,454          1,219,929
     Equipment under capital lease                                                      115,235            115,235
                                                                                   ------------       ------------
                                                                                      2,109,839          1,937,703
     Less allowance for depreciation                                                 (1,787,170)        (1,632,198)
                                                                                   ------------       ------------
                                                                                        322,669            305,505
Patents, net of amortization (1999 - $172,337; 1998 - $172,087)                            --                  250
                                                                                   ------------       ------------

Deferred tax asset                                                                    3,280,000               --

Total assets                                                                       $  8,136,674       $  4,097,391
                                                                                   ============       ============


LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
     Customer advances                                                             $     12,280       $     36,788
     Accounts payable                                                                   278,920            582,110
     Accrued compensation and related taxes                                             473,151            314,174
     Other accrued liabilities                                                          190,081            189,875
     Bank borrowings, short term                                                           --              125,000

                                                                                   ------------       ------------
Total current liabilities                                                               954,432          1,247,947


Shareholders' equity
     Convertible preferred stock series A, ($.01 par value, $2.50 liquidation
       value) 1,400,000 authorized; outstanding:
       1999 - 462,937 shares; 1998 - 632,937 shares                                   1,126,717          1,551,717
     Convertible preferred stock series B, ($.01 par value,
       $2.75 liquidation value) authorized and outstanding:
       1999 - 637,273 shares; 1998 - 637,273 shares                                   1,545,313          1,545,313
     Convertible preferred stock series C, ($.01 par value,
       $2.75 liquidation value) authorized and outstanding:
       1999 - 410,906 shares; 1998 - 410,906 shares                                   1,002,832          1,002,832
     Convertible preferred stock series D, ($.01 par value,
       $2.875 liquidation value) authorized and outstanding:
       1999 - 471,500 shares; 1998 - 471,500 shares                                   1,205,808          1,205,808
     Common stock, ($.01 par value) 12,461,821 authorized; outstanding:
     1999 - 7,669,127; 1998 - 7,465,875                                                  76,691             74,659
     Additional paid-in capital                                                      16,548,112         16,420,828
     Accumulated deficit                                                            (14,323,231)       (18,951,713)
                                                                                   ------------       ------------
                                                                                      7,182,242          2,849,444
                                                                                   ------------       ------------
     Total liabilities and shareholders' equity                                    $  8,136,674       $  4,097,391
                                                                                   ============       ============
</TABLE>

See accompanying notes to financial statements.



<PAGE>


                                               EVEREST MEDICAL CORPORATION
                                                 STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                       Year ended December 31,
                                                                            1999               1998               1997
                                                                          ------------       ------------       ------------
<S>                                                                       <C>                <C>                <C>
Net revenues                                                              $ 12,608,863       $ 10,719,755       $  7,365,380
Cost of goods sold                                                           6,253,533          5,501,001          4,103,920
                                                                          ------------       ------------
Gross margin                                                                 6,355,330          5,218,754          3,261,460


Cost and expenses:
      Sales and marketing                                                    2,986,171          2,680,409          2,192,829
      Research and development                                                 915,047            858,816            633,898
      General and administrative                                             1,071,081            937,494            784,203
                                                                          ------------       ------------
Total operating expenses                                                     4,972,299          4,476,719          3,610,930

Interest income                                                                (10,878)            (8,018)           (16,775)
Interest expense                                                                20,427             79,737             52,146
                                                                          ------------       ------------
Income (loss) before income taxes (benefit)                                  1,373,482            670,316           (384,841)

Income tax (benefit) expense                                                (3,255,000)            10,000               --
                                                                          ------------       ------------

Net income (loss)                                                            4,628,482            660,316           (384,841)

Less preferred stock dividends                                                 343,564            343,564            344,390
                                                                          ------------       ------------
Net income (loss) applicable to common stock                              $  4,284,918       $    316,752       $   (729,231)
                                                                          ============       ============

Basic and diluted net income (loss) per common share                      $       0.56       $       0.04       $      (0.10)
                                                                          ============       ============

Weighted average number of common shares outstanding during the year         7,604,607          7,364,982          7,017,635
                                                                          ============       ============

</TABLE>

See accompanying notes to financial statements.


<PAGE>


                           EVEREST MEDICAL CORPORATION
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                         Year ended December 31
                                                                                 1999             1998               1997
                                                                              -----------      ------------       -----------
OPERATING ACTIVITIES

<S>                                                                           <C>               <C>               <C>
Net income (loss)                                                             $ 4,628,482       $   660,316       $  (384,841)
Adjustments to reconcile net income (loss)
  to net cash provided by (used in) operating activities
     Depreciation and amortization                                                155,223           148,516           168,086
     Provision for losses on accounts receivable                                   30,000            15,000               750
     Value of warrants granted in connection with guarantee of bank line              894             3,576             2,386
     Recognition of deferred tax asset                                         (3,280,000)             --                --
     Changes in operating assets and liabilities
          Accounts receivable                                                    (318,830)         (197,446)         (428,272)
          Inventories                                                            (140,088)         (696,135)         (275,682)
          Prepaid expenses                                                        (48,409)           22,839            68,210
          Customer advances                                                       (24,508)           (1,212)           20,000
          Accounts payable and accrued expenses                                  (143,471)          449,089            41,647
                                                                              -----------      ------------       -----------
Net cash provided by (used in) operating activities                               859,293           404,543          (787,716)

INVESTING ACTIVITIES

Purchases of equipment                                                           (172,136)         (169,980)         (187,629)

                                                                              -----------      ------------       -----------
Net cash used in investing activities                                            (172,136)         (169,980)         (187,629)

FINANCING ACTIVITIES
Dividends paid                                                                   (343,564)         (343,564)         (344,390)
Principal payments on debt and capital leases                                    (625,536)         (477,496)           (5,409)
Proceeds from issuance of debt                                                    500,000              --             600,000
Net proceeds from sale of common stock                                             46,986           723,625            92,696
                                                                              -----------      ------------       -----------
Net cash provided by (used in) financing activities                              (422,114)          (97,435)          342,897
                                                                              -----------      ------------       -----------

Increase (decrease) in cash and cash equivalents                                  265,043           137,128          (632,448)
Cash and cash equivalents at beginning of year                                    217,488            80,362           712,810
                                                                              -----------      ------------       -----------
Cash and cash equivalents at end of year                                      $   482,531       $   217,488       $    80,362
                                                                              -----------      ------------       -----------


Supplemental cash flow information:
     Conversion of Series A and B preferred stock into common stock           $   425,000       $      --         $    51,250

</TABLE>


See accompanying notes to financial statements.


<PAGE>


                           EVEREST MEDICAL CORPORATION
                  STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                             Common      Additional
                                  Preferred       Common       Preferred     Stock -      Paid-in        Accumulated
                                    Shares        Shares         Stock         Par        Capital          Deficit         Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>           <C>          <C>            <C>        <C>              <C>             <C>
Balance January 1, 1997            2,171,616     6,970,912    $ 5,356,920    $69,709    $ 16,240,199     $ (19,227,188)  $2,439,640

Common stock issued under
stock purchase plan and stock
options less related costs                          40,818                       408          72,290                         72,698

Common stock issued upon
exercise of  stock warrants                          7,272                        73          19,925                 -       19,998

Conversion of Series A
preferred stock                       (4,000)        4,000        (10,000)        40           9,960                              -

Conversion of Series B
preferred stock                      (15,000)       15,000        (41,250)       150          41,100                              -

Issuance of warrants in
connection with guarantee of
bank line of credit                                                                            2,386                          2,386

Dividends on preferred stock                                                                (344,390)                      (344,390)

Net loss for the year                                                                                         (384,841)    (384,841)
------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1997          2,152,616     7,038,002      5,305,670     70,380      16,041,470       (19,612,029)   1,805,491
------------------------------------------------------------------------------------------------------------------------------------

Common stock issued under
stock purchase plan                                 16,108                       162          23,463                         23,625

Common stock issued upon
sale of common shares                              411,765                     4,117         695,883                 -      700,000

Issuance of warrants in
connection with guarantee of
bank line of credit                                                                            3,576                          3,576

Dividends on preferred stock                                                                (343,564)                      (343,564)

Net income for the year                                                                                        660,316      660,316
------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1998          2,152,616     7,465,875      5,305,670     74,659      16,420,828       (18,951,713)   2,849,444
------------------------------------------------------------------------------------------------------------------------------------

Common stock issued under
stock purchase plan                                 33,252                       332          46,654                         46,986

Conversion of Series A
preferred stock                     (170,000)      170,000       (425,000)     1,700         423,300                 -            -

Issuance of warrants in
connection with guarantee of
bank line of credit                                                                              894                            894

Dividends on preferred stock                                                                (343,564)                      (343,564)

Net income for the year                                                                                      4,628,482    4,628,482
------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 1999          1,982,616     7,669,127    $ 4,880,670    $76,690    $ 16,548,112     $ (14,323,231)  $7,182,242
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes to financial statements.


<PAGE>



1. Summary of Significant Accounting Policies

Business Activity

Everest Medical Corporation (the Company) is engaged in the development,
manufacturing and marketing of bipolar electrosurgical instrumentation for the
minimally invasive surgery market. The Company operates as one segment.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of less than
three months when purchased to be cash equivalents. The Company's cash
equivalents consist of money market accounts and Treasury Bills and are carried
at cost which approximates market value. The cost of Treasury Bills was $170,633
and $132,548 at December 31, 1999 and 1998, respectively.

Inventories

Inventories are valued at the lower of cost or market determined by the
first-in, first-out (FIFO) method.

Equipment and Fixtures

Equipment and fixtures are stated at cost. The Company provides for depreciation
on a straight-line basis over estimated useful lives from three to five years.
Maintenance, repairs and minor renewals are expensed as incurred.

Patents

Patents employed in current products are carried at cost (primarily patent legal
fees) and are amortized over 60 months. The Company reviews its patents
periodically to determine whether the patents have continuing value. The expense
of writing off patents is charged to research and development.

Revenue Recognition

The Company recognizes revenue when the inventory has been shipped to the
customers.



<PAGE>


1. Summary of Significant Accounting Policies (continued)

Income Taxes

The Company accounts for income taxes under the liability method.

Per Share Data

Basic earnings per share is computed using the weighted average number of common
shares outstanding. Diluted earnings per share is computed using the combination
of dilutive common share equivalents and the weighted average number of common
shares outstanding. The dilutive effect of options and warrants was not material
in 1999 and 1998.

Impairment of Long-Lived Assets

The Company will record impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

2. Inventories

Inventories consisted of:                 December 31
                                    1999              1998
                              ------------------------------------

   Raw materials                    $  718,567      $   740,100
   Work in process                     914,573          807,580
   Finished goods                      258,894          204,266
                              ------------------------------------
                                    $1,892,034       $1,751,946
                              ====================================



<PAGE>


3. Debt

Under a line of credit arrangement, due in December 2000, the Company had a
balance payable of $125,000 at December 31, 1998 with interest payable monthlyat
the banks reference rate which was 8.5%. The borrowings were paid in full in
1999.

In February 1999, the Company entered into a line of credit arrangement with
Norwest Bank, N.A. Under this agreement, the Company is able to borrow up to
$1,000,000. The line of credit bears interest at the bank's reference rate. This
line of credit arrangement was renewed by the bank in December 1999 and expires
in December 2000.

This line of credit arrangement replaces a previous arrangement with another
bank with similar terms and conditions. The previous line of credit entered into
in June 1997 was secured by a standby letter of credit from a shareholder of the
Company. As consideration for securing the letter of credit, the Company paid
the shareholder $50,000 per year and issued a warrant to purchase 25,000 shares
of common stock at an exercise price of $2.50 per share. The warrant expires in
May 2000. The warrant was deemed to have a value of approximately $6,900 which
was expensed over the life of the line of credit. This arrangement ended in
March 1999.

Interest paid by the Company in 1999, 1998 and 1997 was $20,427, $76,161 and
$49,760, respectively.

4. Operating Lease
The Company leases its office and manufacturing facility under an operating
lease that expires in 2004. Maintenance, utilities and real estate taxes are
paid by the Company. Total rent expense under this lease was $258,404, $261,964
and $165,368 for the years ended December 31, 1999, 1998 and 1997, respectively.

Minimum future obligations on the facility lease are as follows:

   2000                                             $164,255
   2001                                              169,654
   2002                                              170,144
   2003                                              175,536
   2004                                              160,908
                                            -------------------
                                                    $840,497
                                            ===================


<PAGE>

5. Income Taxes

At December 31, 1999, the Company had net operating losses for federal income
tax purposes of approximately $16,441,000, plus credits for research and
development costs of approximately $298,000 that are available to offset future
taxable income through the year 2013. These carryforwards are subject to the
limitations of Internal Revenue Code Section 382. This Section provides that
limitations on the availability of net operating losses to offset current
taxable income when an ownership change has occurred for federal tax purposes.
The annual limitation on net operating losses is calculated by multiplying the
value of the corporation immediately prior to the ownership change by the
long-term federal tax exempt rate.

As a result of the sale of Series A preferred stock in 1990, the Company had a
change of ownership under Section 382. The use of losses, incurred through the
change in ownership date, to offset future taxable income will be limited to
approximately $300,000 per year during the carryforward period. The losses
occurring after the change in ownership date are unaffected and can be used to
offset future taxable income without limit. The credits will also be subject to
limitations under these same rules.


Until 1999 the Company had provided a full valuation allowance for the net
deferred tax assets. In the fourth quarter of 1999, based on the Company's
continued strong financial performance over the past two years and the
expectation that this performance will continue, the Company reduced its
valuation allowance for its deferred tax assets by $3,280,000.


<PAGE>


5. Income Taxes (continued)

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts used for financial reporting purposes and the
amounts used for income tax purposes. Significant components of the Company's
deferred tax assets are as follows:

                                                        December 31
                                                  1999              1998
                                              ----------------------------------

   Net operating losses                           $6,248,000       $6,842,000
   Depreciation                                       75,000           95,000
   Amortization                                       35,000           36,000
   Reserve for bad debt                               35,000           23,000
   Reserve for obsolete inventory                     39,000           27,000
   Research and development credit amount            298,000          298,000
   Vacation accrual                                   45,000           33,000
   Other                                              59,000           23,000
                                              ----------------------------------
   Total deferred tax asset                        6,834,000        7,377,000
   Less valuation allowance                        3,554,000        7,377,000
                                              ----------------------------------
   Net deferred tax asset                        $ 3,280,000 $              -
                                              ==================================

Income tax expense (benefit) consists of the following:

                                             1999           1998       1997
Current:
  Federal                             $      --         $   --        $  --
  State                                      --             --           --
  Alternative minimum tax                  25,000         10,000         --

Deferred:
  Federal                                 461,500           --           --
  State                                    81,500           --           --
  Change in valuation  allowance
                                       (3,823,000)          --           --
                                      -----------       --------      -------
                                      $(3,255,000)      $ 10,000      $  --
                                      ===========       ========      =======


<PAGE>

5. Income Taxes (continued)

Reconciliation of the statutory federal income tax rate to the Company's
effective tax rate follows:
                                       1999          1998         1997
Tax at statutory rate                  34.0%         34.0%        34.0%
State income taxes                      6.0           6.0          6.0
  Alternative minimum tax               1.8           1.5            -
Impact of net operating loss                        (40.0)       (40.0)
carryforwards                         (40.0)
  Change in valuation  allowance
                                     (135.2)            -            -
                                     -------        ------      -------
                                     (133.4)%         1.5%           -%
                                     =======        ======      =======

6. Convertible Preferred Stock

During 1995, the Company sold 471,500 shares of Series D Convertible Preferred
Stock for $1,205,808. The Series D Preferred Stock carries a coupon rate of 10%
with dividends payable quarterly. The conversion price is $2.875 per share.

During 1994, the Company sold 410,906 units, each consisting of one share of
Series C Convertible Preferred Stock and a warrant to purchase one-half share of
Common Stock, for $1,002,832. The Series C Preferred Stock carries a coupon rate
of 6% with dividends payable quarterly. The conversion price is $2.75 per share.

The Company's Series B Convertible Preferred Stock carries a coupon rate of 8%
with dividends payable quarterly. The conversion price is $2.75 per share. Each
share of this Series was sold with a warrant attached to purchase one share of
Common Stock at $2.75. The warrants expired in 1998.

The Series A Convertible Preferred Stock is convertible at $2.50 per share. This
Series is subject to automatic conversion concurrently with the closing of a
public offering of the Company's Common Stock with aggregate minimum proceeds of
$7,500,000 at a minimum price per share of $5.00.


<PAGE>

6. Convertible Preferred Stock (continued)

The Series A, B, C and D Preferred Stock are convertible into Common Stock on a
one-for-one basis at the option of the holders, and each holder has voting
rights on all matters submitted to shareholders on an as-if-converted basis. The
Series A Preferred Stock has anti-dilution rights for any sales of Common Stock
by the Company at less than its current conversion price, and the conversion
price for each Series of Preferred Stock is subject to adjustment for stock
dividends, stock splits and capital reorganizations.


7. Stock Purchase and Option Plans and Warrants

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, but
applies Accounting Principles Board Opinion No. 25 and related interpretations
in accounting for its plans.

The Company has a stock purchase plan, nonstatutory and incentive stock option
plans and compensatory stock options. Total shares reserved at December 31, 1999
for convertible notes and convertible preferred stock, future employee stock
purchase plan purchases and options and warrants were 4,278,639.

Stock Purchase Plan

The Company has an employee stock purchase plan under which the sale of 200,000
shares of its Common Stock has been authorized. The purchase price of the shares
under the plan is the lesser of 85% of the fair market value on the first or
last day of the offering period. Offering periods are six months each. Employees
may designate up to 10% of the compensation for the purchase of stock.


<PAGE>



7. Stock Purchase and Option Plans and Warrants (continued)

Stock Option Plans

In 1997, the Company adopted the 1997 Stock Option Plan under which 500,000
shares were reserved. Shares under this plan are generally exercisable beginning
one year from the date of grant in cumulative amounts of one-fourth to one-third
of the shares under option and expire seven years from the date of grant.
Incentive and non-statutory options are granted at prices not less than market
on the date of grant.

In 1992, the Company adopted the 1992 Stock Option Plan under which 500,000
shares were reserved. Shares under this plan are generally exercisable beginning
one year from the date of grant in cumulative amounts of one-fourth to one-third
of the shares under option and expire ten years from the date of grant.
Incentive and nonstatutory options are granted at prices not less than market on
the date of grant.

In 1986, the Company adopted an Incentive Stock Option Plan under which 600,000
shares were reserved. Incentive options are generally exercisable beginning one
year from the date of grant in cumulative yearly amounts of one-fourth and
one-half of the shares under option and expire five to ten years from the date
of grant.

Also, in 1986, the Company adopted a Nonstatutory Stock Option Plan under which
300,000 shares were reserved. Shares under this plan are exercisable beginning
18 months from the date of grant. Additionally, 55,000 shares were reserved
during the period from 1986 through 1989 for directors of the Company through
granting of individual non-qualified option agreements. Non-qualified director
options are exercisable beginning six months from the date of grant. All
non-qualified options expire after five years.



<PAGE>


7. Stock Purchase and Option Plans and Warrants (continued)

Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of the Statement. The fair
value for these options was estimated at the date of the grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for 1999, 1998 and 1997, respectively; risk free interest rates of
6%, 5% and 5%; dividend yields of 0%, 0% and 0%; volatility factors of the
expected market price of the Company's stock of .533, .582 and .593; and a
weighted-average expected life of the option of seven, seven and four years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different than those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:

                                           1999             1998        1997
                                        ----------------------------------------
   Pro forma income (loss) applicable
     to common stock                    $4,132,147        $187,847    $(996,570)
   Pro forma income (loss) per common
     share                                 $.54             $.03        $(.14)

The pro forma results may not be representative of the future impact of applying
Statement 123 due to the phase-in provisions of the Statement and actual vesting
experience.



<PAGE>


7. Stock Purchase and Option Plans and Warrants (continued)

A summary of the Company's stock option activity and related information for the
years ended December 31 follows:

<TABLE>
<CAPTION>
                                       1999                      1998                      1997
                             ------------------------- ----------------------------------------------------
                                          Weighted-Average          Weighted-Average          Weighted-Average
                                           Exercise                   Exercise                  Exercise
                                             Price                     Price                     Price
                                Options                   Options                   Options
                             ------------------------- ----------------------------------------------------

<S>                             <C>           <C>         <C>           <C>           <C>         <C>
   Outstanding at beginning
     of year                    1,294,154     $1.99       1,170,154     $2.31         989,600     $2.31
   Granted                        142,000      1.69         146,500      1.99         346,554      2.23
   Exercised                            -        -                -        -          (33,750)     1.70
   Canceled                       (60,000)     1.87         (22,500)     2.30        (132,250)     2.28
                             ==============            ==============            ==============
   Outstanding end of year      1,376,154     $1.96       1,294,154     $1.99       1,170,154     $2.31
                             ==============            ==============            ==============
   Exercisable at end of year   1,166,204     $2.29       1,048,579     $2.32         944,064
                             ==============            ==============            ==============

   Weighted average fair
     value of options
     granted during the year       $1.01                     $1.11                    $  .93

</TABLE>

At December 31, 1999, the Company had exercise prices for options outstanding as
follows: 1,174,200 shares from $1.53 to $2.90 and 201,954 shares from $3.00 to
$5.00. The weighted average remaining contractual life of those options are six
and four years, respectively.

Shares reserved and available for grant at December 31, 1999 for the option
plans were 49,733.

Warrants

At December 31, 1999, the Company had total exercisable warrants outstanding to
purchase shares of its Common Stock as follows: 25,000 shares at $2.50 per
share; 305,747 shares at $2.75 per share; 247,150 shares at $2.875 per share.
The warrants expire at various dates from 2000 through 2005.



<PAGE>


8. Employee Benefit Plan

The Company has a defined contribution plan for substantially all employees.
Each employee may elect to contribute from 1% to 20% of their compensation to
the plan. Employees become 100% vested in Company contributions after four years
of service. In April 1999, the Company authorized a matching contribution for
those participants who elect to make salary deferral contributions under the
Plan. The matching contribution equals 20% of each participant's salary deferral
contributions which do not exceed 5% of the participant's contributions. The
expense for this plan for the year ended December 31, 1999, was $16,578, with no
expense in 1998 or 1997.

9. Export Sales and Major Customers

Total sales to foreign customers were $1,496,031, $1,267,653 and $1,418,234 in
1999, 1998 and 1997, respectively.

The Company had total sales to OEM customers of $3,698,014, $3,791,058 and
$1,913,985 in 1999, 1998 and 1997, respectively. Sales to one OEM customer
amounted to $1,889,653 in 1999. Sales to another OEM customer amounted to
$1,594,493 in 1998. Accounts receivable at December 31, 1999 and 1998 included
$170,920 and $296,820, respectively, from these customers.

10. Credit Risk

The Company is subject to credit risk on its accounts receivable which are
primarily with health care facilities, original equipment manufacturers and
medical products distributors. The Company performs credit investigations to
minimize credit risk. Certain distributors have the right to return unsold
product in the event the distributor's agreement is terminated for any cause.

11. Subsequent Event

On February 22, 2000, the Company entered into a definitive merger agreement
with Gyrus Group PLC through which the company will be acquired for $51.6
million.

<PAGE>


                           EVEREST MEDICAL CORPORATION

                         EXHIBIT INDEX TO ANNUAL REPORT
                                 ON FORM 10-KSB
                   For the Fiscal Year Ended December 31, 1999

Item No.             Item

3.1      Restated Articles of Incorporation of the Company, as amended
         (Incorporated by reference to Exhibit 3.1 to the Company's Form 10-KSB
         for the fiscal year ended December 31, 1995)

3.2      Restated Bylaws of the Company, as amended (Incorporated by reference
         to Exhibit 3.2 to the Company's Registration Statement on Form S-18
         (File No. 33-37352-C))

4.1      Specimen form of the Company's Common Stock Certificate (Incorporated
         by reference to Exhibit 4.1 to the Company's Registration Statement on
         Form S-18 (File No. 33-37352-C))

4.2      Restated Articles of Incorporation of the Company, as amended (See
         Exhibit 3.1)

4.3      Restated Bylaws of the Company, as amended (See Exhibit 3.2)

10.1     1986 Incentive Stock Option Plan, as amended (Incorporated by reference
         to Exhibit 10.6 to the Company's Registration Statement on Form S-18
         (File No. 33-37352-C))**

10.2     1986 Non-Statutory Stock Option Plan, as amended (Incorporated by
         reference to Exhibit 10.7 to the Company's Registration Statement on
         Form S-18 (File No. 33-37352-C))**

10.3     Form of Incentive Stock Option Agreement (Incorporated by reference to
         Exhibit 10.8 to the Company's Registration Statement on Form S-18 (File
         No. 33-37352-C))**

10.4     Form of Non-Statutory Option Agreement (Incorporated by reference to
         Exhibit 10.9 to the Company's Registration Statement on Form S-18 (File
         No. 33-37352-C))**

10.5     1999 Employee Stock Purchase Plan (Incorporated by reference to Exhibit
         10.5 to the Company's Form 10-KSB for the fiscal year ended December
         31, 1998)**

10.6     Employee Incentive Savings and Profit Sharing Plan (Incorporated by
         reference to Exhibit 10.11 to the Company's Registration Statement on
         Form S-18 (File No. 33-37352-C))**


<PAGE>

10.7     Employee Incentive Savings and Profit Sharing Trust (Incorporated by
         reference to Exhibit 10.12 to the Company's Registration Statement on
         Form S-18 (File No. 33-37352-C))**

10.8     1992 Stock Option Plan (Incorporated by reference to Exhibit 10.37 to
         the Company's Registration Statement on Form S-1 (File No. 33-45872))**

10.9     Lease Agreement dated September 20, 1989 between the Company and
         Carlson Center Industrial II Limited Partnership (Incorporated by
         reference to Exhibit 10.36 to the Company's Registration Statement on
         Form S-18 (File No. 33-37352-C))

10.10    Amendment #1 dated December 7, 1992 to Lease Agreement dated September
         20, 1989 between the Company and Carlson Center Industrial II Limited
         Partnership (Incorporated by reference to Exhibit 10.13 to the
         Company's Form 10-KSB for the fiscal year ended December 31, 1994)

10.11    Amendment #2 dated December 9, 1993 to Lease by and between the Company
         and the Estate of James Campbell (Incorporated by reference to Exhibit
         10.14 to the Company's Form 10-KSB for the fiscal year ended December
         31, 1994)

10.12    Supply Agreement dated April 2, 1991 between the Company and C.R. Bard,
         Inc. (Incorporated by reference to Exhibit 10.36 to the Company's
         Registration Statement on Form S-1 (File No. 33-45872))

10.13    First Amendment to Supply Agreement dated April 2, 1991 between the
         Company and C.R. Bard, Inc. (Incorporated by reference to Exhibit 10.36
         to the Company's Registration Statement on Form S-1 (File No.
         33-45872))

10.14    Stock Purchase Agreement dated July 15, 1993 between the Company and
         Johnson & Johnson Development Corporation, including Distribution and
         License Agreement between the Company and Ethicon Endo-Surgery
         (Incorporated by reference to Exhibit 10.29 to the Company's Form
         10-KSB for the fiscal year ended December 31, 1993)

10.15    Employment Agreement with John L. Shannon, Jr. dated January 1, 1999
         (Incorporated by reference to Exhibit 10.15 to the Company's Form
         10-KSB for the fiscal year ended December 31, 1998)**

10.16    Form of Warrant dated February 18, 1994 issued pursuant to agreement to
         certain purchasers (Incorporated by reference to Exhibit 10.38 to the
         Company's Form 10-KSB for the fiscal year ended December 31, 1993)

10.17    Exclusive Distribution Agreement dated January 1, 1996 with KK Adachi
         (Incorporated by reference to Exhibit 10.21 to the Company's Form
         10-KSB for the fiscal year ended December 31, 1995)


<PAGE>

10.18    Warrant to purchase 290,909 shares of Common Stock dated February 16,
         1996 issued to Okabena Partnership K (Incorporated by reference to
         Exhibit 10.25 to the Company's Form 10-KSB for the fiscal year ended
         December 31, 1995)

10.19    Separation Agreement dated October 12, 1996 between the Company and R.
         Keith Poppe (Incorporated by reference to Exhibit 10.25 to the
         Company's Form 10-KSB for the fiscal year ended December 31, 1996)**

10.20    Terms of Employment for Michael Geraghty. (Incorporated by reference to
         Exhibit 10.26 to the Company's Form 10-KSB for the fiscal year ended
         December 31, 1996)**

10.21    Amendment #3 dated September 11, 1997 to Lease by and between the
         Company and the Estate of James Campbell, as Landlord (Incorporated by
         reference to Exhibit 10.24 to the Company's Form 10-KSB for the fiscal
         year ended December 31, 1997)

10.22    Management Incentive Program for Fiscal Year 1999 (Incorporated by
         reference to Exhibit 10.22 to the Company's Form 10-KSB for the fiscal
         year ended December 31, 1998)**

10.23    Credit Agreement between Norwest Bank Minnesota, N.A. and the Company
         dated February 26, 1999. (Incorporated by reference to Exhibit 10.23 to
         the Company's Form 10-KSB for the fiscal year ended December 31, 1998)

10.24    Revolving Note dated February 26, 1999 from the Company to Norwest Bank
         Minnesota, N.A. (Incorporated by reference to Exhibit 10.24 to the
         Company's Form 10-KSB for the fiscal year ended December 31, 1998)

10.25*   Restated Credit Agreement between Norwest Bank Minnesota N.A. and the
         Company dated December 30, 1999.

10.26*   Revolving Note dated December 30, 1999 from the Company to Norwest Bank
         Minnesota, N.A.

10.27*   Supply Agreement dated January 25, 2000 between the Company and Guidant
         Corporation

23.1+    Consent of Independent Auditors

24.1*    Power of Attorney of John L. Shannon, Jr., David D. Koentopf, Thomas F.
         Murphy, Donald R. Brattain, Richard J. Migliori and Anthony Badolato
         (included on the signature pages of this Form 10-KSB)

27.1*    Financial Data Schedule (in electronic format only)

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

 + Filed herewith.
 * Previously filed.
** Management contract or compensatory plan or arrangement.


<PAGE>

                                  Exhibit 23.1




                         Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statements on
Form S-8 (Nos. 33-40186, 33-64630 and 33-95030) pertaining to the 1989 Employee
Stock Purchase Plan, Registration Statement on Form S-8 (No. 33-64594)
pertaining to the 1992 Stock Option Plan, Registration Statement on Form S-8
(No. 333-21383) pertaining to the 1986 Incentive Stock Option Plan, Registration
Statement on Form S-8 (No. 333-80025) pertaining to the 1997 Stock Option Plan,
Registration Statement on Form S-8 (No. 333-80019) pertaining to the 1999
Employee Stock Purchase Plan and in Registration Statement Nos. 333-05729 and
333-10763 on Form S-3, dated June 17, 1996 and August 23, 1996, respectively, of
our report dated January 7, 2000, except for Note 11 as to which date is
February 22, 2000, with respect to the financial statements of Everest Medical
Corporation included in the Annual Report (Form 10-KSB/A-1) for the year ended
December 31, 1999.


                                                          /s/ Ernst & Young LLP


Minneapolis, Minnesota
March 10, 2000