SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB

                  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, 1998                                                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. [ ]

The Issuer's revenues for fiscal year 1998 were $10,719,755.

As of March 12, 1999, there were 7,618,167 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 March 12, 1999, as reported by
NASDAQ), excluding shares owned beneficially by executive officers and
directors, was approximately $11,427,250.

Part II 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 Annual Report to Shareholders for the year ended December 31, 1998 (the
"1998 Annual Report"). 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 for its annual meeting to
be held April 27, 1999 (the "1999 Proxy Statement").

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


<PAGE>
                                     PART I

ITEM 1   DESCRIPTION OF BUSINESS

General Development of Business

         Everest Medical Corporation (the "Company" or "Everest") is engaged
primarily in the development, manufacturing and marketing of bipolar
electrosurgical devices for use in minimally invasive surgical procedures.
Today, the Company serves the medical specialties of gynecology,
gastroenterology, cardiovascular and general surgery. Sales are worldwide with
primary emphasis on an independent network of over 150 sales professionals. In
addition, the Company supplies propriety bipolar instruments to leading medical
device companies, including Guidant Corporation, Johnson & Johnson and C.R.
Bard.

         The Company commenced commercial sales of laparoscopic surgical
products in October 1991. The first product sold was the BiLAP(R) Bipolar
Cutting/Coagulating Probes. The Company added the BiCOAG(R) Bipolar Forceps in
September 1992, the EVERSHEARS(R) Straight Bipolar Scissors in November 1992 and
the EVERSHEARS Curved Bipolar Scissors in September 1993. The Company introduced
three additional products to the laparoscopic market in 1994, including the
EVERSHEARS II Bipolar Metal-on-Metal Curved Scissors, the BiCOAG Bipolar
Dissecting Forceps and the BiLAP Bipolar Needle Electrode. In 1995, the Company
commenced sales of the innovative, patented, multi-functional BiCOAG Cutting
Forceps, and in 1996 added additional versions, including a 5mm version of the
BiCOAG Cutting Forceps. In December 1996, the Company introduced the BiCOAG
Forceps in a 3mm version. This 3mm version of the bipolar forceps was introduced
to market in March 1998 as MOLly (Minimally Operative Laparoscopy) with FDA
clearance to expand the labeling to include the indication of female tubal
sterilization via contraceptive bipolar coagulation of the fallopian tube. The
Company is targeting these existing and new products to the laparoscopic general
surgery and gynecology markets.

         As minimally invasive surgical techniques have evolved to increasingly
complex surgery in anatomically crowded areas of the human body, the need for
safer instrumentation has become more evident. The Company believes that bipolar
electrosurgery is gaining increasing scientific recognition and acceptance in
the growing minimally invasive surgery ("MIS") markets which predominately
utilize monopolar energy. Bipolar energy offers the surgeon more control, less
tissue damage, effective hemostasis and performance, eliminating the dangers
associated with monopolar energy. The Company believes that bipolar technology
will become the standard in electrosurgery in advanced MIS procedures and the
Company will be a beneficiary of this trend.

         In late 1996, the Company identified the promising emerging minimally
invasive cardiovascular market as its first major market diversification. In
June 1997, the Company announced its first commercial venture in this market--a
product supply agreement with Guidant Corporation. Guidant, a technology leader
in minimally invasive surgery, bundles a version of the EVERSHEARS II Bipolar
Scissors and an innovative version of the bipolar cutting forceps, the
BiSECTOR(TM) Bipolar Ligating Forceps, in its minimally invasive saphenous vein
harvesting systems kits. These products were introduced to the market in the
third quarter of 1997. In 1998, the Company developed and commenced shipments to
Guidant of a 56cm flexible shaft version of these devices for exclusive use by
Guidant with its VASOVIEW(TM) and UNIPORT(TM) Endoscopic Vessel Harvesting
System.


<PAGE>

         Together, these two businesses of cardiovascular and Everest
laparoscopy comprise the Company's Growth Businesses. The balance of the
Company's product offerings including the Company's gastrointestinal and OEM
Forceps comprise the Mature Businesses of the Company.

         The Company markets a line of disposable products for use in selected
gastrointestinal endoscopic interventional procedures. These procedures are
performed by gastroenterologists using endoscopes through which Everest's
products are inserted into the body. These products are the BiSNARE(R)
Polypectomy Snare for removing colon polyps and the BiCOAG Probe Coagulator for
treating intestinal bleeding.

         The electrosurgical products currently under development or being
marketed by Everest operate in a bipolar mode providing an improved margin of
patient safety in minimally invasive surgical procedures. Many of these
procedures are typically performed using monopolar electrosurgery which has
inherent characteristics that may pose certain risks for patients. In
electrosurgery, radio frequency (or RF energy) is used both to cut and coagulate
tissue. With monopolar devices, the RF energy must pass from the surgical
instrument through the patient's body to a separate return electrode attached to
a large surface area, generally the buttocks or thigh. With monopolar
electrosurgery, there is a greater potential for injury to body tissues as the
electrical current passes through to the surface or return electrode (grounding
pad) where skin burns may also occur. With bipolar devices, the RF energy is
contained at the surgical site because both the active and return electrodes are
located on the surgical instrument. In minimally invasive surgery, there is even
greater potential for complications when using monopolar instruments due to the
combined effects of the surgeon's limited field of vision, the proximity of
other organs and the inherent tendency of the surgical instruments to conduct
monopolar RF energy.

         The Company has developed extensive expertise in the control and
containment of bipolar radio frequency energy to affect both surgical cutting
and coagulation of blood in a variety of surgical and interventional procedures.
The Company's strategy is to leverage its expertise to design, develop and
manufacture proprietary surgical instruments for use in selected minimally
invasive surgical procedures where the safety and other features of bipolar
electrosurgery have demonstrable advantages.

         In 1998, the Company was awarded ISO 9001 certification for its quality
systems in design and manufacturing, and received authorization to place the CE
Mark on its products for distribution to members of the European Community.
These milestones provide an important recognition of the superior product
quality and safety standards of Everest Medical.

         The Company was incorporated in Minnesota on April 19, 1983. The
Company's address is 13755 First Avenue North, Minneapolis, Minnesota 55441, and
its telephone number is (612) 473-6262.


<PAGE>

Business

         Laparoscopic Surgical Products

         The Company believes laparoscopy is a rapidly growing market in the
United States. Laparoscopic procedures, such as gall bladder removal,
hysterectomies, Nissen Fundiplation and hernia repair can now be routinely
performed through a trocar cannula. The cutting and coagulating instruments most
often utilized are either electrosurgical or lasers. Each of these methods
involves certain patient risks. With monopolar electrosurgical devices, there is
a risk that the passage of electrical current through the body will result in
unintended lateral tissue damage. Tissue damage can occur in laparoscopic
procedures performed with monopolar instruments due to RF current from the
monopolar instrument inducing current on one of the trocar cannulas or other
surgical instruments. This tissue damage, which can include severe burning, may
not be visible to the surgeon during surgery, but may result in post-operative
complications such as bowel perforation. Lasers are sometimes difficult to
control and have limited coagulation effect, particularly in the closed
conditions of a laparoscopic procedure. They are also expensive to acquire and
may be inconvenient for the clinician due to the problems of scheduling the
limited number available in a hospital and the high level of expertise required.
To the Company's knowledge, the EVERSHEARS Bipolar Scissors and the BiLAP Probe
were the first bipolar electrosurgical devices commercially available for the
purpose of providing cutting and coagulation in laparoscopic procedures. In the
past three years, there have been additional products introduced to the market
by competitors that may address the need for cutting and coagulation during
laparoscopic procedures.

         Current Laparoscopic Surgical Products

         EVERSHEARS Bipolar Scissors. The EVERSHEARS II Bipolar Scissors is used
to cut and coagulate tissue during laparoscopic surgery, combining mechanical
cutting with electrosurgical coagulation. The EVERSHEARS II Bipolar Scissors
consists of a handle and a long tube with blades at the distal end. The
EVERSHEARS II also contains a spindle which allows the physician to rotate the
device. The patented EVERSHEARS II design consists of metal cutting blades and
stainless steel support member which serves as the coagulation electrodes. The
conductive metal cutting blade is isolated from the support member by a
non-conductive adhesive. The EVERSHEARS II Bipolar Scissors is designed to
utilize the bipolar coagulating output of most standard electrosurgical
generators on the market. The EVERSHEARS II Bipolar Scissors is available in a
dual action curved design which allow the physician better visualization of the
surgical site.

         In the fourth quarter of 1998, the Company commenced limited shipments
of the EVERSHEARS LP Bipolar Scissors. This next generation device features a
new lower profile scissors blade designed to improve the precision of cutting
and the surgical feel of the device. In this design, the blades are 30% thinner,
25% longer, open 30% wider and cut smoother than the EVERSHEARS II Bipolar
Scissors currently marketed. The Company continues to be the only company in the
world to market a laparoscopic bipolar scissors offering the clinician the
benefits of precision mechanical cutting and simultaneous coagulation.


<PAGE>

         The Company currently distributes the EVERSHEARS Bipolar Scissors to
hospitals and physicians only through its network of independent marketing
representatives. Sales of EVERSHEARS Bipolar Scissors approached $1,400,000 for
1998.

         BiCOAG Bipolar Cutting Forceps. The Company introduced this patented
new product in September 1995 in a 10mm version. This innovative product
incorporates a precision bipolar forceps for grasping and coagulation of tissue
with a surgical cutting blade positioned between the forceps jaws to allow
transection of coagulated tissue. The Company was issued a patent from the
United States Patent Office on August 29, 1995 for this design.

         The BiCOAG Cutting Forceps allows the laparoscopic surgeon the ability
to grasp and coagulate safely with bipolar energy and transect tissue with one
instrument. This product minimizes the number of surgical instruments needed and
the need for instrument exchanges, resulting in a reduction of surgical time.
Additionally, the use of bipolar energy to safely and effectively seal vessels
may result in the elimination of costly stapling devices in many laparoscopic
procedures.

         In the second quarter of 1996, the Company added a locking feature to
the device which enables the device to be used for retraction and increases
surgeon ease and comfort. The Company also commenced shipments of the new 5mm
version of the BiCOAG Cutting Forceps during the last half of 1996. The Company
believes this device is the first commercially available 5mm cutting forceps.
The 5mm version of the BiCOAG Cutting Forceps complements the 10mm device,
offering surgeons the advantage of using smaller trocars, reducing incision
size, cost and potential complications.

         The Company realized a significant portion of its growth in 1996, 1997
and 1998 from the revenues generated from this product line. Revenues grew from
under $200,000 in 1995 to in excess of $3,800,000 in 1998.

         BiCOAG Bipolar Forceps. The BiCOAG Forceps is used to coagulate tissue
and blood vessels during laparoscopic surgery. The BiCOAG Forceps consists of a
handle and a long tube containing two electrodes and a spindle which allows the
physician to rotate the device to more easily accomplish its function. The
forceps is available in two models, a macro version which has large paddles
attached to the end of the electrodes for coagulating large areas, and the micro
version which has a small electrode surface for more precise coagulation. The
BiCOAG Forceps is designed to operate on the bipolar coagulating output of most
standard electrosurgical generators on the market.

         The BiCOAG Forceps were reintroduced to the Company's independent sales
channel in September 1995 after an 18-month hiatus. Sales of the BiCOAG Forceps
were previously restricted from the Company's independent sales channel due to a
now-terminated exclusivity provision in the product supply agreement with
Ethicon Endo-Surgery, a division of Johnson & Johnson. The sales impact of the
reintroduction of the BiCOAG Forceps for 1995 was nominal, but since then the
Company has continued to experience sales increases with revenues in 1998
exceeding $400,000.


<PAGE>

         In addition to the Company's independent sales channel, the BiCOAG
Forceps are also marketed and distributed by Ethicon Endo-Surgery and Origin
MedSystems, a subsidiary of Guidant Corporation. Sales to these OEM customers
represented 10% of the Company's revenue in 1997 and 1998.

         The Company has been notified that Origin Medsystems will discontinue
marketing this device in the second quarter of 1999 due to its strategic
realignment efforts. The Company is working closely with Origin to allow for a
smooth transition of customers to the Company's independent sales network.

         BiCOAG Dissecting Forceps. The BiCOAG Dissecting Forceps is similar to
the bipolar forceps described above, but combines the ability to grasp and
dissect tissue in the surgical procedure with the benefits of bipolar
coagulation. This product provides the surgeon with a versatile and high-utility
instrument, and is compatible with most electrosurgical generators. Sales of
this product in 1998 exceeded $500,000.

         MOLly 3mm Bipolar Forceps. In December 1996, the Company introduced
what it believes to be the world's first 3mm Bipolar laparoscopic forceps
targeted for the emerging microlaparoscopy market. This device allows for secure
grasping, effective coagulation, the use of smaller trocar ports and improved
outcomes. Procedures such as diagnostic laparoscopy are being moved out of
traditional hospital settings to alternate sites, including surgical-centers and
physicians' offices. The Company believes smaller instrumentation will improve
the success rate of these procedures by allowing the use of smaller ports,
reducing complications.

         In March 1998, the Company received 510(k) clearance from the United
States Food & Drug Administration to expand the labeling for its 3mm bipolar
forceps to include the indication of female tubal sterilization via
contraceptive bipolar coagulation of the fallopian tube. See "Regulation." An
estimated 700,000 tubal sterilization procedures are performed yearly in the
United States. The Company believes this may represent a significant opportunity
for this product. To date, the Company has not experienced a significant revenue
contribution from this product.

         BiLAP Bipolar Probes. The BiLAP Probe consists of a handle and a long
rigid tube. The probe contains cutting electrodes and an area to provide spot
coagulation on the distal end, and features suction and irrigation capabilities
to the operative site. The BiLAP Probe was released for general sale in the
United States in October 1991. Initially the BiLAP Probes were designed to work
only on an Everest-made Bipolar generator; however, due to product modifications
made in 1996, the device is now compatible with most common electrosurgical
generators, eliminating the need for an Everest Generator. Sales of the BiLAP
System to date have been minimal, and the Company does not believe sales will
increase significantly in the future.

         BiLAP Bipolar Needle Electrode. The BiLAP Bipolar Needle Electrode is
similar in design to the BiLAP product line but features an adjustable needle
electrode that advances and retracts for precise cutting that preserves
surrounding tissues. The device utilizes the safety of bipolar energy and
provides the surgeon with precision cutting performance. This device is
compatible with most common electrosurgical generators. The sales of this
product are not expected to reach significant levels since this product has a
small niche of the market based on current surgical techniques.


<PAGE>

         Laparoscopic Surgical Products Under Development. The Company has
ongoing development projects to optimize the performance of its products, and
the reduction of its manufacturing costs through the benefits of value
engineering, and to offer a lower profile, higher-quality blade design for its
bipolar scissors.

         Gastrointestinal (GI) Endoscopic Products

         Current GI Endoscopic Products

         BiSNARE Polypectomy Snare. Lower gastrointestinal polyp removal
procedures are performed to reduce the risk of cancerous lesion formation. When
performed with a monopolar snare, this procedure may have the undesirable side
effects of colon wall perforation and delayed hemorrhage. The Company is
marketing a device designed to make the removal of polyps easier and safer. The
BiSNARE Polypectomy Snare consists of a bipolar wire loop on a long catheter
which is inserted through an endoscope. The wire loop is placed over the polyp
by the endoscopist, RF energy is activated, and, as the polyp is cut from the
intestinal wall, the exposed blood vessels are coagulated. The Company believes
that, compared to competing monopolar devices, the BiSNARE presents less
potential for burns and intestinal perforations because it requires less power
and the energy is localized to the lesion. In addition, it is easier to prepare
the patient for the procedure than with competing devices because the BiSNARE
does not require a grounding pad.

         The BiSNARE is currently offered in several models to address physician
preferences. The Company is currently focusing on increasing its market share in
laparoscopy, therefore, the BiSNARE is sold to hospitals and physicians in the
United States through a limited network of independent marketing representatives
and distributors. Revenues from this product have fallen over the past three
years primarily due to a decline in revenues from the Company's distribution in
Japan of this product. This revenue decline resulted both from increased
competitive products which eroded existing business and from delays in obtaining
approval in Japan of new versions of the bipolar snare.

         BiCOAG Probe Coagulator. In a common endoscopic procedure, a
coagulating tip on the distal end of a catheter is used to treat ulcers and
other intestinal bleeding. The BiCOAG Coagulator is a catheter with a spiral
electrode tip and a flushing port designed to facilitate the endoscopic
visualization and coagulation of gastrointestinal bleeding. The BiCOAG Probe has
a spiral bipolar electrode designed to permit the endoscopist to use any surface
of the tip for therapy while reducing the incidence of tissue adhesion. The
BiCOAG Probe was released for sale in the third quarter of 1990.

         The Company has entered into an agreement with Bard Interventional, a
division of C.R. Bard, Inc., and is providing a private label version of the
coagulating probe for sale in the United States and Canada. Bard has no
obligation to purchase a minimum number of units under this agreement. In 1998,
the Company experienced a sharp increase in revenues under this product supply
agreement as Bard was able to gain additional market share for a period of time
due to competitive market opportunities. The Company believes the opportunity
was short-lived and does expect revenues to fall to normal levels in 1999.


<PAGE>

         GI Endoscopic Products Under Development

         Biopsy Forceps. The Company has developed a bipolar instrument that
will enable the endoscopist to obtain a tissue sample for pathology and
coagulate the site while maintaining the integrity of the sample. The market
potential for the product is under evaluation. The Company has entered into a
development agreement with a leading international distributor of surgical
instruments to refine the product design and explore the market potential.

         Minimally Invasive Cardiovascular Surgery

         The Company has identified the emerging minimally invasive
cardiovascular surgery market as an opportunity to export its bipolar
technology. The Company believes the inherent safety of bipolar technology
offers the cardiovascular surgeon the cost-effective electrosurgical solution to
meet the challenges of these new procedures. The Company also believes strongly
that bipolar electrosurgery has the potential to become the standard of care for
the new minimally invasive cardiovascular surgery marketplace.

         The Company is exploring two applications for bipolar technology in
cardiac surgery--bipolar dissection of the internal mammary artery during
coronary artery bypass surgery, and bipolar "ligation and transection" of side
branches during minimally invasive saphenous vein harvesting. The Company
believes it can leverage its technology to these procedures without significant
obstacles. The applicable products include the EVERSHEARS II Metal-on-Metal
Bipolar Scissors and the new BiSECTOR(TM) Ligating Forceps.

         In mid-1997, the Company entered into a product supply agreement with
Guidant Corporation for the cardiovascular market. Under the terms of this
agreement, Everest supplies Guidant with a version of its bipolar scissors and
bipolar cutting forceps to be packaged in the proprietary Guidant VasoView(TM)
Balloon Dissection System kit, offering clinicians a complete minimally invasive
solution for saphenous vein harvesting during cardiovascular and peripheral
vascular surgical procedures. Surgeons perform approximately 600,000 coronary
artery bypass procedures and 200,000 peripheral bypass procedures worldwide each
year. Guidant introduced the Everest Medical products to their customers during
the third quarter of 1997.

         In the first quarter of 1998, the Company introduced its BiSECTOR
Bipolar Ligating Forceps as a tool for minimally invasive sapheneous vein
harvesting to be included in kits being introduced on the market. The product
provides a one-step alternative to coagulate and transect vessels, compared to
the single function, more costly, scissors and clip appliers. Guidant purchased
over $1,400,000 of the Company's products in 1998. Guidant continues to be the
market leader in this arena and introduced a second generation VASOVIEW(TM)
UNIPORT(TM) Endoscopic Vessal Harvesting System in 1998. To support this next
generation system, the Company developed and commenced shipments for Guidant of
an innovative 56cm flexible shaft scissors and its BiSECTOR ligating forceps for
use with this sytem.

         In addition, the Company will be exploring proprietary bipolar
technology as an application to improve the current internal mammary artery
(IMA) harvesting technique in minimally invasive, beating heart, bypass graft
procedures. With obvious vital structures such as the heart and aorta nearby,
the Company believes these relatively new and still evolving heart procedures
will be more effective due to the added safety and one-step methods that bipolar
technology brings.


<PAGE>

         General Market Trends

         The MIS market continues to grow. Factors accounting for this growth
include: (a) increasing concern by employers and healthcare providers regarding
the total system costs associated with surgery; (b) higher degree of awareness
of patients regarding the benefits of MIS; and (c) improved technology for use
by clinicians in these procedures.

         At present, many physicians, hospitals and third party payers do not
fully appreciate the favorable economics of MIS. There is a growing body of data
to support the conclusion that MIS procedures will significantly reduce the
total system healthcare-related costs of surgery. These potential cost savings
include reduced hospital stays and patient recovery time. From an employer's
perspective, savings are evident in lower costs of short-term disability and
workers' compensation. In addition, employers may realize savings in costs
associated with the hiring of replacement workers--training expense, reduced
productivity and additional compensation. The Company believes that large
employers will become more aggressive in managing their total system
healthcare-related costs and indicate a preference for MIS procedures. This may
include employers limiting reimbursement to laparoscopic procedures only, unless
clearly contraindicated.

         Today, patients are better informed with respect to the benefits of
MIS--returning to an active lifestyle sooner, potentially reduced risks due to
anesthesia and infection, and obvious cosmetic advantages--and are requesting
less invasive procedures.

         The Company continues to believe that MIS will grow and expand into
other medical markets. Today, the Company serves the medical specialties of
gynecology, general surgery, gastrointestinal endoscopy and cardiovascular.

         As seen in its successful entrance to the cardiovascular market, the
Company believes it can be successful in leveraging its technological expertise
and operational capabilities into new an demerging MIS markets including
otolaryngology, orthopedics and urology as well as the expanding procedural
opportunity in gynecology, general surgery and cardiovascular markets.

         The current health care debate by the federal government has the
potential to tremendously impact the system of delivery of health care in this
country. While the ultimate outcome is uncertain at this time, the Company feels
it will be well-positioned to take advantage of any change that may occur. In
order to reduce the overall rate of growth of spending on health care, any new
or revised system will need to encourage the ongoing trend to MIS due to the
overall efficiency of these procedures. The Company also expects that the trend
towards managed health care will bring into the procedural equation important
factors such as safety, efficacy, cost effectiveness and ease of use resulting
in a greater demand for bipolar energy.


<PAGE>

Competition

         The medical device industry is intensely competitive in almost all
segments and tends to be dominated in large, more mature markets by a relatively
small group of large and well-financed companies. The Company also competes with
smaller, entrepreneurial companies, some of which are better financed than
Everest and may have established positions in certain markets.

         Minimally Invasive Surgical Markets

         A number of major medical products suppliers, including United States
Surgical Corporation (a subsidiary of Tyco Corporation), Ethicon, Inc. (a
subsidiary of Johnson & Johnson, Inc.), CONMED Corporation, Karl Storz
Endoscopy-America Inc., Imagyn Medical Technologies, Inc. and Circon Corporation
are currently selling devices for minimally invasive surgical procedures. For
the most part, the electrosurgical products sold by these companies are
monopolar devices. The Company also believes that a number of companies are
developing bipolar devices for laparoscopic applications. Competitors are
selling a bipolar coagulating forceps. The Company believes, however, that it is
the only manufacturer currently marketing a full line of bipolar devices
specifically designed for laparoscopy.

         Due to the expected rapid growth in the market for minimally invasive
surgical products, the Company anticipates that additional competitors will
enter the market. It also expects that there will be a consolidation of existing
competitors, including acquisitions of small companies by large medical products
companies. This trend will mean increased competition for the Company.

         Minimally Invasive Cardiovascular and Saphenous Vein Harvesting Markets

         The principal competitors of the Company's products offered through
Guidant Corporation in the emerging minimally invasive cardiovascular market
include Ethicon EndoSurgery (a subsidiary of Johnson & Johnson), CardioThoracic
Systems, Inc., Heartport and General Surgical Innovations Inc.

         Endoscopic Markets

         The principal competitors of the BiSNARE polypectomy device are
Microvasive, Inc. (subsidiary of Boston Scientific Corp.), Wilson Cook Medical
Inc., Bard Interventional (a division of C.R. Bard, Inc.) and Olympus Corp. All
of these companies market monopolar systems. BEI, Inc. makes a bipolar snare
that is currently sold to customers at a significantly higher price than the
BiSNARE.

         The principal competitors to the BiCOAG Probe are Microvasive, Circon
Corporation and Olympus. All of these companies market bipolar devices, with the
exception of Olympus, which offers a device using heat for coagulation.

         The Company believes that the principal competitive factors in the MIS
market are product features, physician familiarity with the products and their
function, the ability of products to address cost containment issues, product
quality, distribution strength and price. Competitors to each of the Company's

<PAGE>

products market both disposable and reusable products. All of the Company's
current surgical instruments are intended for single use, a feature which the
Company believes provides the benefits of less risk of infection to patients and
reduced labor costs to hospitals.

Marketing and Distribution

         The Company markets and promotes its products through advertising in
medical journals, publication of scientific papers, direct mail, attendance at
trade shows and participation by Everest's personnel in training sessions for
physicians. The Company also provides promotional information for its
independent sales representatives and international distributors. In addition,
the Company, its independent representatives and its distributors provide
physicians with assistance in learning the proper use of the Company's
laparoscopic products.

         Over the past 4 years, the Company has focused on developing its
independent sales channel whereby the Company works with independent sales
organizations which have expertise in the Company's primary markets of general
surgery and gynecologic laparoscopy. The Company, in many cases, retains direct
billing to the hospital and pays a commission based on orders shipped. The
Company has seen this distribution channel grow to represent 60% of its sales
volume in 1998. The Company believes that continued management focus, ongoing
product development and increased sales and marketing efforts will continue to
grow this independent sales channel in 1999.

         The Company is approaching the minimally invasive cardiovascular market
with a strategic partnership with Guidant Corporation, who became a shareholder
in the Company in 1998. Guidant is the strategic marketer and distributor of
versions of the Company's bipolar products to be packaged with the VasoView
Balloon Dissection System for less invasive saphenous vein harvesting.

         The Company continues to maintain its non-exclusive product supply
agreement with Ethicon Endo-Surgery, a division of Johnson & Johnson, Inc.,
whereby Ethicon was granted a license to market the Company's laparoscopic
forceps. The Company also has a non-exclusive agreement with Origin MedSystems,
a subsidiary of Guidant Corporation, established in 1993 to market the Company's
laparoscopic forceps. This Origin agreement will, however, be discontinued in
the second quarter of 1999. See "Business--Laparoscopic Surgical Products."

         Everest currently markets its GI endoscopic products in the United
States through a minimum number of independent distributors. These distributors
do not have written agreements with the Company and serve on a non-exclusive
basis. The Company also services a growing number of accounts directly. The
Company continues to provide Bard Interventional (a division of C.R. Bard, Inc.)
with its gastrointestinal coagulating probe.

         The Company's sales and marketing department consists of the Vice
President of Sales and Marketing, four regional sales managers, one marketing
manager, one clinical support manager and two sales and marketing support
individuals. The Company expects to continue to invest in this growing
distribution strategy in 1999.


<PAGE>

         The Company intends to continue to utilize independent distributors for
foreign sales. During 1998, the Company concentrated its sales and marketing
efforts primarily in the United States market and experienced an increase in
sales internationally. The Company expects sales in 1999 to increase
domestically, as well as internationally.

Manufacturing

         The manufacturing process for the Company's current products consists
primarily of the assembly of parts and components purchased from outside
vendors, final testing and packaging. The Company currently produces the
majority of its injection molded plastic parts. It is probable that the Company
primarily will assemble its future products from parts bought from outside
suppliers. However, management may determine that certain parts should be
produced by the Company due, for instance, to a desire to control quality or to
reduce cost. The Company is currently subcontracting sterilization functions
with third parties. During 1993, the Company installed a class 10,000 clean room
in its facility which gives the Company the capability to package its products
in house at considerable savings compared to subcontracting that function.

         Most of the parts and components used in the Company's current products
are purchased from multiple vendors or are available from additional vendors the
Company has qualified. However, in some instances the Company purchases, and may
in the future purchase, only from a single vendor. Although the Company believes
it would be able to obtain such parts from alternative vendors if required,
there could be some interruption in the Company's ability to supply products to
customers. If, as in the past, the Company finds itself with a single source of
supply for a critical component, it will, to the extent possible, take steps to
protect itself from a shortage of supply. Such steps include increased safety
stock, working to qualify additional vendors, and alternative designs which
utilize currently available components.

Research and Development

         The Company's research and development activities are conducted at its
headquarters facility and at laboratory and clinical facilities at various
universities and hospitals. The Company attempts to coordinate its research and
development activities with those of its scientific advisors and other physician
contacts. The objective of the Company is to direct those coordinated efforts to
use its base of technology and expertise to develop products which meet
identified market needs. For the years ended December 31, 1998 and 1997, the
Company's research and development expenditures were $859,000 and $634,000,
respectively. The Company expects spending in the research and development area
to increase as the Company attempts to expand its laparoscopic product offering
and to capitalize on certain opportunities in the minimally invasive
cardiovascular arena, microlaparoscopy and other surgical specialties.

Regulation

         The medical devices manufactured and marketed by the Company are
subject to regulation by the U.S. Food and Drug Administration (the "FDA") and,
in some instances, by state and foreign authorities. Pursuant to the Medical
Device Amendments of 1976 (the "1976 Amendments") to the Federal Food, Drug and
Cosmetic Act, and regulations promulgated thereunder, medical devices intended

<PAGE>

for human use are classified into three categories (Classes I, II, and III),
depending upon the degree of regulatory control to which they would be subject.
The Company's current GI surgical products have been classified as Class II
devices, and the Company believes that its planned electrosurgical devices will
also be in that class.

         If a new device, irrespective of whether it is a Class II or III
device, is substantially equivalent to an existing device that has been
continuously marketed since the effective date of the 1976 Amendments (May 28,
1976) (a "Substantially Equivalent Device"), FDA requirements may be satisfied
through a Premarket Notification Submission (a "510(k) Submission"), under which
the applicant provides product information supporting its claim of substantial
equivalence. In a 510(k) Submission, the FDA may also require that it be
provided with clinical test results demonstrating the safety and efficacy of the
device. Under certain circumstances, that clinical data can be obtained only
after submitting to the FDA an application for an Investigational Device
Exemption ("IDE"). Marketing may commence when the FDA issues a letter finding
substantial equivalence. The Company has received 510(k) marketing clearances
finding substantial equivalence from the FDA, without submission of clinical
testing data, for all of its current products.

         If a medical device does not qualify for the 510(k) Submission
procedure, the manufacturer must file a premarket approval application ("PMA").
This requires more extensive prefiling testing than the 510(k) Submission and
involves a significantly longer FDA review process. FDA approval of a PMA occurs
after the applicant has established the safety and efficacy of the device to the
satisfaction of the FDA under an IDE Procedure requiring preclinical laboratory
and animal tests and human clinical studies. The Company does not believe that
any of its products currently under development will be subject to this more
time-consuming FDA review process.

         The United States Congress has enacted legislation which substantially
changes certain aspects of the regulation of the sale of medical devices and
which, depending on how it is interpreted and enforced, could make it
substantially more difficult and time-consuming to comply with premarketing
clearance and approval processes.

         As a manufacturer of medical devices, the Company is also subject to
certain other FDA regulations, and its manufacturing processes and facilities
are subject to continuing review by the FDA to ensure compliance with Good
Manufacturing Practices regulations. The Company believes that its manufacturing
and quality control procedures substantially conform to the requirements of FDA
regulation.

         The financial arrangements through which the Company markets, sells and
distributes its products may be subject to certain federal and state laws and
regulations with respect to the provision of services or products. These
so-called "fraud and abuse" laws and regulations prohibit certain direct or
indirect payment arrangements that are designed to induce or encourage the
purchase or recommendation of products reimbursable under Medicare or Medicaid.
Violations of these laws and regulations may result in civil and criminal
penalties, including substantial fines and imprisonment. The Company believes
that its operations and its marketing, sales and distribution practices
currently comply in all respects with the fraud and abuse laws and regulations,
to the extent they are applicable.


<PAGE>

         The Company's devices are also subject to regulation in foreign
countries.

Third Party Reimbursement

         In 1983, Congress amended the Social Security Act to establish a
prospective reimbursement system for Medicare which limits the reimbursement
that hospitals receive for treating certain medical conditions by setting
maximum fees that can be charged for Medicare patients. Under this system,
hospitals are paid a fixed amount for treating each patient with a particular
diagnosis. This differs from the previous system under which Medicare providers
were reimbursed for actual costs of providing services up to a stated maximum on
each procedure performed. In addition, certain private insurers have initiated
prospective reimbursement systems designed to slow the escalation of health care
costs. The Company does not believe that these reimbursement limitations will
have a material adverse effect on future sales of its existing or currently
proposed product lines, although the Company has become aware of pressure to
limit reimbursement for single-use devices.

Intellectual Property

         Due to the rapid technology change that characterizes the medical
device industry, the Company believes that the improvement of existing products,
reliance upon trade secrets and unpatented proprietary know-how and the
development of new products are generally as important as patent protection in
establishing and maintaining a competitive advantage. Nevertheless, the Company
has made, and continues to make, efforts to obtain patents, when available, in
connection with its product development program. There can be no assurance,
however, that any patents obtained will provide substantial protection or be of
commercial benefit to the Company, or that their validity will not be
successfully challenged.

         In 1994, the Company was awarded a patent for its second generation
bipolar scissors design, EVERSHEARS II. Although there were two opposing patents
issued to another company in 1994 involving ceramic bipolar scissors, the
Company believes that the patented EVERSHEARS II is a strong marketing
alternative in the bipolar scissors market. After review of the allowed claims
of the two opposing patents and the related files, the Company, based on the
advice of its patent counsel, believes that its metal-on-metal design
incorporated in the EVERSHEARS II does not infringe on either of the opposing
patents issued. The Company commenced shipment of the EVERSHEARS II on a limited
basis in the third quarter of 1994 and full market introduction in January 1995.

         In 1995, the Company was awarded patents for its dissecting forceps
design and its bipolar cutting forceps design. The Company was awarded three
additional patents in 1996, two of which relate to the bipolar scissors
technology. The third patent, a methods patent, was granted to the Company which
allows for the interchangeability of monopolar and bipolar currents to an
instrument.

         In November 1997, the Company received official notice from the United
States Patent and Trademark Office ("PTO") that it intended to issue a
reexamination certificate for the Company's bipolar cutting forceps patent. The
Company had requested this reexamination in an effort to ensure the long-term

<PAGE>

viability of the bipolar cutting forceps patent. A reexamination certificate
states that the essential claims of the bipolar cutting forceps patent have been
upheld by the PTO. The bipolar cutting forceps design incorporates a precision
bipolar forceps for grasping and coagulation of tissue with a passive,
reciprocally-moveable surgical cutting blade positioned between the forceps jaws
to allow transection of the coagulated tissue. The Company was issued a U.S.
patent for this device on August 29, 1995. A reexamination is a PTO action to
review an issued patent in the context of newly discovered prior art. As a
result of the successful outcome of the reexamination in favor of the Company,
it executed a cross-licensing agreement with an undisclosed party in the fourth
quarter of 1997. The Company received licensing revenue of $183,000 covering the
two-plus years since the patent issued in August 1995. Licensing revenues in
1998 approached $85,000 and the Company does not believe future licensing
revenues will be material to the Company.

         In October 1998, the Company reached a settlement with Boston
Scientific Corporation with respect to separate patent interference actions
declared by the United States Patent and Trademark Office. A patent interference
action is a PTO action to determine who is entitled to the patent on the same
invention. The interference action involved two of the Company's bipolar
electrosurgical scissors designs. The resolution of the settlement resulted in
the Company maintaining ownership of the key "metal-on-metal" bipolar scissors
patent, which the Company is currently marketing, on terms favorable to the
Company, eliminating further legal costs and uncertainty.

         The Company generally requires its consultants and each of its
employees to agree in writing to keep its proprietary information confidential
and, within certain limitations, to assign all inventions relating to the
Company's business to the Company.

         The Company has registered its trademark logo, Everest Medical, and the
trademarks BiSNARE, BiTOME, BiCOAG, EVERSHEARS, BiLAP and BiBx on the principal
register in the PTO. In addition, the Company has filed trademark applications
on some of its other products.

Employees

         As of March 12, 1999, the Company had 105 employees, all of which are
full-time. The employees include 4 in research and development, 63 in
production, 16 in manufacturing support, 6 in quality assurance, 9 in sales and
marketing and 7 in general and administrative functions. The Company's employees
are not represented by a union, and the Company considers its relationship with
its employees to be good.

Outlook and Risks

         Certain statements made in this annual report on Form 10-KSB, which are
summarized here, are forward-looking statements that involve risk and
uncertainties, and actual results may be materially different. Factors that
could cause actual results to differ include, but are not limited to those
identified:


<PAGE>

o    The expectation that as the Company continues to invest in sales and
     marketing support programs, increased revenues will result through the
     independent sales channel depends on surgeons increasing their use of
     bipolar technology as an alternative to existing monopolar and ultrasonic
     technologies, and upon general market conditions and competitive conditions
     within this market, including the introduction of products by both U.S. and
     European competitors.
o    The Company's expectation that it will experience sales growth domestically
     and internationally depends on general market conditions and competitive
     conditions that may be encountered in both such markets, and on Everest's
     ability both (i) to increase its market share in its core business of
     laparoscopy given that Everest competes with large, well-capitalized
     companies who have the ability to enter into contact purchasing agreements
     with large institutions, and (ii) to establish a market presence in the
     minimally invasive cardiac surgery market.
o    The expectation that bipolar technology will become the standard in the MIS
     market and that the Company will be a beneficiary of this trend depends on
     demand and on acceptance by physicians, hospitals and third party payers of
     the believe that MIS procedures result in reduced costs.
o    The expectation that the Company will increase its research and development
     spending in order to achieve ultimate sales growth depends on the Company
     having sufficient capital. The belief that the Company's current capital
     resources will be sufficient to fund current and anticipated business
     operations could be adversely impacted by changes in anticipated operating
     results or the Company's inability to obtain financing on favorable terms
     and to meet the Company's obligations on its preferred stock dividends.

ITEM 2.  DESCRIPTION OF PROPERTY

         The Company currently rents facilities consisting of approximately
23,485 square feet located at Carlson Technical Center, Suite 500, 13755 First
Avenue North, Minneapolis, Minnesota 55441. The Company pays monthly rent of
approximately $13,650, plus operating expenses and taxes, under the lease which
extends through December 2004. The Company uses approximately 65% of the space
for production, 15% for research and development and 10% for each of sales and
marketing and administration. The Company believes this space will adequately
meet its needs for the foreseeable future, and, in management's opinion, the
property is adequately covered by insurance.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is not a party to, nor is its property the subject of, any
material pending legal proceeding.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.

<PAGE>

Executive Officers of the Company

         The Company's executive officers, along with their ages and positions
as of March 12, 1999, are as follows:

  Name                    Age                                Position
John L. Shannon, Jr.       45      President, Chief Executive Officer and 
                                   Chairman of the Board
Michael E. Geraghty        51      Vice President, Sales and Marketing
Steven M. Blakemore        44      Vice President, Operations and Engineering
David J. Parins            47      Vice President, Technology
Thomas F. Murphy           39      Vice President, Finance and Administration 
                                   and Assistant Secretary

         John L. Shannon, Jr. Mr. Shannon has served as Chairman of the Board
since May 1997 and as President and Chief Executive Officer since August 1993.
From May 1989 to June 1993, Mr. Shannon was President and Chief Executive
Officer of EdenTec Corporation, a medical device manufacturer. From November
1985 to May 1989, Mr. Shannon was employed by Threshold Ventures, Inc., a
venture capital firm, most recently as President. From September 1984 to
November 1985, Mr. Shannon was Marketing Manager for SciMed Life Systems, Inc.,
a medical device manufacturer. From June 1979 to September 1984, Mr. Shannon was
employed by The Toro Company, a lawn and garden manufacturer, in a variety of
financial, planning and marketing positions, most recently as Marketing Manager.

         Michael E. Geraghty. Mr. Geraghty joined the Company as Vice President
of Sales and Marketing in January 1997. From August 1995 to January 1997, Mr.
Geraghty was Director of Marketing - Advance Products at ArthroCare Corporation,
a start-up bipolar electrosurgical medical device manufacturer. From March 1994
to August 1995, Mr. Geraghty was the National Sales Manager of Laser
Peripherals, and from December 1990 to October 1993, he was the Sales Manager
for Intramed Labs, Inc., both of which are medical device manufacturers.

         Steven M. Blakemore. Mr. Blakemore has been employed by the Company
since November 1992, most recently as Vice President of Operations and
Engineering. From October 1989 to February 1992, Mr. Blakemore was employed by
Clarus Medical Systems, a medical device manufacturer, as Vice President of
Operations and Research and Development. From March 1986 to October 1989, Mr.
Blakemore was employed by Medical Graphics Corporation, a medical device
manufacturer, most recently as Vice President of Operations. Mr. Blakemore is
the inventor on one patent in medical technology.

<PAGE>

         David J. Parins. Mr. Parins rejoined the Company in April 1998 as Vice
President of Technology. Prior to rejoining the Company, Mr. Parins was employed
by Cardiac Instruments, a startup medical device company, as Vice President of
Research and Development from October 1997 to April 1998. Prior to this short
hiatus, Mr. Parins was employed by the Company as Vice President of Engineering,
Quality Assurance and Regulatory Affairs from November 1988 to October 1997. Mr.
Parins is the holder of many of the Company's patents and has over twenty years
of experience in the medical device industry.

         Thomas F. Murphy. Mr. Murphy has served as Vice President of Finance
and Administration of the Company since January 1997, prior to which he served
as Chief Financial Officer since joining the Company in July 1994. Mr. Murphy
has also served as Assistant Secretary of the Company since February 1995. From
December 1992 to July 1994, he was Vice President of Finance for DaVinci
Medical, Inc., a manufacturer of laparoscopic surgical instruments. From October
1990 to May 1992, Mr. Murphy was employed by Tsumura International, a consumer
goods manufacturer of home fragrance and bath products, as Vice President of
Finance. From 1986 to October 1990, Mr. Murphy held various positions in sales
operations, administration and finance for Minnetonka Corporation, a consumer
goods manufacturer.


                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The information required by Item 5 is incorporated by reference from
the Company's 1998 Annual Report, portions of which are filed herewith in
Exhibit 13.1.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The information required by Item 6 is incorporated by reference from
the Company's 1998 Annual Report, portions of which are filed herewith in
Exhibit 13.1.

ITEM 7.  FINANCIAL STATEMENTS

         The Financial Statements of the Company for the year ended December 31,
1998 are incorporated by reference from the Company's 1998 Annual Report,
portions of which are filed herewith in Exhibit 13.1.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

         None.



<PAGE>


                                    PART III

ITEM 9.  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND CONTROL  PERSONS;  
         COMPLIANCE  WITH SECTION  16(a) OF THE EXCHANGE ACT

         The information required by Item 9 regarding the Company's executive
officers is set forth in Part I of this report.

         The information required by Item 9 regarding the Company's directors is
incorporated by reference from the Company's 1999 Proxy Statement under the
caption "Information About Nominees." The Company's proxy statement will be
filed pursuant to Rule 14a within 120 days after the close of the fiscal year
for which this report is filed.

         The information relating to compliance with Section 16(a) of the
Exchange Act is incorporated by reference from the Company's 1999 Proxy
Statement under the caption "Compliance with Section 16(a) of the Exchange Act."
The Company's proxy statement will be filed pursuant to Rule 14a within 120 days
after the close of the fiscal year for which this report is filed.

ITEM 10. EXECUTIVE COMPENSATION

         The information required by Item 10 is incorporated by reference from
the Company's 1999 Proxy Statement under the caption "Executive Compensation."
The Company's proxy statement will be filed pursuant to Rule 14a within 120 days
after the close of the fiscal year for which this report is filed.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by Item 11 is incorporated by reference from
the Company's 1999 Proxy Statement under the caption "Security Ownership of
Management and Certain Beneficial Owners." The Company's proxy statement will be
filed pursuant to Rule 14a within 120 days after the close of the fiscal year
for which this report is filed.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by Item 12 is incorporated by reference from
the Company's 1999 Proxy Statement under the caption "Certain Transactions." The
Company's proxy statement will be filed pursuant to Rule 14a within 120 days
after the close of the fiscal year for which this report is filed.


<PAGE>

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 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 March 11, 1999, 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, 1998.


<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 30, 1999                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.

                               (Power of Attorney)

         Each person whose signature appears below constitutes and appoints John
L. Shannon, Jr. and Thomas F. Murphy as his true and lawful attorneys-in-fact
and agents, each acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Annual Report on Form 10-KSB
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, each acting alone, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.

         Signature                      Title                         Date


/s/ John L. Shannon, Jr.        Chief Executive Officer,         March 30, 1999
John L. Shannon, Jr.            President (Principal Executive
                                Officer) and Chairman of the
                                Board

/s/ David D. Koentopf           Director                         March 30, 1999
David D. Koentopf

(Signatures continued on following page)


<PAGE>


         Signature                      Title                         Date


/s/ Thomas F. Murphy            Vice President of Finance        March 30, 1999
Thomas F. Murphy                and Administration
                                (Principal Financial and
                                Accounting Officer)


/s/ Donald R. Brattain          Director                         March 30, 1999
Donald R. Brattain


                                Director             
Richard J. Migliori, M.D.





<PAGE>


                           EVEREST MEDICAL CORPORATION

                         EXHIBIT INDEX TO ANNUAL REPORT
                                 ON FORM 10-KSB
                   For the Fiscal Year Ended December 31, 1998

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     Employee Stock Purchase Plan (Incorporated by reference to Exhibit
         10.10 to the Company's Registration Statement on Form S-18 (File No.
         33-37352-C))**

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))**

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**

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)

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**

10.23*   Credit Agreement between Norwest Bank Minnesota, N.A. and the Company
         dated February 26, 1999.

10.24*   Revolving Note dated February 26, 1999 from the Company to Norwest Bank
         Minnesota, N.A.

13.1*    Portions of 1998 Annual Report, including Management's Discussion and
         Analysis, Financial Statements and Market for Common Equity

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 and Richard J. Migliori (included on the
         signature pages of this Form 10-KSB)

27.1     Financial Data Schedule (in electronic format only)

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

 * Filed herewith.
** Management contract or compensatory plan or arrangement.