<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                         SECURITIES AND EXCHANGE COMMISSION 
                               WASHINGTON, D.C. 20549     

--------------------------------------------------------------------------------
                                      FORM 10-K 

/X/  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

     For the fiscal year ended MARCH 31, 1998 or  

/ /  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934

     For the transition period from                to            
                                    --------------    ------------

     COMMISSION FILE NUMBER 0-11278

                              MINNTECH CORPORATION 

             (Exact name of registrant as specified in its charter)

                MINNESOTA                               41-1229121
      (State or other jurisdiction                   (I.R.S. Employer
      Incorporation or organization                Identification No.)

                           14605 - 28TH AVENUE NORTH 
                          MINNEAPOLIS, MINNESOTA 55447 
                    (Address of principal executive offices)

      Registrant's telephone number, including area code:   (6l2) 553-3300

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

        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 $.05 PER SHARE

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

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

     / /


As of  May 28, 1998, 6,785,261 shares of Common Stock, par value $.05 per share,
were outstanding, and the aggregate market value of the shares of Common Stock
(based upon the closing transaction price on such date as reported on the NASDAQ
National Market System) held by non-affiliates of the registrant was
approximately $92,025,102.
       
--------------------------------------------------------------------------------

                        DOCUMENTS INCORPORATED BY REFERENCE

Documents Incorporated by Reference       10-K Part and Item Where Incorporated 
-----------------------------------       --------------------------------------
1.   Certain portions of the               Part III: Items 10, 11, 12 and 13 
     Definitive Proxy Statement for
     The Annual Meeting of Shareholders 
     of the Registrant 
     To be held August 26, 1998

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


<PAGE>

                                          
                             FORWARD-LOOKING STATEMENTS


     The information presented in this Annual Report on Form 10-K under the
headings "Item 1. Business" and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" contains forward-looking
statements within the meaning of the safe harbor provisions of Section 21E of
the Securities Exchange Act of 1934, as amended. Such statements are subject to
risks and uncertainties, including those discussed under "Forward Looking
Statements" in Item 7 and "Risk Factors" on pages 15 - 19 of this Annual Report
on Form 10-K, that could cause actual results to differ materially from those
projected. Because actual results may differ, readers are cautioned not to place
undue reliance on these forward-looking statements.
                                          
                                          
                                       PART I
                                          
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF THE BUSINESS
     Minntech Corporation (the "Company") was incorporated on January 30, 1974,
under the laws of Minnesota. The Company is engaged in the development,
manufacture, and marketing of medical supplies and devices; sterilants; and
industrial filtration and separation products. The Company's products are used
primarily in kidney dialysis and in open-heart surgery. The trade name of Renal
Systems is used for products sold in the dialysis market, the trade name of
Minntech is used for products sold in the cardiosurgery market.  The trade name
of Fibercor is used for industrial filtration and separation products marketed
to the pharmaceutical, medical, and biotechnology industries.  The Company has
core technologies in electronics, fibers, plastics, and chemical solutions, all
of which were internally developed.

INDUSTRY SEGMENTS
     Through March 31, 1998, the Company has been primarily engaged in a single
industry segment -- medical devices and supplies. The Company also markets
filtration devices and disinfectants for industrial filtration and separation
applications.

PRODUCTS
     The Company has four interrelated product groups:

         -    Dialysis Supplies and Devices

         -    Reprocessing Products

         -    Cardiosurgery Products

         -    Industrial Filtration and Separation Products

DIALYSIS SUPPLIES AND DEVICES
     The Company manufactures supplies, concentrates, and electronic equipment
for hemodialysis treatment of patients with chronic kidney failure or end-stage
renal disease ("ESRD"). These dialysis products accounted for approximately 31
percent of the Company's sales in fiscal 1998, 32 percent of sales in fiscal
1997, and 29 percent of sales in fiscal 1996.

     According to the United States Renal Data Service, over approximately
220,000 Americans suffering from ESRD underwent life-sustaining hemodialysis
treatments in 1996.  These treatments are typically administered three times a
week and require approximately three gallons of dialysis concentrate each.

     CONCENTRATES
     The Company's main dialysis supply product is a line of concentrates used
by kidney centers to prepare dialysate, a chemical solution used to draw waste
products out of the blood during hemodialysis treatments. The Company believes
it provides the industry's most complete line of these concentrates in both
liquid and powder form 


                                          2
<PAGE>

for use in virtually all types of kidney dialysis machines.  Concentrate
products accounted for over 86 percent of all dialysis supply and device product
sales in fiscal 1998.

     ELECTRONICS
     The Company's major dialysis electronic products are the
Sonalarm-Registered Trademark- Foam Detector, a device that detects air emboli,
or bubbles, in blood during hemodialysis, and the Minipump-TM- Hemodialysis
Blood Pump, which circulates blood during hemodialysis. The Sonalarm-Registered
Trademark- and the Minipump-TM-  are sold to end-users and in component form to
other manufacturers of blood processing equipment.

     OTHER
     In March 1997, the Company discontinued the Primus-Registered Trademark-
dialyzer line (artificial kidney), taking a one-time restructuring charge to
write off all of the assets employed in the dialyzer business.  

REPROCESSING PRODUCTS 
     The Company manufactures electronic equipment and sterilant products for
reprocessing -- the cleaning and disinfection of medical devices for subsequent
reuse. Its current product line includes products for both dialyzer and
endoscope reprocessing.   Combined reprocessing product sales accounted for
approximately 45.2 percent of sales in fiscal 1998, 38.2 percent of sales in
fiscal 1997, and 34.3 percent of sales in 1996.

     DIALYZER REPROCESSING
     The Company's dialyzer reprocessing products include the
Renatron-Registered Trademark- II Automated Dialyzer Reprocessing System and
Renalin-Registered Trademark- Cold Sterilant, a peracetic acid solution that
replaces formaldehyde, glutaraldehyde, and bleach in dialyzer reprocessing.
Actril-Registered Trademark- Cold Sterilant, a surface disinfectant, is also
part of the dialyzer reprocessing product line.

     The Renatron-Registered Trademark- reprocessing system, first introduced in
1982, provides an automated method of rinsing, cleaning, sterilizing, and
testing dialyzers for multiple use. The Renatron-Registered Trademark- II, the
most current version of the product introduced in 1990, includes a bar code
reader, computer, and Renalog-Registered Trademark- software system that
provides dialysis centers with automated record keeping and data analysis
capabilities. The Company believes its Renatron-Registered Trademark- system is
faster, easier to use, and more efficient than competitive automated systems.
The Company also believes that the Renatron-Registered Trademark- system is one
of the top selling automated dialyzer reprocessing systems in the world. At
March 31, 1998, the Company had an installed customer base of more than 3,500
Renatron-Registered Trademark- stations.

     Renalin-Registered Trademark- Cold Sterilant has been used in over 75
million dialyzer reprocessing treatments since the product was first introduced
in 1985. The product's proprietary peracetic acid-based formula effectively
cleans, disinfects, and sterilizes dialyzers without the hazardous fumes and
disposal problems related to older glutaraldehyde and formaldehyde reprocessing
solutions. The Company believes Renalin-Registered Trademark- is the leading
dialyzer reprocessing solution in the United States.

     In response to government-mandated cost containment measures, many United
States dialysis centers in the late 1970s began disinfecting and reusing
dialyzers (artificial kidneys) instead of discarding them after a single use.
Data released by the Centers for Disease Control ("CDC") indicate that, as of
1996, 81 percent of all dialysis centers in the United States reuse dialyzers.
Between 1983 and 1996, the percentage of these facilities using
Renalin-Registered Trademark- for dialyzer reprocessing grew from 5 to 54
percent. The other dialysis centers used primarily formaldehyde or
glutaraldehyde disinfectants to reprocess dialyzers. The CDC also reported that
61 percent of centers practicing reuse used an automated system to reprocess
their dialyzers.

     Unlike the United States market, dialyzer reuse is in the formative stages
in Europe. The Company has increased reprocessing product sales in Europe by
employing direct salespersons in major dialysis markets and promoting the
advantages of reuse.  The Company estimates that approximately 73 percent of the
worldwide ESRD patients are outside of the United States.

     Dialyzer reprocessing sales accounted for 42.1 percent of Company sales in
fiscal 1998.

                                          3
<PAGE>

     ENDOSCOPE REPROCESSING
     In February 1998, the Company entered into a distribution and marketing
agreement with Advanced Sterilization Products ("ASP"), a division of Ethicon (a
Johnson & Johnson company), to sell the Company's automated endoscope
reprocessor (formerly the AER-TM- Plus) and endoscope reprocessing
sterilant/disinfectant product (formerly Peract-Registered Trademark- 20). The
peracetic acid-based liquid sterilant/disinfectant received 510(k) market
clearance in October 1997, and will be called CIDEX-Registered Trademark- PA
under the terms of the new agreement (CIDEX-Registered Trademark- PA is a
registered trademark of ASP). The multi-year alliance also calls for ASP to meet
certain minimum purchase agreements of the endoscope reprocessor and
sterilant/disinfectant. Both products will continue to be manufactured at the
Company's production facility in Minneapolis, Minnesota. The Company also
entered into a multi-year joint development deal with ASP in April 1998 to
develop a next generation endoscope reprocessor and sterilant. See "Research and
Product Development".

     The Company's endoscope reprocessing product line was originally purchased
from Bard Interventional Products, a division of C.R. Bard Inc. ("Bard"), in
September 1994. Through February 1998, the products were sold under the
Company's trade name of Unitrol-TM-.

     Over 10 million gastrointestinal endoscopy procedures are performed
annually in the United States. Unlike disposable medical devices, which are
discarded after a patient procedure, the endoscopes used in these procedures may
be used on hundreds of patients a year before being retired from use. These
multi-channel scopes have numerous joints and crevices that can easily become
clogged with blood, tissue, or other biological material. The risk of
transmitting infection from patient to patient can be high if a thorough and
reliable disinfection procedure is not performed after each procedure. The
Company's automated endoscope reprocessor provides consistent high-level
endoscope disinfection. The self-contained system also helps safeguard
reprocessing staff by containing any disinfectant fumes.

     The most widely-used sterilant used for endoscope reprocessing,
glutaraldehyde, emits fumes that can irritate the skin and respiratory system. 
Published studies have reported severe physical reactions to glutaraldehyde
fumes, including skin irritation and inflammation, burning eyes, headaches, and
respiratory distress during medical device reprocessing procedures. The
Company's peracetic acid sterilant/disinfectant emits no noxious fumes and is
biodegradable to safeguard healthcare workers and the environment. 

     Endoscope reprocessing product sales accounted for approximately 3.1
percent of Company sales in fiscal 1998.

     OTHER
     In March 1997, in an effort to reduce expenses and focus resources on
profitable product areas, the Company discontinued the Cathetron-Registered
Trademark- system and CATHx-Registered Trademark- sterilant.   The
Cathetron-Registered Trademark- system, along with its companion cold sterilant
CATHx-Registered Trademark-, was an automated system for cleaning and
sterilizing cardiovascular catheters for subsequent reuse. 

CARDIOSURGERY PRODUCTS
     The Company manufactures three hollow fiber devices for use in
cardiosurgery -- oxygenators, hemoconcentrators, and hemofilters. These
cardiosurgery products accounted for approximately 19.9 percent of the Company's
sales in fiscal 1998, 25.7 percent of sales in fiscal 1997, and 34.4 percent of
sales in fiscal 1996.

     OXYGENATORS
     The Company has manufactured membrane oxygenators based on its proprietary
hollow fiber technology since 1987. To date, the Company's oxygenators have been
used in over 700,000 open-heart procedures worldwide. 

     An oxygenator is used by a perfusionist (a health care professional who
operates heart-lung bypass equipment) to replace the function of the lungs
during open-heart surgery. The patient's blood is circulated through the device,
which removes the carbon dioxide in the blood and exchanges it for oxygen. 
There are an estimated 900,000 open-heart procedures performed annually
worldwide. 


                                          4
<PAGE>

     The Biocor-TM- 200 High Performance Oxygenator received 510(k) clearance on
March 7, 1997, and was launched in the United States market in April, 1997.  The
product has been available in Europe since November 1995. The Biocor-TM-
incorporates the Company's proprietary weaving technology and offers improved
performance over its first-generation oxygenator. The compact design and reduced
surface area of the device results in a low priming volume -- a feature that
shortens set-up time for the perfusionist and can reduce the need for donor
blood. The Biocor-TM- also features a highly biocompatible plastic heat
exchanger, a high gas transfer rate, and a low blood-side pressure drop. The
Company believes that the consistent high performance characteristics of the
device are equal or superior to competing products.

     From 1987 to March 31, 1997, the Company manufactured its first generation
oxygenator for exclusive worldwide distribution pursuant to an agreement with
Bard, under which Bard had exclusive distribution rights through March 31, 1997,
and nonexclusive rights thereafter.  Under its agreement with the Company, Bard
was restricted from selling any other oxygenator until January 1, 1997. In
fiscal 1993, the largest purchase year of the agreement, the first-generation
oxygenator represented 35.3 percent of total sales for the Company. In fiscal
1996, the oxygenators represented 20.5 percent of total sales, and in fiscal
1997, they represented 10.9 percent of total sales. The Company did not receive
significant orders from Bard in fiscal 1998. Since March 31, 1997, this first
generation oxygenator has been available directly from the Company under the
trade name Minntech-TM- 400.

     HEMOCONCENTRATORS 
     In May 1998, the Company received 510(k) market clearance for the HPH
Mini-TM-, a hemoconcentrator designed specifically for pediatric and neonatal
patients. Since 1985, the Company has manufactured and marketed a complete line
of hemoconcentrators. The Hemocor HPH-Registered Trademark- hemoconcentrator
line, the Company's current third-generation product, succeeded the Hemocor
Plus-Registered Trademark- second-generation hemoconcentrator line in February
1994. 

     A hemoconcentrator is used by a perfusionist to concentrate red blood cells
and remove excess fluid from the bloodstream during open-heart surgery. Because
the entire blood volume of the patient passes through the hemoconcentrator
device during an open-heart procedure, the biocompatibility of the blood-contact
components of the device is critical. The entire line of Hemocor HPH-Registered
Trademark- high performance hemoconcentrator products contains the Company's
proprietary polysulfone fiber.  The Hemocor HPH-Registered Trademark- line also
features a unique "no-rinse" design that allows it to be quickly and efficiently
inserted into the bypass circuit at any time during the open-heart procedure.

     The Company estimates that hemoconcentration is currently used in up to 30
percent of the estimated 440,000 open-heart procedures performed annually in the
United States, and to a lesser extent internationally.  Such procedures require
up to 140,000 hemoconcentrator devices each year worldwide. At March 31, 1998,
the Company believed it held a 70 percent share of the United States
hemoconcentrator market. The Company is currently exploring new clinical
applications for its hemoconcentrator products that it believes could increase
the total market size for the product.

     HEMOFILTERS
     In October 1997, the Company entered into a marketing and distribution
agreement with Baxter Healthcare Corporation (a subsidiary of Baxter
International, Inc.) to sell the Company's entire line of Renaflo-Registered
Trademark- II and Minifilter Plus-TM- hemofilter products in all world markets
except Japan and China. 

     The Renaflo-Registered Trademark- hemofilter, introduced in fiscal 1985, is
a device that performs hemofiltration, a slow, continuous blood filtration
therapy used to control fluid overload and acute renal failure in unstable,
critically ill patients that cannot tolerate the rapid filtration rates of
conventional hemodialysis.  The hemofilter removes plasma water, waste products,
and toxins from the circulating blood of patients while conserving the cellular
and protein content of the blood. The Company's hemofilter line features
no-rinse, polysulfone fiber that requires minimal set up time for the healthcare
professional and is highly biocompatible for patient comfort.  The hemofilter is
available in four different sizes to meet the clinical needs of neonates through
adults.

     In April 1995, the Company completed the acquisition of the
hemoconcentrator, hemofilter, and dialysate filter product lines from Amicon
Ireland Ltd., an indirect subsidiary of W.R. Grace & Co. ("Amicon").  The
Company 


                                          5
<PAGE>

began manufacturing the hemoconcentrator and hemofilter products in its
Minneapolis facility in the first quarter of fiscal 1997. 

INDUSTRIAL FILTRATION AND SEPARATION PRODUCTS
     The Company's industrial filtration and separation division, Fibercor,
manufactures hollow fiber filters and disinfectants for high-purity water
systems in the pharmaceutical, medical, and biotechnology industries. The
Company's filtration and separation products are currently sold primarily in the
United States. However, the Company began the establishment of a European
distribution network in fiscal 1998 in order to capture a larger share of the
estimated $1.5 billion worldwide microfiltration market. Through March 31, 1998,
industrial filtration and separation products accounted for 4.3 percent of the
Company's sales in fiscal 1998, 3.6 percent of sales in fiscal 1997, and 2.5
percent of sales in fiscal 1996.  The Company intends to grow this portion of
the business through selected acquisitions.

     FILTER PRODUCTS
     The Company developed a new line of high performance capsule filters in
late fiscal 1998. The FiberFlo-Registered Trademark- Hollow Fiber Capsule Filter
line, which made its market debut in April 1998, is based on the Company's
polysulfone FiberFlo-Registered Trademark- HF cartridge filter product line.
Capsule filters are used in laboratory and pharmaceutical manufacturing
environments to filter spores, bacteria, and pyrogens from water and gas.
FiberFlo-Registered Trademark- capsule filters are engineered for point-of-use
applications that require very fine filtration. Their hollow fiber design
provides a surface area that is up to six times larger than traditional pleated
capsule filters on the market. The large surface area provides greater capacity
and longer filter life for the customer. FiberFlo-Registered Trademark- capsule
filters and cartridge filters are available in a variety of styles, sizes, and
configurations to meet a comprehensive range of customer needs and applications.

     FiberFlo-Registered Trademark- cartridge filters are used in high-purity
industrial water systems to filter spores, bacteria, and pyrogens from water.
They are also used in medical device reprocessing to help health care facilities
meet reprocessing water quality guidelines outlined by the American Association
of Medical Instrumentation.  The cartridge filters feature similar large surface
area and fine filtration advantages to the Company's capsule filter line.

     DISINFECTANTS
     The Company's Minncare-Registered Trademark- Cold Sterilant is a liquid
sterilant product that is used to sanitize high-purity water treatment systems.
Minncare-Registered Trademark- is based on the Company's proprietary peracetic
acid sterilant technology, and is engineered to clean and disinfect reverse
osmosis membranes and water distribution systems.   The Company has private
label agreements for both Minncare-Registered Trademark- and Actril-Registered
Trademark- sterilants with several manufacturers of filtration and separation
products.

MARKETS AND DISTRIBUTION 
     The Company sells its medical products in the United States primarily to
hospitals, clinics, and kidney treatment centers. The Company markets these
products in the United States through a direct sales force and through
distributors. At March 31, 1998, the Company employed a total of seven dialysis
sales representatives in the United States, two cardiosurgery sales
representatives, and three water filtration sales representatives. In addition,
a customer service staff and a technical services department support field
activity. The Company also operates its own trucks to expedite delivery of
certain products and minimize shipping costs.

     The Company's headquarters for its European operations in the Netherlands,
Minntech B.V., employed a total of 18 people in Europe at March 31, 1998. This
wholly-owned subsidiary has been the base for the Company's European dialysis,
reprocessing, and cardiosurgery sales operations since 1995. The Company
established direct sales operations in Europe in 1991. The Company's goal is to
increase its revenues in Europe through expanded direct sales activities. In
fiscal 1998, the Company created a full-time position dedicated to establishing
a European sales distribution network for industrial filtration and separation
products.

     The Company's dialysis marketing programs are directed at nephrologists
(doctors who specialize in treating kidney disease), nurses, hospital and clinic
administrators, and others who influence purchasing decisions. Cardiosurgery
marketing programs are directed at perfusionists and cardiovascular surgeons.
Industrial filtration and 


                                          6
<PAGE>

separation marketing programs are directed at distributors and large OEMs.
Endoscope reprocessing marketing programs are directed at gastroenterology
nurses and physicians, infection control and central sterile processing
personnel, and hospital and clinic administrators. The Company supports its
field organization and network of distributors through advertising, distribution
of sales materials, publication of articles in medical journals, sponsorship of
technical and clinical workshops, and attendance at medical conferences and
trade shows.

SOURCES AND AVAILABILITY OF MATERIALS 
     The Company has multiple sources of supply for use in its manufacturing
operations with the exception of oxygenator fiber. In addition, the Company
constructs many of its injection molds and also molds and extrudes many of its
component plastic parts. 

PATENTS AND TRADEMARKS 
     The Company holds rights under 146 patents worldwide (including 42 U.S.
patents) covering its products or components thereof. At March 31, 1998, the
Company also had a total of 74 pending patent applications in the United States
and in foreign countries. The Company also holds rights under 225 trademark
registrations worldwide and has 64 trademark applications pending.

     The Company believes that patent protection is a significant factor in
maintaining its market position, but the rapid changes of technology in kidney
dialysis therapy, cardiosurgery, and the other areas in which the Company
competes may limit the value of the Company's existing patents.  

     While patents have a presumption of validity under the law, the issuance of
a patent is not conclusive as to its validity or the enforceable scope of its
claims. Accordingly, there can be no assurance that the Company's existing
patents will afford protection against competitors with similar inventions, nor
can there be any assurance that the Company's patents will not be infringed.
Competitors may also obtain patents that the Company would need to license or
design around. These factors also tend to limit the value of the Company's
existing patents. Consequently, in certain instances, the Company may consider
trade secret protection to be a more effective method of maintaining its
proprietary positions.

SEASONALITY OF THE BUSINESS
     The Company's business is not seasonal.

WORKING CAPITAL AND BACKLOG 
     The Company's credit practices and related working capital needs are
comparable to those of other companies in the medical device and supplies
industry. The Company generally fills orders within 30 days of receipt. The
Company had approximately $85,000 of order backlogs as of March 31, 1998.

SIGNIFICANT CUSTOMERS 
     The Company's five largest customers accounted for approximately 24.9
percent of total sales in 1998, and 29.0 percent in 1997.  Sales of oxygenators
to Bard accounted for approximately less than one percent of total sales in
1998, 10.9 percent in fiscal 1997, and 20.5 percent in fiscal 1996.  The Bard
contract expired June 30, 1997. 

RENEGOTIATION OR TERMINATION OF GOVERNMENT CONTRACTS 
     No material portion of the Company's business is subject to renegotiation
of profits or termination of contracts or subcontracts at the election of the
Government.

COMPETITION 
     DIALYSIS
     The Company's dialysis and dialyzer reprocessing products are sold in a
highly competitive market, and the Company competes with many other firms. The
dialysis market is dominated by a few firms, including Baxter Healthcare
division of Baxter International Inc., Gambro (part of the Gambro Group, a
wholly-owned subsidiary of Incentive AB), and Fresenius Medical Care AG. These
firms have substantially greater financial and personnel resources than the
Company and most of them produce and sell a more comprehensive line of dialysis
equipment 


                                          7
<PAGE>

and supplies. The Company also faces competition from other international
companies and several smaller companies that carry a limited line of products.

     There is a growing trend in the dialysis industry whereby manufacturers of
supplies are acquiring chains of dialysis treatment centers. These manufacturers
have a built-in customer base for their products. However, the Company views its
manufacturer-only status as a competitive market advantage. The Company believes
that many dialysis treatment providers do not want to purchase hemodialysis
supplies from manufacturers who also provide dialysis services and are, in
effect, their competitors.  

     CARDIOSURGERY
     The Company's major competitors in the oxygenator market are Bard,
Medtronic, Inc., Cobe Cardiovascular Inc. (a subsidiary of Gambro Group), the
Bentley Division of Baxter Healthcare Corporation., Sorin Biomedical, Inc.,
Terumo Medical Corporation, Avecor Cardiovascular, Inc., and SARNS, Inc. (a
subsidiary of 3M Company). The major competitors in the hemoconcentrator market
are Cobe Cardiovascular, Terumo Medical Corporation, and Baxter Healthcare
Corporation. 

     The cardiosurgery supply business has also experienced some consolidation
over the past several years. Since 1995, one of the largest manufacturers of
cardiosurgery devices has purchased several large contract groups that provide
perfusion services to hospitals. This development may have a future impact on
sales of cardiosurgery products to the perfusionists employed by this
competitor, and the hospitals they contract with. In addition, the development
of new surgical technologies such as minimally-invasive cardiosurgery that may
not require current perfusion components such as oxygenators or
hemoconcentrators could impact future sales of these products.

     INDUSTRIAL FILTRATION AND SEPARATION
     Major competitors in the industry include Pall Corporation, Millipore
Corporation, Sartorius AG, Cuno, Inc., Corning, Inc., and Osmonics, Inc.  There
are a number of different mediums currently used in the manufacture of
microfilters that compete with the Company's polysulfone filbers (e.g., PTFE,
cellulose, polypropylene, nylon, PVDF). 

MARKET CONDITIONS
     The health care industry in the United States operates under cost
containment pressures imposed by the federal government, employers, and health
insurance carriers. One major influence is the Medicare Prospective Payment
System, implemented in 1983, which provides for fixed payments to hospitals for
care of Medicare patients based on diagnosis rather than actual hospital charges
(the DRG system). In addition, the Company's end-user customers for its dialysis
and reprocessing products are subject to fixed payments per treatment under
separate Medicare regulations which have been in place for 25 years.

     Health care providers, in general, have responded by shortening hospital
stays through quicker clinical diagnoses and by employing less invasive medical
procedures and more efficient therapies. In addition, hospitals and other health
care providers have sought to lower their costs by reducing their purchased
supplies costs and by improving their utilization of facilities and equipment.
Dialysis centers, in particular, have also responded by reprocessing and reusing
dialyzers and by shortening treatment times.

     Under the current cost containment environment, the competitive factors in
the medical markets served by the Company are such that cost reduction is a
prime consideration. While this may adversely affect some of the Company's
supply products, cost containment pressures may be a positive factor for certain
Company products, such as dialyzer reprocessing products and the
Renapak-Registered Trademark- Concentrate Manufacturing System. 

RESEARCH AND PRODUCT DEVELOPMENT 
     The Company strives to design and develop technologically advanced products
that are customer driven, cost effective, and, in the case of its medical
products, improve the quality of patient care. The Company emphasizes product
development rather than basic research. The ability of the Company to compete
effectively depends upon its ability to anticipate changing market needs and
successfully develop products to meet those needs.


                                          8
<PAGE>

     In April 1998, the Company entered into second agreement with Advanced
Sterilization Products for the development of a next-generation automatic
endoscope reprocessing machine and chemical sterilant. This multi-year joint
development and licensing agreement calls for a $1.5 million licensing fee to be
paid to the Company upon the completion of certain milestone events. Under the
agreement, the Company will have the exclusive right to manufacture the
reprocessing system and sterilant, and ASP will have worldwide marketing rights
for the products.

     The Company's other current research and development efforts are directed
toward dialyzer reprocessing applications, blood filtration and oxygenation
technologies, sterilant/disinfectant applications, and industrial filtration and
separation technologies.

     As of March 31, 1998, 27 of the Company's employees were engaged in
research and development. In addition to its own research activities, the
Company, from time to time, obtains experimental and clinical research from
outside investigators, consultants, and institutions.

     Over the past three years the Company has expended a total of $9.4 million
in research and development as follows: fiscal 1998 - $2.9 million; fiscal 1997
- $3.4 million; and fiscal 1996 - $3.1 million. Such costs represented 4.1
percent, 5.2 percent, and 4.8 percent of revenues, respectively, in each period.

GOVERNMENT REGULATION 
     The medical products manufactured and marketed by the Company are subject
to the Federal Food, Drug and Cosmetic Act and the Medical Device Amendments of
1976 (collectively, the "FDCA"). These laws give the United States Food and Drug
Administration ("FDA") extensive regulatory authority over medical products
developed, manufactured or marketed by the Company in the United States. The
FDCA requires the Company to register with the FDA, provide updated device
listings and submit a premarket notification to FDA when (i) a device is being
introduced into the market for the first time; (ii) the manufacturer makes a
significant change or modification to an already marketed device that could
affect safety or effectiveness; or (iii) there is a major change or modification
in the intended use of the device. The FDCA also requires that the Company
submit a premarket approval application for devices that are life supporting or
sustaining, or present a potential unreasonable risk of injury or illness. In
addition, the FDCA subjects the Company to Quality System Regulations ("QSR")
under which the FDA conducts periodic inspections to verify compliance. Further,
the QSR's impose certain requirements regarding manufacturing procedures,
distribution, advertising, labeling, and record keeping. The FDA also has the
power to order suspension of manufacturing or marketing or to recall products
that are not in compliance with law.

     Before introducing its products into the market, the Company must comply
with the premarket approval and/or notification provisions of the FDCA. Data
regarding the product's safety and effectiveness must be submitted to the FDA.
In some instances, clinical studies may be necessary to obtain this data. In
some cases, before commencing clinical trials, the Company must apply for an
Investigational Device Exemption ("IDE"). Under an approved IDE, a device is
exempt from certain FDA provisions including misbranding, registration, listing,
premarket approval, records and reports and good manufacturing practices, thus
enabling the applicant company to test a device clinically. Before an IDE is
granted, sufficient nonclinical data must be submitted to demonstrate that the
device is safe and effective. Significant time and expense may be associated
with the collection of both clinical and nonclinical data, and there are no
assurances, that the necessary FDA premarket approvals or clearances will be
granted. 

     In January 1995, the Company received ISO 9001 certification for its
Minneapolis, Minnesota facilities. This certification allows the Company to
self-certify its products for sale throughout the European community. In order
to self-certify, the Company must maintain certain records and files which are
reviewed by a "notified body" organization on an annual basis. Many of the
Company's products now display the CE mark. 

     Certain products of the Company are also subject to registration with the
Environmental Protection Agency ("EPA"). The registration process generally
entails the collection and submission of data to support the products' label
claims. Considerable time and cost may be involved with the collection of data
to support these submissions, and there are no assurances that the necessary EPA
approvals will be granted for the Company's new products. 


                                          9
<PAGE>

     Compliance with federal, state, and local provisions regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, do not have a material adverse effect upon the
capital expenditures, earnings, and competitive position of the Company.

EMPLOYEES 
     As of March 31, 1998, the Company employed 378 full-time and 8 part-time
employees, including 243 persons in manufacturing operations.  An additional 34
people were contracted as temporary labor.  None of these employees are covered
by a collective bargaining agreement, and the Company believes that its employee
relations are good.

GEOGRAPHIC AREA INFORMATION 
     The major foreign markets for the Company's products are Europe and the
Pacific Rim. Sales outside the United States for the years ended March 31, 1998,
1997 and 1996 were approximately $14.6 million, $12.2 million and $10.5 million,
respectively. Sales outside the United States accounted for approximately 21.0
percent, 18.5 percent, and 16.1 percent of total sales, respectively, in each
period.
                                           
EXECUTIVE OFFICERS OF THE REGISTRANT 
     The executive officers of the Company, their ages, and the year they became
executive officers are listed below:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------
                                                                                                  FIRST ELECTED
            NAME                              POSITION WITH COMPANY                      AGE        AS OFFICER
---------------------------------------------------------------------------------------------------------------
<S>                         <C>                                                          <C>      <C>
Thomas J. McGoldrick        President and  Chief Executive Officer                        57           1985
Daniel H. Schyma            Vice President--Sales and Marketing                           56           1992
Richard P. Goldhaber        Vice President--Research and Development                      54           1993
Barbara A. Wrigley          Vice President, General Counsel and Secretary                 47           1994
Robert W. Johnson           Vice President--Regulatory Affairs and Quality Assurance      42           1994
Paul E. Helms               Senior Vice President--Operations                             52           1996
Jules L. Fisher             Vice President and Chief Financial Officer                    44           1996
---------------------------------------------------------------------------------------------------------------
</TABLE>
 

     Executive officers are elected annually by the Board of Directors and serve
until their successors are duly elected and qualified. 

     Mr. McGoldrick served as Vice President Corporate Development from March
1985 to June 1995, as Executive Vice President from June 1995 through March
1997, and as President and Chief Executive Officer from March 1998 to date. 

     Mr. Schyma served as Vice President Cardiopulmonary from January 1992 to
June 1994, as Vice President International from June 1994 through March 1997,
and as Vice President Sales and Marketing from March 1997 to date.

     Ms. Wrigley served as Intellectual Property Counsel from September 1991 to
August 1993, as General Counsel from August 1993 to March 1994, and as Vice
President General Counsel and Secretary from March 1994 to date.

     Mr. Goldhaber joined the Company in November 1993 as Vice President
Research and Development, having previously been employed by Baxter Healthcare
Corporation from 1965 to 1993 in various manufacturing and engineering
capacities, including Vice President, New Product Development for Baxter's
European operations. 

     Mr. Johnson served as Director, Quality Assurance from August 1992 through
April 1994, as Vice President Quality Assurance from April 1994 to March 1997,
and as Vice President Regulatory Affairs and Quality Assurance from March 1997
to date.


                                          10
<PAGE>

     Mr. Helms joined the Company in August 1996 as Senior Vice President
Operations, having previously been employed by Cabot Medical Corporation from
1988 to 1991 as Vice President of Manufacturing, and from 1991 to 1996 as Vice
President of Operations.

     Mr. Fisher joined the Company in November 1996 as Vice President and Chief
Financial Officer, having previously been employed by U.S. Surgical Corporation
as Director, Operations Accounting from 1991 to 1996. From 1987 to 1991, Mr.
Fisher served in various financial positions for the Pharmaceutical Group of
Bristol-Myers Squibb Company.

ITEM 2.   PROPERTIES 
     UNITED STATES
     The Company owns two facilities located on adjacent sites, comprising a
total of 14 acres of land in Plymouth, a suburb of Minneapolis, Minnesota. One
facility is a 65,000 square-foot building, occupied by the Company since 1977,
which is used for manufacturing and warehousing operations. The second facility
is a 110,000 square-foot building, purchased in 1990, that houses the Company's
executive, administrative and sales staffs, and research operations. This
building is also used for manufacturing and warehousing. 

     The Company also owns two parcels of undeveloped land adjacent to these
facilities comprising a total of 7.8 acres and plans to sell the largest parcel
which is 5.5 acres in fiscal 1999.

     EUROPE
     The Company owns a 21,000 square-foot building on a 4.4 acre site in
Heerlen, The Netherlands. Occupancy commenced in April 1995. The facility serves
as the Company's European headquarters and is being used as a sales office and
warehouse.  In fiscal 1998 the Company also began manufacturing activities at
the Heerlen location.

     The Company believes its facilities are in good condition, being utilized
for their intended purposes, and have sufficient capacity to meet its reasonably
anticipated needs.

ITEM 3.  LEGAL PROCEEDINGS 
     The Company is not aware of any pending or threatened legal proceedings
which it regards as likely to have a material adverse effect on its business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 
     There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year ended March 31, 1998.

                                      PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
          STOCKHOLDER MATTERS
The Company's common stock is traded on the NASDAQ National Market System under
the symbol "MNTX". The prices below are the high and low transaction prices as
reported in each quarter of the last two fiscal years. 

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
YEARS ENDED MARCH 31               1998                     1997
--------------------------------------------------------------------------------
Fiscal Quarter Prices      High          Low         High         Low
<S>                      <C>          <C>          <C>          <C>
First Quarter            $   12.875   $    9.000   $   21.500   $   10.000

Second Quarter           $   12.250   $   10.250   $   15.000   $    9.500

Third Quarter            $   13.250   $   11.000   $   13.750   $   10.375

Fourth Quarter           $   14.250   $   11.938   $   12.125   $    9.625
</TABLE>

     As of June 20, 1998, the Company had approximately 465 shareholders of
record.

     The Company paid annual cash dividends of $0.10 per share on its Common
Stock in September 1996 and September 1997. The Board of Directors will consider
annually the payment of dividends. However, any future 


                                          11
<PAGE>

determination as to payment of cash dividends will depend upon the financial
condition and results of operations of the Company and such other factors that
are deemed relevant by the Board of Directors. 

Item 6. SELECTED FINANCIAL DATA 
    (in thousands of dollars except per share amounts)
 

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31                                   1998        1997        1996        1995        1994       1993  
------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>         <C>         <C>         <C>         <C>         <C>      
STATEMENT OF EARNINGS DATA
Net sales - product                                  $69,381     $65,907     $64,769     $55,883     $47,488     $44,017
Contract revenues                                        -           -           -           300         300         300
                                                   ---------   ---------    --------   ---------   ---------   ---------
Total revenues                                        69,381      65,907      64,769      56,183      47,788      44,317
Cost of product sales                                 39,818      38,493      38,107      31,775      26,620      24,800
Research and development expenses                      2,862       3,424       3,123       3,133       2,893       2,405
Selling, general and administrative expenses          19,154      17,404      15,320      11,940      10,053       9,553
Amortization of intangibles                              752         856         763         358         198         141
Restructuring and other unusual items                    -         9,569         936         -           -           -  
                                                   ---------   ---------    --------   ---------   ---------   ---------
Earnings (loss) from operations                        6,795      (3,839)      6,520       8,977       8,024       7,418
Other income (expense), net                               33        (499)         42         237         (44)        115
                                                   ---------   ---------    --------   ---------   ---------   ---------
Earnings (loss) before income taxes                    6,828      (4,338)      6,562       9,214       7,980       7,533
Provision (benefit) for income taxes                   2,253        (700)      2,394       3,294       3,045       2,814
Minority interest                                       (110)       (266)       (140)        -           -           -  
                                                   ---------   ---------    --------   ---------   ---------   ---------
Net earnings (loss)                                  $ 4,685    $ (3,372)    $ 4,308     $ 5,920     $ 4,935     $ 4,719
                                                   ---------   ---------    --------   ---------   ---------   ---------
                                                   ---------   ---------    --------   ---------   ---------   ---------

Basic earnings per share                             $  0.69      ($0.50)      $0.66       $0.95       $0.81       $0.79
Basic weighted average common shares                   6,746       6,722       6,513       6,235       6,094       5,957

BALANCE SHEET DATA
Cash, cash equivalents and                           $ 7,236     $ 3,622     $ 5,219     $ 4,487     $ 7,699     $ 6,250
  marketable securities
Working capital                                       26,080      20,104      22,128      18,106      17,875      13,653
Property and equipment, net                           14,191      15,647      17,323      15,632      12,900      12,039
Total assets                                          51,550      48,594      50,047      41,274      36,030      31,352
Long term debt                                           -           -           -           -         1,906       1,943
Stockholders' equity                                  41,833      37,435      41,210      35,052      28,704      23,067
Book value per common shares                           $6.20       $5.61       $6.21       $5.49       $4.66       $3.80

GENERAL DATA AND RATIOS
Current ratio                                            4.1         3.0         4.2         4.6         5.4         3.7
Gross margin on net product sales                       42.6%       41.6%       41.2%       43.1%       43.9%       43.7%
Net earnings (loss) as a % of  revenues                  6.8%       (5.1%)       6.7%       10.5%       10.3%       10.6%
Return on average stockholders' equity                  11.8%       (8.6%)      11.3%       18.6%       19.1%       22.4%
</TABLE>

 

                                          12
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
        CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS 
     REVENUES
     Revenues in fiscal year 1998 increased by $3.5 million, or 5.3 percent over
fiscal 1997 revenues due primarily to increased unit volumes in dialysis and
endoscopy reprocessing products.  Sales of dialysis reprocessing products
increased 20.2 percent and endoscopy products grew 133.0 percent for the year. 
Industrial filtration and separation revenues increased by 25.9 percent for the
year.

     Revenues from cardiosurgery products declined 18.6 percent during fiscal
1998 from the prior year.  Sales of the first generation oxygenator to Bard
represented less than 1 percent of sales in fiscal 1998 compared to 10.9 percent
in fiscal 1997. (The Company's oxygenator supply contract with Bard expired June
30, 1997.)   Total oxygenator sales, first generation and second generation
(Biocor-TM- 200 High Performance Oxygenator) combined, declined to 5.4 percent
of Company sales in fiscal 1998 from 11.9 percent in fiscal 1997.  Sales of
hemoconcentrators and hemofilters increased 10.4 percent as a result of
continued growth in unit volumes.

     In fiscal 1997 total revenues increased by $1.1 million, or 1.8 percent,
compared to fiscal 1996.  The increase was primarily attributable to unit volume
growth in dialysis reprocessing products and dialysis supplies and devices. 
Cardiosurgery revenues in fiscal 1997 declined 23.9 percent from fiscal 1996 due
to the phase out of the first generation oxygenator supply contract with Bard.

     Foreign exchange rate movements had an unfavorable year-to-year impact on
international sales of $1.7 million in fiscal 1998 and $.6 million in fiscal
1997, respectively.  Foreign exchange rate movements had a $.4 million favorable
impact on international sales in fiscal 1996.  Sales have grown at a compound
annual rate of  7.5 percent over the last three years.  The following table is a
summary of sales and percent of total Company sales by product group over the
last three fiscal years:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31
(IN THOUSANDS OF DOLLARS)           1998                    1997                    1996
-----------------------------------------------------------------------------------------------------
<S>                              <C>           <C>       <C>           <C>       <C>          <C>   
Dialysis supplies and devices    $21,247        30.6%    $21,391        32.5%    $18,648        28.8%

Reprocessing products             31,333        45.2%     25,175        38.2%     22,220        34.3%

Cardiosurgery products            13,801        19.9%     16,959        25.7%     22,298        34.4%

Water filtration products          3,000         4.3%      2,382         3.6%      1,603         2.5%
                                 --------------------------------------------------------------------

Total Company Sales              $69,381       100.0%    $65,907       100.0%    $64,769       100.0%
                                 -------       -----     -------       -----     -------       -----
                                 -------       -----     -------       -----     -------       -----
</TABLE>
 

     GROSS MARGIN AND OPERATING EXPENSES
     Following is a summary of gross margins and key operating expenses as a
percentage of sales:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
YEAR ENDED MARCH 31
(IN THOUSANDS OF DOLLARS)                1998           1997           1996
--------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C> 
Cost of product sales                    57.4%          58.4%          58.8%
Gross margin                             42.6           41.6           41.2
Research and development                  4.1            5.2            4.8
Selling, general, and administrative     27.6           26.4           23.7
</TABLE>

     Gross margin as a percentage of sales increased in fiscal 1998 to 42.6
percent compared to 41.6 percent in fiscal 1997.  The increase in gross margin
in fiscal 1998 is attributable to favorable product mix combined with product
cost reductions.  In fiscal 1997, gross margin as a percentage of product sales
increased to 41.6 percent compared to 41.2 percent in fiscal 1997.  The increase
in fiscal 1997 gross margin was due primarily to favorable product mix.


                                          13
<PAGE>

     Research and development expenses in fiscal 1998 were $2.9 million, or 4.1
percent of sales, compared to $3.4 million, or 5.2 percent of sales, in fiscal
1997, and $3.1 million, or 4.8 percent of sales, in fiscal 1996.  The Company
intends to continue investing a substantial portion of its sales revenue in new
product development.  The Company expects that total research and development
expenses in fiscal 1999 will approximate 5.0 to 5.5 percent of sales.

     Selling, general, and administrative expenses as a percentage of total
sales were 27.6 percent in fiscal 1998, compared to 26.4 percent in fiscal 1997,
and 23.6 percent in fiscal 1996.  The higher spending in fiscal 1998 was
primarily to support the BIOCOR-TM-  200 IHS Oxygenator launch.  Expenses
increased in fiscal 1997 and fiscal 1996 due to expanded sales staff and
marketing efforts in international markets.  Additionally, expenses in the
United States cardiosurgery business increased due to transitioning the
oxygenator product line to direct distribution from an OEM supply structure
under its supply contract with Bard.

     RESTRUCTURING AND UNUSUAL ITEMS
     The Company recorded pre-tax charges for restructuring and unusual items of
$9.6 million in the fourth quarter of fiscal 1997. These charges reflect the
discontinuation of the Primus-Registered Trademark- dialyzer and
Cathetron-Registered Trademark- catheter reprocessing system combined with
expenses associated with the departure of the Company's founder, Dr. Louis C.
Cosentino, as Chairman, Chief Executive Officer, and President.  Management
determined that the dialyzer product line does not fit within the long-term
strategy of the Company due to the competitive nature of the business and high
sales volumes required to be profitable. Key aspects of the dialyzer related
charges were fixed asset, inventory, and intellectual property write-downs to
estimated net realizable values. 

     Accrued liabilities at March 31, 1998 and 1997 include approximately $.6
million and $1.1 million,  of restructuring reserves which relate primarily to
remaining employee costs.

     INCOME TAXES 
     The income tax expense for fiscal 1998 was approximately $2.2 million which
is an effective tax rate of 33.0 percent, compared to an income tax benefit of
$.7 million or an effective tax rate of 16.1 percent in fiscal 1997.  In fiscal
1996, the Company's effective tax rate was 36.5 percent.

     The Company's tax provision in fiscal years 1998 and 1996 reflect a benefit
for net operating losses in its European subsidiary.  The fiscal 1997 tax
expense does not recognize a benefit for these operating losses.  The Company
expects the effective tax rate for fiscal 1999 to be between 33.0 percent and
35.0 percent.

     NET EARNINGS 
     The Company reported net earnings of $4.7 million, or $.69 per share (basic
and diluted), compared to a net loss of $(3.4) million, or $(.50) per share
(basic and diluted) in fiscal 1997.  The net loss in fiscal 1997 was due to
restructuring charges related primarily to the discontinuation of the
Primus-Registered Trademark- dialyzer and Cathetron-Registered Trademark-
catheter reprocessing system.  Prior to the restructuring charge, the Company
recorded net income of $3.0 million or $.44 per share, in fiscal 1997.  The
Company's fiscal 1998 net earnings reflect a 60.3 percent increase over fiscal
1997 excluding the restructuring charge.

     In fiscal 1996, the Company recorded net earnings of $4.3 million, or $.66
and .62 per basic and diluted shares, respectively. 

     INFLATION
     Management believes inflation has not had a material effect on the
Company's results of operations or on its financial condition. 


                                          14
<PAGE>

     LIQUIDITY AND CAPITAL RESOURCES 
     The Company continues to maintain a strong balance sheet, as evidenced by
the following liquidity trends:

<TABLE>
<CAPTION>
(in thousands of dollars)
--------------------------------------------------------------------------------
MARCH 31                                               1998      1997      1996
--------------------------------------------------------------------------------
<S>                                                  <C>       <C>       <C>   
Cash, cash equivalents and marketable securities     $7,236    $3,622    $5,219
Working capital                                      26,080    20,104    22,128
Stockholders' equity                                 41,833    37,435    41,210
Cash flow from operations                             8,646       970     5,312
Cash dividends paid                                     674       667       652
</TABLE>
 

     The increase in cash, working capital, current ratio, and cash flow from
operations in fiscal 1998 is primarily attributable to the improvement in net
earnings.  The Company's current ratio at March 31, 1998 was 4.1 compared to 3.0
at March 31, 1997.

     A total of  $1.3 million was expended for plant improvements and equipment
in fiscal 1998, compared to $5.2 million and $4.3 million in fiscal 1997 and
1996, respectively.  The Company plans to invest between $3.5 million and $4.0
million in capital equipment in fiscal 1999.  During the first quarter of fiscal
1996, the Company acquired a group of hollow fiber product lines for $1.4
million in cash.

     During the past three years, proceeds from stock options exercised provided
a total of $3.0 million in equity capital as follows: fiscal 1998 -- $.5
million; fiscal 1997 -- $.5 million; and fiscal 1996 -- $2.0 million.

     In April 1998, the company signed a finite risk insurance policy to cover
potential future product liability and legal defense exposures.  A payment of 
$1.0 million was made in April 1998 and future payments of $1.4 million will be
made through April 2001.  In the event that these exposures do not materialize,
the Company will recover a portion of these premiums. 

     The Company believes that its strong financial condition at March 31, 1998,
along with anticipated cash flows from operations, will be sufficient to meet
its working capital and capital equipment needs in fiscal 1999.  

     YEAR 2000 COMPLIANCE
     The Year 2000 problem is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's programs and products that have time sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000, which could result
in system failures.  The Company has reviewed its critical information systems
for year 2000 compliance and has initiated plans to correct any deficiencies in
a timely manner.  As a result of this review and action plan, the Company
believes the cost of such corrective actions will not be material to the
Company's operations or financial position.

     FOREIGN CURRENCY TRANSACTIONS
     Substantially all of the Company's United States-based export sales are
invoiced and paid in United States dollars. The transactions of the Company's
Netherlands-based subsidiary are invoiced and paid in several currencies,
including Dutch guilders, German marks and United States dollars. The Company
does not currently hedge its foreign currency transactions. Accordingly, the
Company is subject to risks associated with fluctuations in currency exchange
rates.

     RISK FACTORS
     Certain statements made in this Annual Report on Form 10-K, are 
forward-looking statements that involve risks and uncertainties, and actual 
results may differ. Factors that could cause actual results to differ include 
those identified below.

     COMPETITION; UNCERTAINTY OF TECHNOLOGICAL CHANGE.  The markets in which the
Company competes are highly competitive and are characterized by innovation and
technological change. The Company currently competes in each area of the
Company's business with a number of companies that have capital resources,
research and development staffs, facilities, experience in conducting clinical
trials and obtaining regulatory approvals, and 


                                          15
<PAGE>

experience in manufacturing and marketing medical supplies and devices that are
significantly greater than those of the Company. In addition, there are several
companies developing new technologies that may reduce the demand for the
Company's existing products, such as minimally invasive techniques in open-heart
surgery, which may not require the use of oxygenators. There can be no assurance
that the Company's competitors will not succeed in developing technologies and
products that are more effective than any that are being developed by the
Company or that would render the Company's products obsolete or noncompetitive.
In addition, certain of the Company's competitors may achieve patent protection,
regulatory approval or product commercialization that would limit the Company's
ability to compete. The Company's inability to compete successfully could have a
material adverse effect on its business, financial condition, and results of
operations.

     RELIANCE ON PATENTS AND PROPRIETARY TECHNOLOGY.  The Company relies heavily
on proprietary technology, which it protects primarily through licensing
arrangements, patents, trade secrets, and proprietary know-how. The Company
holds patents and has pending patent applications that cover certain aspects of
its technology. There can be no assurance that any pending or future patent
applications will be granted or that any current or future patents, regardless
of whether the Company is an owner or a licensee of such patent, will not be
challenged, rendered unenforceable, invalidated or circumvented or that the
rights granted thereunder or under its licensing agreements will provide a
competitive advantage to the Company. There can also be no assurance that the
Company's trade secrets or non-disclosure agreements will provide meaningful
protection of the Company's proprietary information.  Furthermore, there can
also be no assurance that others will not independently develop similar
technologies or duplicate any technology developed by the Company or that the
Company's technology will not infringe upon patents or other rights owned by
others. The Company's inability to maintain its proprietary rights would have a
material adverse effect on its business, financial condition, and results of
operations.

     LACK OF MARKET ACCEPTANCE. The Company's principal products are based upon
innovative medical concepts.  The Company believes that market acceptance of
these products will depend, in part, on the Company's ability to convince the
medical community of the safety, efficacy, convenience, and cost effectiveness
of these products as compared to existing competitive products. Market
acceptance will further depend on the Company's ability to gain acceptance by
the medical community of the use of its products. There can be no assurance that
medical professionals will readily adopt new products or approaches,
particularly when certain competitors of the Company provide a more complete
product mix than that offered by the Company.  The Company's inability to gain
market acceptance for its recently introduced Biocor-TM- 200 oxygenator and
other products would have a material adverse effect on the Company's business,
financial condition, and results of operations.

     LITIGATION; POTENTIAL FOR ADVERSE OUTCOMES. The medical supply and device
market is characterized by frequent and substantial intellectual property
litigation. Intellectual property litigation is complex and expensive, and the
outcome of such litigation is difficult to predict. A finding against the
Company could have a material adverse effect on the Company's business,
financial condition, and results of operations. 

     GOVERNMENT REGULATION. In the United States, the United States Food and
Drug Administration (the "FDA") regulates the sale of medical supplies and
devices as well as manufacturing procedures, labeling, and recordkeeping with
respect to such products. The process of obtaining marketing clearances and
approvals from the FDA for new products can be time consuming and expensive, and
there is no assurance that such clearances or approvals will be granted or that
FDA review will not involve delays that would adversely affect the Company's
ability to commercialize its products. The FDA requires that a new product
secure either a 510(k) clearance or an approved PMA, depending upon its
classification, prior to marketing in the United States. The Company's products
are currently sold under a 510(k) clearance, which is available for products
demonstrated to be substantially equivalent to products that are already
commercially available. The 501(k) clearance process typically takes several
months and may require the submission of supporting laboratory or clinical data.
No assurance can be given that the Company will receive FDA marketing approval
for new products on a timely basis, or at all. Even if regulatory approvals to
market a product are obtained from the FDA, such approvals may entail
limitations on the indicated uses of the product. Product approvals by the FDA
can also be withdrawn due to failure to comply with regulatory requirements or
the occurrence of unforeseen problems following initial approval. The FDA could
also limit or prevent the manufacture or distribution of the Company's products
and has the power to require the recall of such products. A product recall,
whether voluntary or mandated by the FDA, would have a material adverse effect
on the Company, particularly at the early stage of market introduction. FDA
regulations depend heavily on administrative 


                                          16
<PAGE>

interpretation, and there can be no assurance that future interpretations made
by the FDA or other regulatory bodies, with possible retroactive effect, will
not adversely affect the Company.

     The FDA, various state agencies, and foreign regulatory agencies inspect
the Company from time to time to determine whether the Company is in compliance
with various regulations relating to manufacturing practices, validation,
testing, quality control and product labeling. For example, the United States
Environmental Protection Agency regulates the chemical sterilants used in the
Company's water filtration product line. A determination that the Company is in
violation of such regulations could lead to imposition of civil penalties,
including fines, product recall orders or product seizures, and, in extreme
cases, criminal sanctions.  

     International regulatory bodies often establish varying regulations
governing products standards, packaging requirements, labeling requirements,
import restrictions, tariff regulations, duties and tax requirements.  As a
result of the Company's sales in Europe, the Company was required to be
certified as ISO 9001 compliant and to receive CE mark certification. Failure to
maintain CE mark certification would have a material adverse effect on the
Company's business, financial condition, and results of operations.

     LIMITATIONS ON THIRD-PARTY REIMBURSEMENT.  The Company's ability to sell
its products depends in part on the extent to which reimbursement for the cost
of such products and related treatments are available to patients under domestic
and foreign governmental health programs, private health insurance, managed care
organizations, workers' compensation insurers, and other similar programs. Over
the past decade, the cost of health care has risen significantly, and there have
been numerous proposals by legislators, regulators, and third-party health care
payors to curb these costs. In addition, certain health care providers are
moving towards a managed care system in which such providers contract to provide
comprehensive health care for a fixed cost per person.  The Company is unable to
predict what changes will be made in the reimbursement methods utilized by
third-party health care payors. In addition, hospitals and other health care
providers have become increasingly price competitive and, in some instances,
have put pressure on medical suppliers to lower their prices.  Any reductions in
coverage or price limitations by third-party payors could have a material
adverse effect on the Company's business, financial condition, and results of
operations.

     PRODUCT LIABILITY. The medical supply and device industry has been
historically litigious and the Company faces an inherent business risk of
financial exposure to product liability claims in the event that the use of its
products results in personal injury.  Since the Company's principal products are
designed to be used in connection with medical procedures on the human body,
manufacturing errors or design defects could result in an unsafe condition,
injury or death to the patient, and could result in a recall of the Company's
products and substantial monetary damages. There can be no assurance that the
Company will not experience losses due to product liability claims in the
future. Although the Company currently maintains liability insurance, there can
be no assurance that the coverage limits of the Company's insurance policies
will be adequate. Such insurance is expensive, difficult to obtain, and may not
be available in the future on acceptable terms, or at all. Any claims against
the Company, regardless of their merit or eventual outcome, could have a
material adverse effect upon the Company's business financial condition, and
results of operations.

     ACQUISITION OF CUSTOMERS BY COMPETITORS OF THE COMPANY. A significant
percentage of dialysis treatment centers nationwide are owned by competitors of
the Company. Accordingly, the Company may face difficulty in selling its
dialysis products to these centers. Additionally, a competitor has recently
acquired a number of companies that provide contract perfusion services to
hospitals.  Although the Company believes that it is too early to assess the
long-term effects of these acquisitions on its business, the Company may face
difficulty in selling its cardiosurgery products to perfusionists employed by
these companies or to hospitals or clinics that contract with them. These
acquisitions (or other acquisitions by the Company's competitors) could have a
material adverse effect on the Company's business, financial condition, and
results of operations.

     DEPENDENCE ON DISTRIBUTOR SALES. Sales to distributors constitute a
significant portion of the Company's business both in the U.S. and foreign
markets. There can be no assurance that the Company will be able to maintain its
relationship with distributors, or, if these relationships terminate, that new
distributors will be found. The loss of a significant distributor could have a
material adverse effect on the Company's business, financial condition, and
results of operations if a new distributor (or other suitable sales
organization) could not be found on a timely basis.

     INTERRUPTION IN SOURCES OF SUPPLY.  The fiber used in the Company's
oxygenators is purchased from a single source. If this source of supply becomes
unavailable, then there can be no assurance that the Company would be 


                                          17
<PAGE>

able to find an acceptable substitute supplier. In addition, high demand for
polycarbonate products by various industries has at times caused temporary
shortages of their supply. Any significant interruption in the supply of these
products could have a material adverse effect on the Company's business,
financial condition, and results of operations.

     ENVIRONMENTAL COMPLIANCE. In the ordinary course of its manufacturing
process, the Company uses various chemical solvents and other regulated
substances. Although the Company is not aware of any claim involving violation
of environmental or occupational health and safety laws or regulations, there
can be no assurance that such a claim may not arise in the future, which could
have a material adverse effect on the Company's business, financial condition,
and results of operations.

     CURRENCY RISK. Approximately 21 percent of the Company's business is
transacted in foreign markets. Long-term changes or short-term fluctuations in
currency exchange rates could have a material adverse effect on the Company's
business, financial condition, and results of operations.

     DEPENDENCE ON SIGNIFICANT CUSTOMERS. The Company's five largest customers
in fiscal 1998 accounted for 24.9 percent of its total sales. The loss of one or
more of these customers could have a material adverse effect on the Company's
business, financial condition, and results of operations. The Company's
oxygenator supply contract with Bard ended June 30, 1997. Although the Company
plans to supplant the lost revenues from Bard under this contract with sales of
its recently introduced Biocor-TM- 200 oxygenator, there can be no assurance
that these plans will be realized.

     DEPENDENCE ON KEY PERSONNEL.  The Company's success depends in large part
on its ability to attract and retain highly qualified scientific, technical,
management, and marketing personnel. Competition for such personnel is intense
and there can be no assurance that the Company will be able to attract and
retain the personnel necessary for the development and operation of its
business.  The loss of the services of key personnel could have a material
adverse effect on the Company's business, financial condition, and results of
operations. 

     POSSIBLE VOLATILITY OF SHARE PRICE. Market prices for securities of medical
technology companies are highly volatile and the trading price of the Company's
Common Stock could be subject to significant fluctuations in response to
quarterly variations in operating results, announcements of technological
innovations by the Company or its competitors, government regulation, and other
events or factors, including the various risk actors discussed herein. In
addition, market prices of securities of medical technology companies have from
time to time experienced extreme price and volume fluctuations, which may be
unrelated to the operating performance of particular companies. These broad
market fluctuations may materially adversely affect the market price of the
Company's Common Stock.

     ANTI-TAKEOVER CONSIDERATIONS.  The Board of Directors of the Company has
the authority, without any action by the shareholders, to fix the rights and
preferences of any shares of the Company's Preferred Stock to be issued from
time to time. In addition, as a Minnesota corporation, the Company is subject to
certain anti-takeover provisions of the Minnesota Business Corporation Act (the
"MBCA"). The authority of the Board with regard to the Preferred Stock and the
provisions of the MBCA could have the effect of delaying, deferring or
preventing a change in control of the Company, may discourage bids for the
Company's Common Stock at a premium over the then prevailing market price of the
Common Stock, and may adversely effect the market price of, and the voting and
other rights of the holders of, Common Stock.

     VOLATILITY OF GLOBAL MARKETS.  The Company and its subsidiary operate in a
global market.  Global operations are subject to risks, including political and
economic instability, general economic conditions, imposition of government
controls, fluctuations of exchange rates, the need to comply with a wide variety
of foreign and United States export laws, trade restrictions and the greater
difficulty of administering business overseas.  Although substantially all of
the Company's direct international sales are denominated in United States
dollars, both direct sales by the Company and sales through its affiliated
international distributors may be affected by these factors and thus may
adversely affect the operations and financial results of the Company.

     YEAR 2000 ISSUES.  Certain of the Company's information systems and
products may require updating to continue to function properly beyond 1999.  The
Company believes that adequate resources have been allocated for this purpose
and does not expect to incur significant expenditures to address this issue. 
However, there can be no assurance that the Company will identify all Year 2000
compliance issues in its information systems and products in 


                                          18
<PAGE>

advance of their occurrence or that the Company will be able to remedy
successfully any problems that are discovered.  The expenses of the Company's
efforts to address such problems, or the expenses or liabilities to which the
Company may become subject as a result of such problems, could have a material
adverse effect on the Company's business, financial condition, and results of
operations,  In addition, the revenue stream and financial stability of existing
customers may be adversely impacted by Year 2000 compliance problems, which
could cause fluctuations in the Company's revenue and operating results.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 
     The Financial Statements and Reports of Independent Certified Public
Accountants are contained on pages 21 through 32 of this report.

     QUARTERLY FINANCIAL DATA 
     Quarterly financial data has not been submitted because the Company has
less than 800 shareholders of record.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
        FINANCIAL DISCLOSURE 
     None

                                     PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 
     The information required under this Item with respect to directors will be
included under the heading "Election of Directors" in the Company's definitive
Proxy Statement for the Annual Meeting of Shareholders to be held August 26,
1998, and is incorporated herein by reference.

     The information required under this item with respect to directors,
executive officers and any persons who are beneficial owners of more than ten
percent of any class of equity securities of the Company will be included under
the heading "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held on August 26, 1998, and is incorporated herein by reference.

     Pursuant to Instruction 3 to Item 401(b) of Regulation S-K, information 
as to executive officers of the Company is set forth in Part I of this Form 
10-K under the caption "Executive Officers of the Registrant".

ITEM 11. EXECUTIVE COMPENSATION 
     The information required under this Item will be included under the heading
"Executive Compensation and Other Information" in the Company's definitive Proxy
Statement for the Annual Meeting of Shareholders to be held August 26, 1998, and
is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
     The information required under this Item will be included under the heading
"Security Ownership of Certain Beneficial Owners and Management" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held August 26, 1998, and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 
     None

(THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK.)


                                          19
<PAGE>
PART IV 

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)  DOCUMENTS FILED AS PART OF REPORT

1    Financial Statements
     The following consolidated financial statements of the Company and its
     subsidiaries are filed as part of this Form 10-K:
        (i)    Consolidated Balance Sheets for the years ended March 31, 1998
               and 1997
       (ii)    Consolidated Statements of Earnings three years ended March 31,
               1998, 1997 and 1996
      (iii)    Consolidated Statements of Stockholder's Equity three years ended
               March 31, 1998, 1997, and 1996
       (iv)    Consolidated Statements of Cash Flows three years ended March 31,
               1998, 1997 and 1996
        (v)    Notes to Consolidated Financial Statements
       (vi)    Report of Independent Certified Public Accountants

2    Schedules filed as part of this Form 10-K: none
     All schedules are omitted because they are not applicable to the Company or
     because the information required is included in the consolidated financial
     statements and notes thereto.
3    Exhibits included herein:
     3(a)   Articles of Incorporation, as amended(1)
     3(b)   Amendment of By-Laws in March 1986(2)
     3(c)   Restated By-Laws(2)
     4      Form of Specimen Common Stock Certificate(3)
     10(a)  1989 Stock Plan, as amended(4)*
     10(b)  Amendment to 1989 Stock Plan Effective February 25, 1998*
     10(c)  Form of Employment Agreement dated September 1, 1996 with certain
            officers of the Company(4)*
     10(d)  Separation and Consulting Agreement with Dr. Louis C. Cosentino
            dated April 1, 1997(4)*
     10(e)  1990 Employee Stock Purchase Plan, as amended June 1, 1993(3)
     10(f)  Supplemental Executive Retirement Plan effective April 1, 1996(5)*
     10(g)  Amendment to Supplemental Executive Retirement Plan effective April
            1, 1998*
     10(h)  Director Emeritus Consulting Plan(6), as amended(7)*
     23     Consent of Price Waterhouse LLP
     27     Financial Data Schedule
(b)  REPORTS ON FORM 8-K
     None


-----------------------
*Management contract, compensatory plan or arrangement filed pursuant to Rule
601(b)(10)(iii)(A) of Regulation S-K under the Securities Exchange Act of 1934.

(1) Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year ended March 31, 1988, File No.
0-11278.
(2) Incorporated by reference to the specified exhibit filed as part of the
Company's report on Form 8-K on March 12, 1986, File No. 0-11278.
(3) Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year ended March 31, 1993, File No.
0-11278.
(4) Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year-ended March 31, 1997, File No.
0-11278.
(5)  Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year ended March 31, 1995, File No.
0-11278.
(6) Incorporated by reference to the specified exhibit filed as part of the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995,
File No. 0-11278.
(7) Incorporated by reference to the specified exhibit filed as part of the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, File No. 0-11278.


                                          20
<PAGE>

                                MINNTECH CORPORATION
                             CONSOLIDATED BALANCE SHEET
                             (in thousands of dollars)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
MARCH 31                                                                             1998           1997 
---------------------------------------------------------------------------------------------------------
<S>                                                                                <C>            <C>    
ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                                       $ 6,805        $ 3,222
   Marketable securities                                                               431            400
   Accounts receivable, less allowance for
    doubtful accounts of $351 and $409                                              14,571         11,556
   Inventories                                                                      11,196         11,833
   Prepaid expenses and other current assets                                         1,623          2,972
                                                                                 ---------      ---------
        TOTAL CURRENT ASSETS                                                        34,626         29,983
                                                                                 ---------      ---------

PROPERTY AND EQUIPMENT, AT COST
   Land, buildings and improvements                                                  9,533          9,647
   Machinery and equipment                                                          19,911         19,809
   Office and sales equipment                                                        3,863          3,635
                                                                                 ---------      ---------
                                                                                    33,307         33,091
   Less accumulated depreciation                                                   (19,116)       (17,444)
                                                                                 ---------      ---------
     NET PROPERTY AND EQUIPMENT                                                     14,191         15,647

OTHER ASSETS
   Patent costs, net of accumulated amortization of $1,523 and $1,133                  780            711
   Goodwill net of accumulated amortization of $1,412 and $1,024                       888          1,328
   Other                                                                             1,065            925
                                                                                 ---------      ---------
TOTAL ASSETS                                                                       $51,550        $48,594
                                                                                 ---------      ---------
                                                                                 ---------      ---------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Term loan                                                                       $   225        $ 3,241
   Accounts payable                                                                  3,893          3,921
   Accrued compensation                                                              3,010          1,831
   Other accrued expenses                                                            1,109            886
   Income taxes payable                                                                309            -  
                                                                                 ---------      ---------
      TOTAL CURRENT LIABILITIES                                                      8,546          9,879
                                                                                 ---------      ---------

DEFERRED INCOME TAXES                                                                  454            146
DEFERRED COMPENSATION                                                                  783          1,090
MINORITY INTEREST                                                                      (66)            44
                                                                                 ---------      ---------
STOCKHOLDERS' EQUITY
   Preferred stock - 5,000,000 shares authorized, none outstanding
   Common Stock - $.05 par value; 10,000,000 shares authorized 6,771,736
     and 6,675,713 shares issued and outstanding                                       339            334
   Additional paid-in-capital                                                       12,657         12,143
   Retained earnings                                                                28,837         24,958
                                                                                 ---------      ---------
TOTAL STOCKHOLDERS' EQUITY                                                          41,833         37,435
                                                                                 ---------      ---------
                                                                                 ---------      ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
                                                                                   $51,550        $48,594
                                                                                 ---------      ---------
                                                                                 ---------      ---------
</TABLE>

The accompanying notes are an integral part of these statements.


                                          21
<PAGE>

                                MINNTECH CORPORATION
                         CONSOLIDATED STATEMENT OF EARNINGS
                (in thousands of dollars, except per share amounts)
                                           
                                                                     
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31                                    1998           1997           1996
------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>           <C>     
REVENUES
   Net sales - products                              $69,381        $65,907        $64,769
                                                   ---------      ---------      ---------
     Total revenues                                   69,381         65,907         64,769
                                                   ---------      ---------      ---------

OPERATING COSTS AND EXPENSES
   Cost of product sales                              39,818         38,493         38,107
   Research and development                            2,862          3,424          3,123
   Selling, general and administrative                19,154         17,404         15,320
   Amortization of intangible assets                     752            856            763
   Restructuring and other unusual items                 -            9,569            936
                                                   ---------      ---------      ---------
     Total operating costs and expenses               62,586         69,746         58,249
                                                   ---------      ---------      ---------

EARNINGS (LOSS) FROM OPERATIONS                        6,795         (3,839)         6,520
                                                   ---------      ---------      ---------

OTHER INCOME (EXPENSES)
   Interest expense                                      (16)          (174)            (2)
   Interest income and other, net                         49           (325)            44
                                                   ---------      ---------      ---------
                                                          33           (499)            42
                                                   ---------      ---------      ---------

EARNINGS (LOSS) BEFORE INCOME TAXES
  AND MINORITY INTEREST                                6,828         (4,338)         6,562
   Provision for income taxes                          2,253           (700)         2,394
   Minority interest                                    (110)          (266)          (140)
                                                   ---------      ---------      ---------
NET (LOSS) EARNINGS                                  $ 4,685        $(3,372)       $ 4,308
                                                   ---------      ---------      ---------
                                                   ---------      ---------      ---------

NET EARNINGS (LOSS) PER SHARE
     Basic                                           $  0.69        $ (0.50)       $  0.66
     Diluted                                         $  0.69        $ (0.50)       $  0.62
</TABLE>


The accompanying notes are an integral part of these statements.
 

                                          22
<PAGE>
 

                                MINNTECH CORPORATION
                   CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                             (in thousands of dollars)

<TABLE>
<CAPTION>
                                                       Common Stock
                                                 ----------------------------
                                                     Shares                       Additional 
                                                   Issued and                       Paid-In       Retained 
                                                   Outstanding       Amount         Capital       Earnings        Total
                                                 ------------------------------------------------------------------------
<S>                                              <C>               <C>            <C>             <C>            <C>    
BALANCES MARCH 31, 1995                            6,384,758        $   319        $ 9,124        $25,609        $35,052
Exercise of stock options, net of 40,555
   shares surrendered in payment                     250,376             13          1,966              -          1,979
Tax benefit from exercise of stock
   Options                                                 -              -            556              -            556
Dividend paid                                              -              -              -           (652)          (652)
Reduction of unrealized holding losses
   on investments                                          -              -              -             80             80
Foreign currency translation adjustment                    -              -              -           (113)          (113)
Net earnings                                               -              -              -          4,308          4,308
                                                 -----------    -----------    -----------    -----------    -----------

BALANCES MARCH 31, 1996                            6,635,134        $   332        $11,646        $29,232        $41,210
Exercise of stock options                             40,579              2            485              -            487
Tax benefit from exercise of stock
   Options                                                 -              -             12              -             12
Dividend paid                                              -              -              -           (667)          (667)
Reduction of unrealized holding losses
   on investments                                          -              -              -             52             52
Foreign currency translation adjustment                    -              -              -           (287)          (287)
Net earnings (loss)                                        -              -              -         (3,372)        (3,372)
                                                 -----------    -----------    -----------    -----------    -----------

BALANCES MARCH 31, 1997                            6,675,713        $   334        $12,143        $24,958        $37,435
Exercise of stock options, net of 8,876
   shares surrendered in payment                      96,023              5            449              -            454
Tax benefit from exercise of stock
   Options                                                 -              -             65              -             65
Dividend paid                                              -              -              -           (674)          (674)
Reduction of unrealized holding losses
   on investments                                          -              -              -              8              8
Foreign currency translation adjustment                    -              -              -           (140)          (140)
Net earnings (loss)                                        -              -              -          4,685          4,685
                                                 -----------    -----------    -----------    -----------    -----------

BALANCES MARCH 31, 1998                            6,771,736           $339        $12,657        $28,837        $41,833
                                                 -----------    -----------    -----------    -----------    -----------
                                                 -----------    -----------    -----------    -----------    -----------
</TABLE>
 

The accompanying notes are an integral part of these statements.


                                          23
<PAGE>

                                MINNTECH CORPORATION
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (in thousands of dollars)
 

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
YEARS ENDED MARCH 31                                        1998      1997      1996 
-------------------------------------------------------------------------------------
<S>                                                       <C>      <C>        <C>    
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss)                                        $4,685   ($3,372)   $4,308
   Adjustments to reconcile net earnings to net cash
    provided by operating activities
      Restructuring charges                                     -     7,781         -
      Depreciation and amortization                         3,528     4,634     3,407
      Tax benefit from stock option exercises                  65        12       556
      Foreign currency exchange (gain) loss                   110       562       159
      Deferred income taxes - current/noncurrent              760    (2,000)     (143)
      Minority interest                                      (110)     (267)     (140)
      Changes in assets and liabilities:
         Accounts receivable                               (3,116)     (723)   (1,060)
         Inventories                                          614    (3,587)   (3,659)
         Prepaid expenses                                     897       (75)      135
         Accounts payable                                     (28)   (1,154)    2,400
         Accrued expenses                                   1,402        95      (514)
         Income taxes payable                                 309      (815)      (72)
         Other                                               (470)     (121)      (65)
                                                          -------   -------   -------
           Total adjustments                                3,961     4,342     1,004
                                                          -------   -------   -------
NET CASH PROVIDED BY OPERATING ACTIVITIES                   8,646       970     5,312
                                                          -------   -------   -------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of property and equipment                     (1,335)   (5,208)   (4,335)
   Patent application costs                                  (366)     (308)     (544)
   Proceeds from sale of marketable securities                  -       743         -
   Acquisition of product lines                                 -         -    (1,402)
                                                          -------   -------   -------
NET CASH USED IN INVESTING ACTIVITIES                      (1,701)   (4,773)   (6,281)
                                                          -------   -------   -------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from note payable                                   -     4,241         -
   Payment of note payable                                 (3,000)   (1,000)
   Proceeds from exercise of stock options                    454       487     1,979
   Minority interest capital contribution                       -         -       450
   Payment of cash dividends                                 (674)     (667)     (653)
                                                          -------   -------   -------

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES        (3,220)    3,061     1,776
Effects of exchange rate changes on foreign currency
 cash balances                                               (142)     (100)      (68)
                                                          -------   -------   -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        3,583      (842)      739
Cash and cash equivalents at beginning of year              3,222     4,064     3,325
                                                          -------   -------   -------

CASH AND CASH EQUIVALENTS AT END OF YEAR                   $6,805    $3,222    $4,064
                                                          -------   -------   -------
                                                          -------   -------   -------
</TABLE>


The accompanying notes are an integral part of these statements.


                                          24
<PAGE>

                               MINNTECH CORPORATION 
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (in thousands of dollars)
                                          
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     BUSINESS DESCRIPTION
     Minntech Corporation is a leader in developing, manufacturing and marketing
medical devices, sterilants and water filtration products. The Company's
products are used in kidney dialysis, open-heart surgery, endoscopy, and in the
preparation of pure water for medical, industrial and laboratory use. 

     CONSOLIDATION POLICY
     The consolidated financial statements include the accounts of the Company,
its majority-owned subsidiary and its wholly-owned subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation.

     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 reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

     RECLASSIFICATIONS
     Certain reclassifications have been made to make the prior year financial
statements comparable with the current year's presentation.  The
reclassification had no effect on earnings or shareholder's equity as previously
reported.

     REVENUE RECOGNITION
     Sales are recognized at the time products are shipped. The Company allows
customers to return products for credit upon written authorization from the
Company.

     Contract revenues derived from development and marketing agreements are
recorded as earned based on the performance requirements of the contract. 
Cash and Cash Equivalents

     The Company considers all highly liquid temporary investments with original
maturities of three months or less to be cash  equivalents. Cash and cash
equivalents consisted of:

<TABLE>
<CAPTION>
          ------------------------------------------------------
          YEAR ENDED MARCH 31,              1998            1997
          ------------------------------------------------------
          <S>                             <C>             <C>
          Cash                             $ 1,820        $ 1,676 
          Money market mutual funds          4,985          1,546 
                                           -------        -------
          Total Cash and Equivalents        $6,805        $ 3,222 
                                           -------        -------
                                           -------        -------
</TABLE>

     A substantial portion of the Company's cash balances are held in one
financial institution.

     Money market mutual funds are stated at fair value, which approximates cost
at March 31, 1998 and 1997. 

     MARKETABLE SECURITIES
     The Company accounts for marketable securities in accordance with the
provisions of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities."

     Marketable securities consisted of investments in bond funds. At March 31,
1998 and 1997, the adjusted cost of the funds exceed fair market value. The
unrealized holding losses, net of income taxes, are reported as a reduction in
stockholders' equity.


                                          25
<PAGE>

     Marketable securities consisted of:

<TABLE>
<CAPTION>
          -------------------------------------------------------
          YEAR ENDED MARCH 31,             1998           1997
          -------------------------------------------------------
          <S>                             <C>            <C>
          Adjusted cost                   $    443       $    443 
          Unrealized holding loss              (12)           (43)
                                          --------       --------
          Fair market value               $    431       $    400 
                                          --------       --------
                                          --------       --------
</TABLE>

     INVENTORIES
     Inventories are valued at the lower of cost or market, with cost determined
by the first-in, first-out method.

     Inventories consisted of:

<TABLE>
<CAPTION>
          ---------------------------------------------------------------
          YEAR ENDED MARCH 31,                   1998             1997
          ---------------------------------------------------------------
          <S>                                  <C>              <C>
          Finished Goods                       $  5,733         $  6,181 
          Materials and work-in process           5,463            5,652 
                                               --------         --------
                                               $ 11,196         $ 11,833 
                                               --------         --------
                                               --------         --------
</TABLE>

     PROPERTY AND EQUIPMENT
     Property and equipment are depreciated on a straight-line basis over their
estimated service lives. Accelerated and straight-line methods are used for
income tax reporting purposes.

     PATENT COSTS 
     Patent application costs consist principally of legal and filing fees and
are capitalized and amortized over five years.

     GOODWILL
     Goodwill represents the cost in excess of the fair value of net assets
acquired and is amortized using the straight-line method over five to seven
years. The Company periodically evaluates the existence of goodwill impairment
on the basis of whether the goodwill is fully recoverable from projected,
undiscounted net cash flows of the related business unit.

     RESEARCH AND DEVELOPMENT
     Research and development costs are charged to operations as incurred.

     INCOME TAXES
     The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." 

     FOREIGN CURRENCY TRANSLATION
     Foreign assets and liabilities are translated to U.S. dollars at year-end
exchange rates. Revenues and expenses are translated at the average exchange
rates in effect for the year. Unrealized translation adjustments are reported as
a component of stockholders' equity.

     ADOPTION OF FAS130 AND FAS131
     In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting standard No. 130 "Reporting Comprehensive Income" SFAS No.
130 must be adopted by the company in the first quarter of fiscal 1999.  Under
this statement, the company will report in its statement of consolidated
shareholder's equity, in addition to net earnings, comprehensive income and its
components including, as applicable, unrealized gains and losses on available
for sale securities and foreign currency translation adjustments. 
Implementation of this disclosure standard will not effect the company's results
of operations, cash flows or financial position.

     In June 1997, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 131 "Disclosure about Segments of an
Enterprise and Related Information."  This statement, which must be adopted by
the company for the fiscal year ending March 31, 1999 establishes new standards
for reporting information about operating segments in annual and interim
financial statements.  Under SFAS No. 131, operating segments are determined
consistent with the way management organizes and evaluates financial information
internally for making decisions and assessing performance.  SFAS No. 131 also
requires related disclosures about 


                                          26
<PAGE>

products, geographic areas, and major customers.  Implementation of this
disclosure standard will not effect the Company's results of operations, cash
flows or financial position.

NOTE 2--RESTRUCTURING AND UNUSUAL ITEMS
     In the fourth quarter of fiscal 1997, the Company adopted a restructuring
plan designed to reduce its cost structure and improve its competitive position
primarily through the discontinuation of two unprofitable product lines--the
Primus-Registered Trademark- dialyzer and Cathetron-Registered Trademark-
catheter reprocessing system. In addition, the charge provided for costs
associated with the departure of the Company's founder as Chairman, Chief
Executive Officer and President. The restructuring charge consisted of asset
write downs of $7,856 and employee costs of $1,713 totaling $9,569  before taxes
and $6,294 after taxes.  The following table details the restructuring reserve
as recorded in the balance sheet and current year activity.  The remaining
reserve at  March 31, 1998 relates to employee costs.

THE RESTRUCTURING RESERVE CONSISTED OF THE FOLLOWING:

<TABLE>
           <S>                                     <C>
           Reserve balance at March 31, 1997         $  1,097 
           Fiscal 1998 payments                          (461)
                                                   ----------
           Reserve balance at March 31, 1998         $    636 
                                                   ----------
                                                   ----------
</TABLE>

NOTE 3--LINE OF CREDIT
     At March 31, 1998, the Company had a line of credit with a commercial bank
which allows the Company to borrow up to $10,000 on an unsecured basis at the
prime rate of interest (8.5 percent at March 31, 1998) or the indexed London
Interbank Offered Rate (LIBOR). At March 31, 1998, the Company had no
outstanding borrowings under the line of credit.  This line of credit expires
August 31, 1998, and the Company plans to extend the bank line at that time.

NOTE 4--SIGNIFICANT CUSTOMERS AND EXPORT SALES 
     Sales to one unaffiliated customer accounted for approximately 10 percent
and 23 percent of sales in fiscal years 1997 and 1996, respectively.  Sales to
this customer were made under a contract which expired June 30, 1997.

     Consolidated sales outside the United States, principally to customers 
in Europe and Asia, amounted to $14,587, $12,187 and $10,462  in fiscal years 
1998, 1997 and 1996, respectively.

NOTE 5--INCOME TAXES 
     The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>
           --------------------------------------------------------------------
           YEAR ENDED MARCH 31,        FEDERAL          STATE           TOTAL
           --------------------------------------------------------------------
           <S>                      <C>             <C>             <C>
           1998
           Currently Payable          $   1,414         $    79       $   1,493 
           Deferred                         686              74             760 
                                    -----------     -----------     -----------
           Total                      $   2,100         $   153       $   2,253 
                                    -----------     -----------     -----------
                                    -----------     -----------     -----------
           1997
           Currently Payable          $   1,237         $    63       $   1,300 
           Deferred                      (1,823)           (177)         (2,000)
                                    -----------     -----------     -----------
           Total                      $    (586)        $  (114)      $    (700)
                                    -----------     -----------     -----------
                                    -----------     -----------     -----------
           1996
           Currently Payable          $   2,376         $   162       $   2,538 
           Deferred                        (146)              2            (144)
                                    -----------     -----------     -----------
           Total                      $   2,230         $   164       $   2,394 
                                    -----------     -----------     -----------
                                    -----------     -----------     -----------
</TABLE>


                                          27
<PAGE>

     The provision for income taxes differs from the statutory U.S. federal tax
rate of 34 percent applied to earnings before income taxes as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
YEAR ENDED MARCH 31,                        1998          1997          1996
--------------------------------------------------------------------------------
<S>                                       <C>            <C>          <C>
Income tax expense at statutory 
  federal income tax rates                $   2,322      $ (1,475)    $   2,255 
Foreign subsidiary (income)/loss               (564)          849           672 
State income taxes,
  net of federal benefit                         78           (76)          108 
Exempt income attributable to
 foreign sales                                   --           (53)          (51)

Loss on investment in foreign
 subsidiary                                      --            --          (594)
Other, net                                      417            55             4 
                                         ----------     ---------    ----------
Total Provision                           $   2,253      $   (700)    $   2,394 
                                         ----------     ---------    ----------
                                         ----------     ---------    ----------
</TABLE>

     The tax effects of cumulative temporary differences that give rise to
significant portions of the deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
          -------------------------------------------------------------------
          YEAR ENDED MARCH 31,                              1998      1997
          -------------------------------------------------------------------
          <S>                                            <C>       <C>
          Deferred tax asset
            Foreign subsidiary net operating losses         $ 578   $  1,100 
            Deferred compensation and severance               425        569 
            Fixed asset reserve                               708        708 
            Allowance for doubtful accounts                    55         55 
            Inventories                                       478      1,045 
            Unrealized holding losses on investments          108        131 
            Accruals                                          153        107 
            Amortization of goodwill                          278        189 
            Other, net                                         26         46 
                                                         --------   --------
            Gross deferred tax asset                        2,809      3,950 
            Valuation Allowance                              (578)    (1,100)
                                                         --------   --------
            Net deferred tax asset                       $  2,231   $  2,850 
                                                         --------   --------
                                                         --------   --------
          Deferred tax liability
            Plant and equipment depreciation             $  1,694   $  1,553 
                                                         --------   --------
                                                         --------   --------
</TABLE>

     The Company recorded valuation allowances related to foreign subsidiary net
operating losses which are not recognized until their ultimate realization is
considered to be more likely than not.  The current portion of the deferred tax
asset is included in the prepaid expenses and other current assets component of
the balance sheet.

     Cash payments for income taxes were approximately $423, $2,151, and $2,345
in fiscal years 1998, 1997 and 1996, respectively.

NOTE 6--COMMITMENTS 
     OPERATING LEASES 
     Total rental expense for operating leases for fiscal years 1998, 1997 and
1996 was approximately $473, $804, and $905, respectively.

                                          28
<PAGE>

     Future minimum lease payments for operating leases, net of cancellation
clauses, consist of the following at March 31, 1998:

<TABLE>
<CAPTION>
                    ---------------------------------------
                    FISCAL YEAR                    AMOUNT
                    ---------------------------------------
                    <S>                            <C>
                    1999                           $    355 
                    2000                                175 
                    2001                                 40 
                    2002                                  0 
                                                  ---------
                                                   $    570 
                                                  ---------
                                                  ---------
</TABLE>

     SEVERANCE AGREEMENTS
     The Company has employment agreements with all officers that provide three
years of severance pay benefits if there is a change in control of the Company.
Under the agreements, these officers receive 100 percent of such severance
benefits if they are involuntarily terminated and 50 percent of such severance
benefits if they voluntarily terminate. The maximum contingent liability under
these agreements at March 31, 1998, was approximately $4,050.

NOTE 7--STOCK OPTIONS
     At March 31, 1998, the Company reserved Common Stock under its 1989 Stock
Plan. The Plan provides for incentive stock options and other options to be
granted to directors, officers, key employees, and consultants at an exercise
price not less than fair market value of the Common Stock at the date of grant. 
The options generally vest over a four year period and expire after ten years.

     Option transactions under these plans during the three years ended March
31, 1998, are summarized as follows:   

<TABLE>
<CAPTION>
                                                                 WEIGHTED
                                                NUMBER            AVERAGE
                                               OF SHARES        OPTION PRICE
      <S>                                     <C>               <C>
      Outstanding at March 31, 1995            1,309,216         $    10.84 
        Granted                                  677,010              17.29 
        Exercised                               (273,058)              8.94 
        Cancelled                                (88,753)             13.27 
                                             -----------        -----------
      Outstanding at March 31, 1996            1,624,415         $    13.97 
        Granted                                1,209,783              10.54 
        Exercised                                (23,124)             12.55 
        Cancelled                             (1,013,724)             14.33 
                                             -----------        -----------
      Outstanding at March 31, 1997            1,797,350         $    10.67 
        Granted                                  417,530              12.36 
        Exercised                                (94,180)              4.76 
        Cancelled                                (54,060)             10.50 
                                             -----------        -----------
      Outstanding at March 31, 1998            2,066,640         $    11.27 
                                             -----------        -----------
                                             -----------        -----------
</TABLE>

     In January 1997, 824,883 options granted in fiscal years 1992 through 1997
with exercise prices ranging from $10.75 to $20.50 were repriced to $10.625 per
share, the market price at the time of repricing.  The repricing is reflected in
the above roll forward as a grant cancellation and a new grant issuance.

                                          29
<PAGE>

The following table summarizes stock options outstanding and exercisable at
March 31, 1998.

<TABLE>
<CAPTION>
                           Outstanding                                              Exercisable
---------------------------------------------------------------------    ----------------------------------
                                     Weighted-
                                      Average           Weighted-
 Exercise                        Contractual Life        Average                           Weighted-Average
 Price Range           Options        Remaining      Exercise Price           Options       Exercise Price
--------------------------------------------------  -----------------    ----------------------------------
<S>                   <C>        <C>                <C>                  <C>               <C>
 $4.31 - $5.89           34,103             1.9               $5.05            34,103               $5.05
 $9.50 - $10.625      1,418,637             6.6               10.54         1,016,147               10.58
 $10.75 - $13.75        501,420             8.9               12.32            91,390               11.99
 14.50 - 20.50          112,480             5.9               17.66           112,480               17.66
                      2,066,640             7.0              $11.27         1,254,120              $11.17
</TABLE>

     The estimated weighted average grant-date fair value of stock options
granted during fiscal years 1998, 1997 and 1996 were $5.69, 5.06 and 6.72  per
option, respectively. The Company applies Accounting Principles Board Opinion
No. 25 and related Interpretations in accounting for its stock option and
purchase plans. Had the Company's stock option plans and its stock purchase
plans compensation costs been determined based on the fair value at the option
grant dates for awards consistent with the accounting provision of FAS 123
"Accounting for Stock Based Compensation," the Company's net income (loss) and
earnings (loss) per share for fiscal years 1998, 1997 and 1996 would have been
adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
      --------------------------------------------------------------------------
      YEAR ENDED MARCH 31,                              1998    1997     1996
      --------------------------------------------------------------------------
      <S>                              <C>              <C>    <C>       <C>
      Net Income (Loss)                As reported      4,685  ($3,372)    4,308
                                        Pro-Forma       2,942  ($5,310)    3,812
      Basic Earnings (Loss) per share  As reported       $.69   ($ .50)     $.66
                                        Pro-Forma        $.44   ($ .79)     $.59
      Diluted Earnings (Loss) per      As reported       $.69   ($ .50)     $.62
      share                             Pro-Forma        $.43   ($ .79)     $.55
</TABLE>

     The fair value of options granted under the Company's fixed stock option
plans during fiscal 1998, 1997 and 1996 was estimated on the dates of grant
using the Black-Scholes options-pricing model.  The assumptions for fiscal 1998,
1997 and 1996 were as follows:

<TABLE>
<CAPTION>
     ----------------------------------------------------------------------
     YEAR ENDED MARCH 31,              1998           1997           1996  
     ----------------------------------------------------------------------
     <S>                           <C>            <C>            <C>
     Risk free interest rates      5.6 - 6.5%     6.0 - 6.6%     5.4 - 6.9%
     Expected life                  6.6 YEARS      5.1 years      5.1 years
     Expected volatility                  40%            50%            36%
     Expected dividends                   .8%             1%             1%
</TABLE>

     Pro forma compensation cost related to shares purchased under the Employee
Stock Purchase Plan, discussed below, is measured based on the discount from
market value. The effects of applying FAS 123 in this pro forma disclosure are
not indicative of future pro forma effects. FAS 123 does not apply to awards
prior to fiscal 1996, and additional awards in future years are anticipated.

     The Company adopted an employee stock purchase plan on June 1, 1990. Under
the plan, 562,500 shares of Common Stock were reserved for issuance to eligible
employees. The plan allows employees to designate up to 10 percent of their base
salaries for purchase of common stock at 85 percent of fair market value.

     At March 31, 1998, the Company held a total of $156 in payroll withholdings
for the purchase of stock under the plan.

                                          30
<PAGE>

     A total of 109,537 shares have been issued under the plan since inception
as follows:

<TABLE>
<CAPTION>
                                                      NUMBER OF 
                    MAY 31                              SHARES
                    -------------------------------------------
                    <S>                               <C>
                    1997                                 10,719
                    1996                                 17,455
                    1995                                 17,873 
                    1994                                 15,045 
                    1993                                 15,552 
                    1992                                 14,787 
                    1991                                 18,106 
</TABLE>

NOTE 8--PROFIT SHARING AND RETIREMENT SAVINGS 
     The Company has a 401(k) retirement savings and profit sharing plan under
which eligible employees may contribute up to 10 percent of their salaries. The
Company matches 10 percent of employee contributions to a maximum of 6/10ths of
1 percent of compensation. The Company also makes annual profit sharing
contributions to the plan at the discretion of the Board of Directors. The
Company's contributions are as follows:  

<TABLE>
<CAPTION>
     -----------------------------------------------------------------------
     YEAR ENDED MARCH 31,                     1998        1997        1996
     -----------------------------------------------------------------------
     <S>                                     <C>         <C>         <C>
     Matching 401 (k) contributions          $   58      $   50      $   43 
     Profit sharing contributions               649           -           - 
                                           --------    --------     --------
                                             $  707      $   50      $   43 
                                           --------    --------     --------
                                           --------    --------     --------
</TABLE>

NOTE 9--PREFERRED STOCK 
     The Company's Board of Directors is authorized to issue five million shares
of no par value Preferred Stock in one or more series. The Board can determine
voting, conversion, dividend and redemption rights, and other preferences of
each series. No shares have been issued under this authorization.

NOTE 10--FOREIGN OPERATIONS
     Amounts attributable to foreign operations, primarily in Europe, included
in the consolidated financial statements are as follows:

<TABLE>
<CAPTION>
     -------------------------------------------------------------------------
     YEAR ENDED MARCH 31,                                    1998         1997
     -------------------------------------------------------------------------
     <S>                                                     <C>        <C>
     Net sales of consolidated subsidiaries                  12,668      $7,518 
     Earnings (loss) of consolidated foreign subsidiaries     1,843     ($1,922)
     Total assets of consolidated foreign subsidiaries       10,311      $7,131 
</TABLE>

NOTE 11--NET EARNINGS PER SHARE 
     The Company has adopted SFAS No. 128 "Earnings Per Share" which became
effective for financial statements issued for periods ending after December 15,
1997.  SFAS No. 128 requires presentation of basic and diluted earnings per
share ("EPS") and restatement of EPS data for all prior periods.  Basic EPS
includes no dilution and is computed by dividing net income (loss) by the
weighted average shares of common stock outstanding.  Diluted EPS is computed by
dividing net income (loss) by the weighted average shares of common stock and
dilutive common stock equivalents outstanding.  The Company's dilutive common
stock equivalents result from stock options and are computed using the treasury
stock method.  The following table reconciles the numerators and denominators of
the basic and diluted EPS computations for the years ended March 31, 1998, 1997
and 1996.


                                          31
<PAGE>

<TABLE>
<CAPTION>
                            Income before         Effect of dilutive           Diluted
         1998            Extraordinary item         Stock options        Earnings Per Share
         ----            ------------------         -------------        ------------------
<S>                      <C>                      <C>                    <C>
  Income (Numerator)            4,685                                           4,685
 Shares (Denominator)           6,743                     90                    6,833
   Per Share Amount             $.69                                            $ .69

         1997
         ----
  Income (Numerator)           (3,372)                                         (3,372)
 Shares (Denominator)           6,722                     -                     6,722
   Per Share Amount            ($.50)                                          ($.50)

         1996
         ----
  Income (Numerator)            4,308                                           4,308
 Shares (Denominator)           6,513                    425                    6,938
   Per Share Amount             $.66                                            $ .62
</TABLE>

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Shareholders
Minntech Corporation

     In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of earnings, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Minntech
Corporation and its subsidiaries at March 31, 1998 and 1997 and the results of
their operations and their cash flows for the three years in the period ended
March 31, 1998 in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.

Price Waterhouse LLP

Minneapolis, Minnesota
May 8, 1998


                                          32
<PAGE>

SIGNATURES 

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

MINNTECH CORPORATION
  (Registrant)

By /s/ Thomas J. McGoldrick
   ----------------------------------------
     Thomas J. McGoldrick
     PRESIDENT AND CHIEF EXECUTIVE OFFICER

Date: June 24, 1998
     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
registrant and in the capacities and on the dates indicated


           SIGNATURE                         TITLE                     DATE
--------------------------------------------------------------------------------

                              President, Chief Executive Officer
                              and Director (Principal Executive
/s/ Thomas J. McGoldrick      Officer)
----------------------------
 Thomas J. McGoldrick

                              Chief Financial Officer (Principal
/s/ Jules L. Fisher           Accounting and Financial Officer)
----------------------------
 Jules L. Fisher

/s/ Fred L. Shapiro, M.D.     Director
----------------------------
 Fred L. Shapiro, M.D.

                              Director
----------------------------
 Louis C. Cosentino, Ph.D.

/s/ George Heenan             Director
----------------------------
 George Heenan 

/s/ Amos Heilicher            Director
----------------------------
 Amos Heilicher 

/s/ Norman Dann               Director
----------------------------
 Norman Dann

/s/ Donald H. Soukup          Director
----------------------------
 Donald H. Soukup


                                          33
<PAGE>

                                   EXHIBIT INDEX

 

<TABLE>
<CAPTION>
EXHIBIT NO.                   EXHIBIT                                                   FORM OF FILING
-----------   ------------------------------------------------------------------    -----------------------
<S>            <C>                                                                  <C>
  3(a)         Articles of Incorporation, as amended(1)

  3(b)         Amendment of By-Laws in March 1986(2)

  3(c)         Restated By-Laws(2)

    4          Form of Specimen Common Stock Certificate(3)

  10(a)        1989 Stock Plan, as amended(4)

  10(b)        Amendment to 1989 Stock Plan Effective February 25, 1998              Electronic Submission

  10(c)        Form of Employment Agreement dated September 1, 1996 with 
               certain officers of the Company(4)

  10(d)        Separation and Consulting Agreement with Dr. Louis C. 
               Cosentino dated April 1, 1997(4)

  10(e)        1990 Employee Stock Purchase Plan, as amended June 1, 1993(3)

  10(f)        Supplemental Executive Retirement Plan effective April 1, 1996(6)

  10(g)        Amendment to Supplemental Executive Retirement Plan 
               effective April 1, 1998                                               Electronic Submission

  10(h)        Director Emeritus Consulting Plan(6), as amended(7)

   23          Consent of Price Waterhouse LLP                                       Electronic Submission

   27          Financial Data Schedule                                               Electronic Submission
</TABLE>

------------------------
(1) Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year ended March 31, 1988, File No.
0-11278.
(2) Incorporated by reference to the specified exhibit filed as part of the
Company's report on Form 8-K on March 12, 1986, File No. 0-11278.
(3) Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year ended March 31, 1993, File No.
0-11278.
(4) Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year-ended March 31, 1997, File No.
0-11278.
(5)  Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year ended March 31, 1995, File No.
0-11278.
(6) Incorporated by reference to the specified exhibit filed as part of the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995,
File No. 0-11278.
(7) Incorporated by reference to the specified exhibit filed as part of the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, File No. 0-11278.


                                          34