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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-QSB

|/x/ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------

For the quarterly period ended June 30, 2000
OR

|/ / | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------

For the transition period from  to

Commission file number 0-18785

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OXBORO MEDICAL, INC.(Exact name of small business issuer as specified in its charter)

Minnesota(State or other jurisdiction
of incorporation
or organization)

41-1391803(IRS Employer
Identification No.)


13828 Lincoln Street N.E., Ham Lake, Minnesota 55304(Address of principal executive offices)

(763) 755-9516(Issuer's telephone number)

(Former
name, former address and former fiscal year, if changed since last report)

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Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 / /

At
August 4, 2000, 1,360,503 shares of the issuer's Common Stock were outstanding.

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## 

OXBORO MEDICAL, INC.       INDEX TO FORM 10-QSB

|                              |         |                                                                                                                  |                                                           | PAGE
|----------------------------- | ------- | ---------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------- | ----
|PART IFINANCIAL INFORMATION: |         |                                                                                                                 
|                              | Item 1. |                                                                                                                  | Condensed Financial Statements (unaudited)                |     
|                              |         | Condensed Balance Sheets at June 30, 2000 and September 30, 1999 (unaudited)                                     |                                                           | 3   
|                              |         | Condensed Statements of Operations for the Three Months and Nine Months Ended June 30, 2000 and 1999 (unaudited) |                                                           | 4   
|                              |         | Condensed Statements of Cash Flows for the Nine Months Ended June 30, 2000 and 1999 (unaudited)                  |                                                           | 5   
|                              |         | Notes to Condensed Financial Statements (unaudited)                                                              |                                                           | 6   
|                              | Item 2. |                                                                                                                  | Management's Discussion and Analysis or Plan of Operation |     
|PART IIOTHER INFORMATION:    |         |                                                                                                                 
|                              | Item 5. |                                                                                                                  | Other Information                                         |     
|                              | Item 6. |                                                                                                                  | Exhibits and Reports on Form 8-K                          |     
|SIGNATURES                    |         | 11                                                                                                              
|                              |         |                                                                                                                  |                                                           |     

2

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Part IFinancial Information

Item 1. Financial Statements

OXBORO MEDICAL, INC.

CONDENSED BALANCE SHEETS

(unaudited)

|                                               |                                             | June 30,
2000 |                            | September 30,
1999
|---------------------------------------------- | ------------------------------------------- | ------------- | -------------------------- | ------------------
|ASSETS                                        
|Current Assets:                                |                                             |               |                            |                   
|                                               | Cash and cash equivalents                   |               | $                          | 1,632,586         
|                                               | Rights proceeds due from trustee            |               |                            |                  
|                                               | Trade receivables, net                      |               |                            | 712,710           
|                                               | Inventories                                 |               |                            | 849,293           
|                                               | Income taxes receivable                     |               |                            |                  
|                                               | Deferred income taxes                       |               |                            | 94,000            
|                                               | Receivable from sale of business segment    |               |                            |                  
|                                               | Other current assets                        |               |                            | 17,084            
|                                               |                                             |               |                            |                   
|                                               |                                             |               | Total current assets       |                   
|PROPERTY AND EQUIPMENT, NET                    |                                             | $             | 1,136,134                  |                   
|OTHER ASSETS                                   |                                             | $             | 124,042                    |                   
|                                               |                                             |               |                            |                   
|                                               |                                             |               | Total assets               |                   
|                                               |                                             |               |                            |                   
|LIABILITIES AND SHAREHOLDERS' EQUITY          
|CURRENT LIABILITIES:                           |                                             |               |                            |                   
|                                               | Note payable to bank                        |               | $                          |                  
|                                               | Current maturities of long-term obligations |               |                            | 381,438           
|                                               | Accounts payable                            |               |                            | 209,480           
|                                               | Accrued salaries, wages, and payroll taxes  |               |                            | 155,900           
|                                               | Accrued consulting fees                     |               |                            | 20,205            
|                                               | Other accrued expenses                      |               |                            | 34,696            
|                                               |                                             |               |                            |                   
|                                               |                                             |               | Total current liabilities  |                   
|LONG-TERM OBLIGATIONS, less current maturities |                                             | $             | 60,474                     |                   
|DEFERRED INCOME TAXES                          |                                             |               | 94,000                     |                   
|SHAREHOLDERS' EQUITY:                          |                                             |               |                            |                   
|                                               | Common stock, $0.01 par value               |               |                            | 13,511            
|                                               | Additional paid-in capital                  |               |                            | 2,278,146         
|                                               | Retained earnings                           |               |                            | 1,317,999         
|                                               |                                             |               |                            |                   
|                                               |                                             |               | Total shareholders' equity |                   
|                                               |                                             |               |                            |                   
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     |                                             | $             | 4,565,849                  |                   
|                                               |                                             |               |                            |                   

See
accompanying notes to condensed financial statements.

3

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OXBORO MEDICAL, INC.

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

|                                                                  |          | For the Three Months
Ended June 30,     |           | For the Nine Months
Ended June 30, |  
|----------------------------------------------------------------- | -------- | --------------------------------------- | --------- | ---------------------------------- | -
|
|Net Sales                                                         |          | $                                       | 1,183,666 |                                    | $
|Cost of Goods Sold                                                |          |                                         | 369,071   |                                    |  
|                                                                  |          |                                         |           |                                    |  
|Gross profit                                                      |          |                                         | 814,595   |                                    |  
|Selling, general and administrative expenses                      |          |                                         | 596,543   |                                    |  
|                                                                  |          |                                         |           |                                    |  
|Operating income (loss)                                           |          |                                         | 218,052   |                                    |  
|Interest expense                                                  |          |                                         | 10,595    |                                    |  
|Interest and other income (expense)                               |          |                                         | 33,327    |                                    |  
|                                                                  |          |                                         |           |                                    |  
|Income (loss) from continuing operations                          |          |                                         | 240,784   |                                    |  
|                                                                  |          |                                         |           |                                    |  
|Discontinued Operations:                                          |          |                                         |           |                                    |  
|Loss on disposal of discontinued division                         |          |                                         |          |                                    |  
|Loss from operations of discontinued division                     |          |                                         |          |                                    |  
|                                                                  |          |                                         |           |                                    |  
|                                                                  |          | Total loss from discontinued operations |           |                                    | 
|                                                                  |          |                                         |           |                                    |  
|Net income (loss)                                                 |          | $                                       | 240,784   |                                    | $
|                                                                  |          |                                         |           |                                    |  
|Income (loss) per share from continuing operations:               |          |                                         |           |                                    |  
|                                                                  | Basic    |                                         | $         | 0.18                               |  
|                                                                  | Diluted  |                                         |           | 0.16                               |  
|Loss per share from discontinued operations:                      |          |                                         |           |                                    |  
|                                                                  | Basic    |                                         |           |                                   |  
|                                                                  | Diluted  |                                         |           |                                   |  
|Net income (loss) per share:                                      |          |                                         |           |                                    |  
|                                                                  | Basic    |                                         | $         | 0.18                               |  
|                                                                  | Diluted  |                                         |           | 0.16                               |  
|Weighted average common and common equivalent shares outstanding: |          |                                         |           |                                    |  
|                                                                  | Basic    |                                         |           | 1,348,302                          |  
|                                                                  | Diluted` |                                         |           | 1,536,023                          |  

See
accompanying notes to condensed financial statements.

4

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OXBORO MEDICAL, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

|                                                  |                                                                                                    | For the Nine Months
Ended June 30,                                                      |                                          
|------------------------------------------------- | -------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | -----------------------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:             |                                                                                                    |                                                                                         |                                          
|                                                  | Net income (loss)                                                                                  |                                                                                         | $                                        
|                                                  | Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                                                                         |                                          
|                                                  |                                                                                                    | Discontinued operations                                                                 |                                          
|                                                  |                                                                                                    | Depreciation and amortization                                                           |                                          
|                                                  |                                                                                                    | Loss on disposal of equipment                                                           |                                          
|                                                  |                                                                                                    | Change in operating assets and liabilities not including changes in discontinued items: |                                          
|                                                  |                                                                                                    |                                                                                         | Trade receivables, net                   
|                                                  |                                                                                                    |                                                                                         | Inventories                              
|                                                  |                                                                                                    |                                                                                         | Other current assets                     
|                                                  |                                                                                                    |                                                                                         | Accounts payable                         
|                                                  |                                                                                                    |                                                                                         | Accrued wages, salaries and payroll taxes
|                                                  |                                                                                                    |                                                                                         | Accrued consulting fees                  
|                                                  |                                                                                                    |                                                                                         | Other accrued expenses                   
|                                                  |                                                                                                    |                                                                                         | Income taxes receivable                  
|                                                  |                                                                                                    |                                                                                         |                                          
|                                                  |                                                                                                    |                                                                                         |                                          
|CASH FLOWS FROM INVESTING ACTIVITIES:             |                                                                                                    |                                                                                         |                                          
|                                                  | Proceeds from sale of business segment                                                             |                                                                                         |                                          
|                                                  | Purchases of property and equipment                                                                |                                                                                         |                                          
|                                                  | Change in other assets                                                                             |                                                                                         |                                          
|                                                  |                                                                                                    |                                                                                         |                                          
|                                                  |                                                                                                    |                                                                                         |                                          
|CASH FLOWS FROM FINANCING ACTIVITIES:             |                                                                                                    |                                                                                         |                                          
|                                                  | Net borrowings (payments) under note payable to bank                                               |                                                                                         |                                          
|                                                  | Net proceeds from rights and warrants exercised                                                    |                                                                                         |                                          
|                                                  | Payments on long-term obligation                                                                   |                                                                                         |                                          
|                                                  |                                                                                                    |                                                                                         |                                          
|                                                  |                                                                                                    |                                                                                         |                                          
|                                                  |                                                                                                    |                                                                                         |                                          
|NET INCREASE IN CASH AND CASH EQUIVALENTS         |                                                                                                    |                                                                                         | 1,329,426                                
|CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD |                                                                                                    |                                                                                         | 303,160                                  
|                                                  |                                                                                                    |                                                                                         |                                          
|CASH AND CASH EQUIVALENTS, AT END OF PERIOD       |                                                                                                    | $                                                                                       | 1,632,586                                
|                                                  |                                                                                                    |                                                                                         |                                          

See
accompanying notes to condensed financial statements.

5

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OXBORO MEDICAL, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

June 30, 2000

Note 1Basis of Financial Statement Presentation

The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although
management believes that the disclosures are adequate to make the information presented not misleading.

In
the opinion of management, the unaudited condensed financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the
financial position and results of operations. Results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year or of the results for any
future periods.

In
preparation of the Company's financial statements, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities and related
revenues and expenses. Actual results could differ from the estimates used by management.

Certain
accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements.
These reclassifications had no effect on net income or shareholders' equity.

Note 2Inventories

|                        |                | June 30, 2000 |         | September 30, 1999
|----------------------- | -------------- | ------------- | ------- | ------------------
|Inventories consist of: |                |               |         |                   
|                        | Raw materials  |               | $       | 510,238           
|                        | Finished goods |               |         | 339,055           
|                        |                |               |         |                   
|                        |                | $             | 849,293 |                   

Note 3Net Income (Loss) Per Share

The
Company's basic net income (loss) per share amounts have been computed by dividing net income (loss) by the weighted average number of outstanding common shares. The Company's
diluted net income (loss) per share is computed by dividing net income (loss) by the weighted average number of outstanding common shares and common share equivalents relating to stock options and
warrants, when dilutive. For the three months and the nine months ended June 30, 2000, 187,721 and 131,810 shares of common stock equivalents, respectively, were included in the computation of
diluted net income per share. For the three months and the nine months ended June 30, 1999, the Company reported a net loss and as such, no common share equivalents were included in the
computation of diluted net loss per share. However, if the Company had reported net income in the three months and the nine months ended June 30, 1999, no common share equivalents would have
been included in the computation of diluted net income per share.

Options
to purchase 56,400 and 36,400 shares of common stock with a weighted average exercise price of $6.17 and $6.81 were outstanding at June 30, 2000 and 1999, respectively,
but were excluded from the computation of common share equivalents because their exercise prices were greater than the average market price of the common shares for such periods.

6

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Note 4Sale of Oxboro Outdoors, Inc.

On June 30, 1999, the Company sold the stock of its subsidiary, Oxboro Outdoors, Inc., a maker of outdoor recreational products, for $385,000 in
cash, a 9% promissory note of $265,000 and, less a contingency reserve of $20,000, the assumption of liabilities of approximately $87,000. The promissory note has been satisfied as of June 30,
2000.

Note 5Income Taxes

The Company utilized net operating loss carryforwards to offset income tax expense during the three and nine months ended June 30, 2000. Accordingly,
the Company did not report income tax expense.

Note 6Rights Offering

The Company initiated a common stock rights offering in 1999. For each share of common stock owned, shareholders were given a right to purchase two shares of
common stock and one warrant to
purchase one additional share of common stock for a total purchase price of $2.50. The term of the warrant is one year with an exercise price of $2.75.

As
of September 30, 1999, 148,528 rights were sold which resulted in the issuance of 297,056 shares of common stock and warrants to purchase 148,528 additional shares of common
stock. Gross proceeds of $371,320 were held by the trustee at September 30, 1999 and were received by the Company on October 5, 1999.

The
Company completed the rights offering on November 30, 1999. Additional rights sold in the period from October 1, 1999 to November 30, 1999 totaled 295,767,
which resulted in the issuance of 591,534 shares of common stock and warrants to purchase 295,767 additional shares of common stock. Net proceeds from the sale of rights and warrants during the nine
months ended June 30, 2000, totaled $1,024,236.

7

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Item 2. Management's Discussion and Analysis or Plan of Operation

Overview

The Company ("Oxboro") develops, assembles, and markets medical and surgical devices. Principal medical products produced and sold by Oxboro include silicone
loops, silicone and fabric clamp covers, instrument guards, suture aid booties, identification sheet and roll tape, and various holders and organizers for instruments used in the operating room.

Results of Operations

Net sales for the nine-month period ended June 30, 2000 were $3,447,231 as compared to $3,395,014 for the corresponding period in the
previous fiscal year. This represents an increase of approximately 1.5%. Continued competition and pricing pressure have constrained revenue growth in the Company's existing product lines; however
several new products have recently been added and the Company expects these new products, together with future additions to contribute to sales growth in the future.

Gross
profit as a percent of net sales for the first nine months of fiscal 2000 and 1999 was 68.4% and 56.5%, respectively. The increase in gross profit percentage for fiscal year
2000 results from a decrease in labor and overhead costs from the prior year. In the prior year, labor and overhead were unusually high due to activities related to obtaining ISO 9000 and CE Mark
certification.

During
the first nine months of fiscal 2000, selling, general and administrative ("SG&A") expenses decreased by 11.2%, or $216,746, compared to the first nine months of fiscal 1999.
This decrease is primarily the result of a reduction in legal and consulting expenses pertaining to management changes during fiscal 1999.

Income
from continuing operations for the first nine months of fiscal year 2000 was $726,944 as compared to a loss of $82,515 in the same period of fiscal 1999. The increase is mainly
due to the improvement in gross profit and the decrease in SG&A expenses.

On
June 30, 1999, the Company sold its subsidiary, Oxboro Outdoors, Inc. Accordingly, the activity of Oxboro Outdoors, Inc. through that date is reported as a
discontinued operation.

Liquidity and Capital Resources

The Company has typically financed its operations through internal working capital and a bank line of credit. Financing of its building has been through
long-term bank financing. At June 30, 2000, the balance of the mortgage is shown as currently maturing due to a balloon feature payable June 1, 2001. Although not assured,
the Company expects to negotiate long-term financing to replace the existing mortgage before its maturity and believes it has adequate capital to meet its cash requirements for the next twelve months.
As of June 30, 2000, the Company had working capital of $2,503,954 as compared
to $1,515,848 at September 30, 1999, and long-term debt of $60,474. As of June 30, 2000, the Company had $1,632,586 in cash as compared to $303,160 at September 30,
1999.

During
the nine months ended June 30, 2000, the Company generated $444,203 in net cash from operating activities primarily due to net income and receipt of income taxes
receivable offset by the payment of accrued consulting fees and purchases of inventory. The Company generated $36,887 from investing activities during the nine months ended June 30, 2000,
primarily due to the proceeds from the disposal of Oxboro Outdoors, Inc. offset by the purchases of equipment. The Company generated $848,336 in cash from financing activities due to the net
proceeds from its stock rights offering completed on November 30, 1999 offset by repayment of the bank line-of-credit outstanding at September 30, 1999.

As
of June 30, 2000, the Company had $550,000 available at the rate of prime plus .50% under a line of credit agreement which expires March 31, 2001. No amounts were
outstanding on this line of credit at June 30, 2000, a decrease of $145,313 from September 30, 1999.

8

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Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. In addition, forward-looking
statements may be made orally in the future by or on behalf of the Company. When used in this report, the words "believe," "expect," "will," "can," "estimate," "anticipate" and similar expressions are
intended to identify such forward-looking statements. The Company wishes to caution readers not to place undue reliance on any forward-looking statements and to recognize that the statements are not
predictions of actual future results. Actual results could differ materially from those anticipated in the forward-looking statements due to the risks and uncertainties set forth in our 1999 Annual
Report on Form 10-KSB under the caption "Risks Related to Our Business," as well as others not now anticipated. These risks and uncertainties include, without limitation: market
acceptance of the Company's products and our ability to acquire new products, pricing strategies of competitors, general conditions in the industries served by our products, including consolidation of
customers and the potential loss of those customers or their ability to demand discounted pricing on our products, changes in management of the Company, maintenance of operating capital and bank
financing, the continuing licensing dispute with one of our former officers, the success of competitive products, continuing relationships with our third party suppliers, and overall economic
conditions, including inflation and consumer buying patterns.

9

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PART IIOTHER INFORMATION

Item 5. Other information

On March 30, 1999, Larry A. Rasmusson, our former Chief Executive Officer and a former director of Oxboro, notified us that he believed we were
in default on exclusive license agreements that we executed with him relating to some of our medical products, including bulldogs, fabric ties, Radiopaque fabric clamp covers, bulk and fabric tape,
loops, surgical booties, various types of instrument and specialty guards, a tape stripper, patient hangars and patient care holders. As a result, Mr. Rasmusson has taken the position that the
rights to these medical products have reverted back to him. We believe we are not in default. Mr. Rasmusson has not initiated legal action to terminate the royalty agreements, but if he were to
do so we would aggressively defend ourselves in such action and would challenge the validity of such agreements. In that event, and if necessary and appropriate, we will seek to terminate such
agreements and take whatever other actions may be appropriate, including commencing litigation, to terminate the agreements or have them declared invalid or both. If, however, the royalty agreements
are found valid, and any resulting litigation is determined adversely to us, we may lose the right to manufacture and distribute products related to the royalty agreements. This would have a
substantial negative impact on our revenues and profits until we were able to acquire or develop alternate products.

Item 6. Exhibits and Reports on Form 8-K:







10

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## 

SIGNATURES

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

|Date: August 11, 2000 |  | OXBORO MEDICAL, INC.                                                                   
|--------------------- |  | ---------------------------------------------------------------------------------------
|                      |  | By:Matthew E. Bellin, President
(Principal Executive Officer)                          
|Date: August 11, 2000 |  | By:Linda Erickson, Chief Financial Officer
(Principal Financial and Accounting Officer)

11

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