<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ----------

                                    FORM 10-Q

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1998

                         Commission File Number 0-19841

                               i-STAT CORPORATION
             (Exact name of registrant as specified in its charter)

      Delaware                                           22-2542664
      --------                                           ----------
      (State or other jurisdiction of                    (I.R.S. employer
      incorporation or organization)                     Identification No.)
                                                         
      303 College Road East, Princeton, New Jersey       08540
      (Address of Principal Executive Offices)           (Zip Code)

                                 (609) 243-9300
                                 --------------
              (Registrant's telephone number, including area code)

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

            Yes |X|                                      No | |

The number of shares outstanding of each of the Issuer's classes of common stock
as of the latest practicable date.

<TABLE>
<CAPTION>
            Class                                        August 12, 1998
            -----                                        ---------------
            <S>                                          <C>
            Common Stock, $ .15 par value                13,244,415
</TABLE>
<PAGE>   2

                               i-STAT CORPORATION

                                TABLE OF CONTENTS

                                                                           PAGE
                                                                          NUMBER
                                                                          ------

PART I FINANCIAL INFORMATION

      ITEM 1 - Financial Statements

      Consolidated Condensed Statements of Operations and
         Comprehensive Income for the three months and six
         months ended June 30, 1998 and 1997 .........................      3

      Consolidated Condensed Balance Sheets as of June 30,
         1998 and December 31, 1997 ..................................      4

      Consolidated Condensed Statements of Cash Flows for
         the six months ended June 30, 1998 and 1997 .................      5

      Notes to Consolidated Condensed Financial Statements ...........    6 - 10

      ITEM 2 - Management's Discussion and Analysis of
               Financial Condition and Results of Operations .........   11 - 16

PART II OTHER INFORMATION

      ITEM 1 - Legal Proceedings .....................................     17

      ITEM 4 - Submission of Matters to a Vote of Security
               Holders ...............................................     18

      ITEM 6 - Exhibits and Reports on Form 8-K ......................     19

SIGNATURES ...........................................................     20


                                        2
<PAGE>   3

                               i-STAT CORPORATION
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                            AND COMPREHENSIVE INCOME
           (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
                                   (unaudited)

<TABLE>
<CAPTION>
                                            Three Months Ended               Six Months Ended
                                                 June 30,                        June 30,
                                       ----------------------------    ----------------------------
                                           1998            1997            1998            1997
                                       ------------    ------------    ------------    ------------
<S>                                    <C>             <C>             <C>             <C>         
Net sales ..........................   $     10,454    $      9,146    $     19,240    $     16,952

Cost of sales ......................          8,431           7,258          16,121          13,591
                                       ------------    ------------    ------------    ------------

         Gross profit ..............          2,023           1,888           3,119           3,361
                                       ------------    ------------    ------------    ------------

Operating expenses:

   Research and development ........          2,022           1,808           3,791           3,427

   General and administrative ......          1,844           1,521           3,699           2,978

   Consolidation of operations .....             (7)             --             729              --

   Sales and marketing .............          3,230           3,337           6,502           6,069
                                       ------------    ------------    ------------    ------------

      Total operating expenses .....          7,089           6,666          14,721          12,474
                                       ------------    ------------    ------------    ------------

         Operating loss ............         (5,066)         (4,778)        (11,602)         (9,113)
                                       ------------    ------------    ------------    ------------

Other income (expense), net ........            345             298             754             639
                                       ------------    ------------    ------------    ------------

Net loss ...........................         (4,721)         (4,480)        (10,848)         (8,474)
                                       ------------    ------------    ------------    ------------

Other comprehensive income/(loss):
   Foreign currency translation ....             (5)             (5)            (12)             (4)
                                       ------------    ------------    ------------    ------------

Comprehensive loss .................   $     (4,726)   $     (4,485)   $    (10,860)   $     (8,478)
                                       ============    ============    ============    ============

Basic and diluted net loss per share   $      (0.31)   $      (0.32)   $      (0.71)   $      (0.62)
                                       ============    ============    ============    ============

Shares used in computing basic and
   diluted net loss per share ......     15,369,324      14,032,398      15,362,564      13,700,335
                                       ============    ============    ============    ============
</TABLE>

                  The accompanying notes are an integral part
             of these consolidated condensed financial statements.


                                        3
<PAGE>   4

                               i-STAT CORPORATION
                      CONSOLIDATED CONDENSED BALANCE SHEETS
           (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                         June 30,   December 31,
                                                           1998         1997
                                                         ---------  ------------
<S>                                                     <C>          <C>      
      ASSETS

Current assets:

   Cash and cash equivalents .........................  $  22,033    $  32,914

   Accounts receivable, net ..........................      6,354        5,206

   Inventories .......................................      5,544        5,927

   Prepaid expenses and other current assets .........        668          775
                                                        ---------    ---------

      Total current assets ...........................     34,599       44,822

Plant and equipment, net of accumulated depreciation
   of $19,046 and $16,858 ............................     13,830       12,619

Other assets .........................................      1,640        1,729
                                                        ---------    ---------
      Total assets ...................................  $  50,069    $  59,170
                                                        =========    =========

      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Accounts payable ..................................  $   2,383    $   2,174

   Accrued expenses ..................................      5,185        3,733

   Deferred revenue ..................................        133          218
                                                        ---------    ---------
      Total current liabilities ......................      7,701        6,125

Stockholders' equity:

   Preferred Stock, $.10 par value, shares
   authorized 7,000,000:

      Series A Junior Participating Preferred Stock,
      $.10 par value, 1,500,000 shares authorized;
      none issued ....................................         --           --

      Series B Preferred Stock, $.10 par value,
      2,138,702 shares authorized and issued .........        214          214

   Common Stock, $.15 par value, shares authorized
      25,000,000; shares issued 13,244,957 at June
      30, 1998 and 13,203,527 at December 31, 1997 ...      1,987        1,981

   Additional paid-in capital ........................    209,908      209,594

   Other, net ........................................       (304)        (194)

   Accumulated deficit ...............................   (169,133)    (158,273)

   Accumulated other comprehensive loss related to
      foreign currency translation ...................       (304)        (277)
                                                        ---------    ---------
      Total stockholders' equity .....................     42,368       53,045
                                                        ---------    ---------
      Total liabilities and stockholders' equity .....  $  50,069    $  59,170
                                                        =========    =========
</TABLE>

                   The accompanying notes are an integral part
             of these consolidated condensed financial statements.


                                            4
<PAGE>   5

                               i-STAT CORPORATION
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                            (IN THOUSANDS OF DOLLARS)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                             Six Months Ended
                                                                 June 30,
                                                           --------------------
                                                             1998        1997
                                                           --------    --------
<S>                                                        <C>         <C>      
Cash flows from operating activities:
  Net loss .............................................   $(10,848)   $ (8,474)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Depreciation and amortization ......................      2,247       1,850
    Deferred revenue ...................................        (85)     (1,541)
    Other ..............................................       (106)        (95)
  Change in assets and liabilities .....................      1,155        (397)
                                                           --------    --------
    Net cash used in operating activities ..............     (7,637)     (8,657)
                                                           --------    --------

Cash flows from investing activities:
  Purchase of investments ..............................         --     (22,976)
  Purchase of equipment ................................     (3,398)     (2,431)
  Other ................................................       (125)        (69)
                                                           --------    --------
    Net cash used in investing activities ..............     (3,523)    (25,476)
                                                           --------    --------

Cash flows from financing activities:
  Proceeds from sale of Common Stock ...................        320         288
  Net proceeds from private placement of Common Stock ..         --      22,957
                                                           --------    --------
    Net cash provided by financing activities ..........        320      23,245

Effect of currency exchange rate changes on cash .......        (41)        (37)
                                                           --------    --------
Net decrease in cash and cash equivalents ..............    (10,881)    (10,925)
Cash and cash equivalents at beginning of period .......     32,914      28,417
                                                           --------    --------
Cash and cash equivalents at end of period .............   $ 22,033    $ 17,492
                                                           ========    ========
</TABLE>

                   The accompanying notes are an integral part
             of these consolidated condensed financial statements.


                                            5
<PAGE>   6

                               i-STAT CORPORATION
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)

1.    GENERAL

      Basis of Presentation:

      The information presented as of June 30, 1998 and 1997, and for the
      periods then ended, is unaudited, but includes all adjustments (consisting
      only of normal recurring accruals) which the management of i-STAT
      Corporation (the "Company") believes to be necessary for the fair
      presentation of results for the periods presented. The results for the
      interim periods are not necessarily indicative of results to be expected
      for the year. The year end consolidated condensed balance sheet data was
      derived from the audited financial statements, but does not include all
      disclosures required by generally accepted accounting principles. These
      condensed financial statements should be read in conjunction with the
      Company's audited financial statements for the year ended December 31,
      1997, including the Notes thereto, which were included as part of the
      Company's Annual Report on Form 10-K, File No. 0-19841.

      Recently Issued Accounting Pronouncements:

      The Company has adopted Statement of Financial Accounting Standards No.
      130, "Reporting Comprehensive Income", which establishes standards for the
      reporting and display of comprehensive income and its components in a full
      set of financial statements. The adoption of this Statement had no impact
      on the Company's net loss or stockholders' equity. Statement No. 130
      requires foreign currency translation adjustments, which prior to adoption
      were reported separately in stockholders' equity, to be included in other
      comprehensive earnings. Prior year financial statements have been
      reclassified to conform to the requirements of Statement No. 130.

      In June 1997, the FASB issued Statement of Financial Accounting Standards
      No. 131 " Disclosures about Segments of an Enterprise and Related
      Information" which establishes standards for the way that public business
      enterprises report information about operating segments, geographic areas,
      products and major customers. The Company is required to adopt this
      standard as of the end of 1998 and is currently evaluating the impact of
      this standard on the Company's required disclosure.

      In February 1998, the FASB issued Statement of Financial Accounting
      Standards No. 132 "Employers' Disclosures about Pensions and Other
      Postretirement Benefits." This statement modifies financial statement
      disclosures related to pension and other postretirement plans, including
      standardization of disclosures for pension plans and other postretirement
      plans, permitting the aggregation of information regarding certain plans,
      additional disclosures related to the change in benefit obligations and
      the fair value of plan assets, and elimination of certain other
      disclosures. As with SFAS Nos. 130 and 131, this statement addresses
      disclosure issues and therefore will not have an effect on the Company's
      financial position or results of operations, and the Company is required
      to adopt this standard as of the end of 1998.

      Reclassification:

      Certain reclassifications have been made to 1997 amounts to conform them
      to the 1998 presentation.


                                            6
<PAGE>   7

                               i-STAT CORPORATION
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)

                                   (continued)

2.    NET LOSS PER SHARE

      The Company has adopted Statement of Financial Accounting Standards No.
      128 "Earnings Per Share" which requires the presentation of basic earnings
      per share (EPS), and diluted earnings per share. Basic EPS excludes
      dilution and is computed by dividing income available to common
      stockholders by the weighted-average number of common shares outstanding
      for the period. Diluted EPS reflects the potential dilution that could
      occur if securities or other contracts to issue common stock were
      exercised or converted into common stock or resulted in the issuance of
      common stock that then shared in the earnings of the entity. The Company
      has not included potential common shares in the diluted per-share
      computation as the result is antidilutive.

      The numerator (loss) and denominator (shares) of the basic and diluted per
      share computations were as follows:

<TABLE>
<CAPTION>
      In thousands of dollars, except shares and per share amount
      ---------------------------------------------------------------------------------------------
                                                 Loss        Shares       Per-Share Amount Before
                                                                        Comprehensive Income/(Loss)
      <S>                                      <C>         <C>                    <C>    
      For the quarter ended June 30, 1998      $ (4,721)   15,369,324             $(0.31)
                                               ====================================================

      For the quarter ended June 30, 1997      $ (4,480)   14,032,398             $(0.32)
                                               ====================================================

      For the six months ended June 30, 1998   $(10,848)   15,362,564             $(0.71)
                                               ====================================================

      For the six months ended June 30, 1997   $ (8,474)   13,700,335             $(0.62)
                                               ====================================================
</TABLE>

      Basic and diluted net loss per share is calculated using the weighted
      average number of common shares and preferred shares outstanding for all
      periods presented. Preferred shares have been included in the calculations
      since their date of issuance as they are convertible into common shares on
      a 1:1 basis and have substantially the same characteristics as common
      stock.

      Options to purchase 2,240,764 shares of common stock at $1.50 - $34.11 per
      share, which expire on various dates from February 1999 to June 2008, were
      outstanding at June 30, 1998. These shares were not included in the
      computation of diluted EPS because the effect would be antidilutive due to
      the net loss.

3.    INVENTORIES

      Inventories consist of the following:

<TABLE>
<CAPTION>
                                    June 30, 1998         December 31, 1997
                                    -------------         -----------------
                                            (In thousands of dollars)
      <S>                            <C>                     <C>   
      Raw materials                  $2,071                  $2,206
      Work in process                 2,312                   1,482
      Finished goods                  1,161                   2,239
                                     ------                  ------
                                     $5,544                  $5,927
                                     ======                  ======
</TABLE>


                                            7
<PAGE>   8

                               i-STAT CORPORATION
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)

                                   (continued)

4.    COMMITMENTS AND CONTINGENCIES

      The Company is a defendant in a case entitled Nova Biomedical Corporation,
      Plaintiff v. i-STAT Corporation, Defendant. The Complaint, which was filed
      in the United States District Court for the District of Massachusetts on
      June 27, 1995, alleges infringement by i-STAT of Nova's U.S. Patent No.
      4,686,479. In February 1998, the Court entered summary judgment in favor
      of the Company on the issue of patent infringement. Accordingly, the
      Company has been found not to infringe, either literally or under the
      patent law "doctrine of equivalents", Nova's patent. However, the
      plaintiff has appealed and should it prevail on this issue, a prospect
      which the Company believes to be unlikely, it could have a material
      impact on the financial position, results of operations and cash flows
      of the Company.  The Company had asserted and is pursuing counterclaims
      under the antitrust laws alleging that Nova commenced the action knowing 
      that the patent was not infringed and that it had reason to believe that 
      the patent was invalid and unenforceable.

      The Company is a defendant in a class action complaint entitled Susan
      Kaufman, on behalf of herself and all other similarly situated, Plaintiff,
      v. i-STAT Corporation, William P. Moffitt, Lionel M. Sterling, Imants R.
      Lauks and Matthias Plum, Jr. The class action was brought by Susan Kaufman
      on her behalf and on behalf of all purchasers of the Company's Common
      Stock between May 9, 1995 and March 19, 1996. The complaint, which was
      filed in the Superior Court of New Jersey in Mercer County on June 19,
      1996, alleges New Jersey common law fraud and negligent misrepresentation,
      and is predicated on a "fraud on the market" theory in connection with
      certain sales of i-STAT stock by the Company's chief executive officer,
      chief technology officer and two outside directors during a nine-month
      period. The plaintiffs seek unspecified compensatory damages, interest and
      payment of all costs and expenses incurred in connection with the class
      action. The Company believes the complaint is without merit and, on April
      28, 1998, the Court entered summary judgment in favor of all the
      defendants. However, the plaintiffs have appealed and, should they prevail
      in this matter, it could have a material impact on the financial position,
      results of operations and cash flows of the Company.

      The Company is a defendant in a case entitled Customedix Corporation,
      Plaintiff v. i-STAT Corporation, Defendant. The Complaint, which was filed
      in the United States District Court for the District of Connecticut on
      December 26, 1996, alleges infringement by i-STAT of Customedix's U.S.
      Patent No. 4,342,964. The Plaintiff seeks injunctive relief and an
      accounting for i-STAT's profits and the damages to Customedix from such
      alleged infringement. The case currently is in the preliminary stages of
      discovery. The Company intends to contest the case vigorously and does not
      believe that it has infringed the Customedix patent. The Company has
      obtained an opinion from recognized patent counsel to the effect that no
      infringement has occurred. However, if the plaintiff should prevail in
      this matter, it could have a material impact on the financial position,
      results of operation and cash flows of the Company.

5.    CONSOLIDATION OF OPERATIONS

      In January 1998, the Company decided to consolidate all its cartridge
      assembly operations in its manufacturing facility in Ontario, Canada. In
      order to facilitate this move, the Company will relocate its cartridge
      assembly operation in Plainsboro, New Jersey to its manufacturing facility
      in Ontario, Canada. The relocation of cartridge assembly commenced in June
      1998, with the transfer of one assembly line to Canada, and is expected to
      be completed by December 1998. As a result of this consolidation of
      operations, 66 employees in the cartridge assembly operations were
      notified during the first quarter of 1998 that their employment would be
      terminated.

      The Company's lease for its instrument operations, engineering, customer
      support, selected research and development, marketing and administrative
      facility in Princeton, New Jersey, expires in September 1998. The Company
      will relocate these activities, together with product distribution
      operations currently located in the Plainsboro facility, to a 37,474
      square foot leased facility in East Windsor, New Jersey. The charge to
      earnings in 1998 for these relocations, including severance and retention
      payments to affected employees, the physical move of equipment, rent and
      utilities on the unoccupied Plainsboro facility until that lease expires
      in February 1999, and readdressing packaging, marketing materials and
      stationery, and miscellaneous costs is estimated to be approximately $1.5
      million, with approximately $0.7 million being recorded as a charge to
      earnings in the six months ended June 30, 1998. The charge to earnings in
      the first six months of 1998 comprises approximately $0.6 million for
      severance and retention payments, and approximately $0.1 million for lease
      costs in respect of the unoccupied Plainsboro facility. Retention payments
      are charged to expense over the retention period.


                                            8
<PAGE>   9

                               i-STAT CORPORATION
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)

                                   (continued)

6.    SUBSEQUENT EVENTS

      On August 3, 1998, the Company and Abbott Laboratories ("Abbott") signed
      agreements (the "Alliance Agreements") providing for a long-term sales,
      marketing and research alliance. Abbott will become, subject to the
      existing rights of the Company's other international distributors, the
      exclusive worldwide distributor of the Company's hand-held blood analyzer
      products (including cartridges) and any new products the Company may
      develop for use in the professionally attended human healthcare delivery
      market. The closing of the Alliance Agreements is expected to occur on or
      before the fifth business day after the expiration or termination of the
      applicable waiting period under the Hart-Scott-Rodino Antitrust
      Improvements Act of 1976 and satisfaction or waiver of applicable closing
      conditions. Either party may terminate the Alliance Agreements if the
      closing does not occur by December 11, 1998.

      Abbott will assume the Company's current product sales to U.S. customers
      (the "Base Business") at no profit to Abbott, and the Company and Abbott
      will share in the incremental profits derived from product sales beyond
      the Base Business. Abbott will prepay to the Company a total of
      $25,000,000 during the first three years of the Marketing and
      Distribution Agreement (the "Distribution Agreement") as guaranteed       
      future purchases of incremental units. Such prepayments will be repaid by
      the Company to Abbott as a credit against actual purchases by Abbott of
      incremental units above the Base Business. The parties expect that
      distribution under the Distribution Agreement will commence in the United
      States on January 1, 1999.

      The Distribution Agreement expires on December 31, 2003, subject to
      automatic extensions for additional one-year periods, unless either party
      provides the other with at least 12 months prior written notice, except
      that the Company may terminate the Distribution Agreement on December 31,
      2001 if Abbott fails to achieve a three- year milestone minimum growth
      rate in sales of the Company's products covered by the Distribution
      Agreement. If the Distribution Agreement is terminated, other than (i) by
      the Company for cause or for Abbott's failure to achieve the three-year
      milestone minimum growth rate; or (ii) by Abbott if Abbott delivers the
      requisite notice terminating the Distribution Agreement after the initial
      term, then, the Company will be obligated to pay to Abbott a one-time
      termination fee calculated to compensate Abbott for a portion of its costs
      in undertaking the distribution relationship, and residual payments for
      five years following termination based on a percentage of Abbott's net
      sales of the Company's products during the final twelve months of the
      Distribution Agreement. In the event that such termination occurs within
      the first three years of the Distribution Agreement, the Company also must
      refund Abbott for any gross margin prepayments made and not yet credited
      to Abbott at the time of such termination.

      Under the terms of the Funded Research & Development and License Agreement
      (the "Research Agreement"), the Company will conduct research and will
      develop products primarily to be commercialized by Abbott. Such research
      and development will be funded by Abbott and Abbott will have exclusive
      worldwide commercialization rights to the products developed under the
      Research Agreement subject to rights previously granted to third parties
      and certain other limitations. The parties have identified two initial
      projects to pursue under the Research Agreement, including the research
      and development of tests useful in the diagnosis and treatment of
      myocardial infarction and coronary artery disease. The Company and Abbott
      will jointly own the intellectual property which is developed during the
      course of work performed under the Research Agreement. In addition, Abbott
      will license certain of its intellectual property to the Company which is
      necessary to develop and manufacture the products contemplated by the
      Research Agreement. The Research Agreement terminates upon expiration or
      termination of the Distribution Agreement, unless earlier terminated as
      provided therein. Upon such expiration or earlier termination, both the
      Company and Abbott will be permitted to distribute the products developed
      under the Research Agreement in the territory covered by the Distribution
      Agreement.


                                            9
<PAGE>   10

                               i-STAT CORPORATION
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (unaudited)

                                   (continued)

      At the closing under the Stock Purchase Agreement, Abbott will purchase
      2,000,000 shares (the "Purchased Shares") of the Company's Common Stock,
      par value $0.15 per share, at a price of $11.35 per share, for an
      aggregate purchase price of $22,700,000 before expenses. The Purchased
      Shares will represent, after issuance, approximately 11.5% of the
      outstanding voting securities of the Company. The Stock Purchase
      Agreement, together with a related Registration Rights Agreement which is
      to be executed at closing, contains certain terms and conditions
      pertaining to the voting and transfer of the Purchased Shares.

      In addition to the Distribution Agreement, the Research Agreement and the
      Stock Purchase Agreement, on August 3, 1998, the Company and Abbott also
      entered into a Standstill Agreement providing, among other things, for
      limitations on Abbott's ability to purchase the Company's Common Stock, or
      to propose any merger or business combination with the Company or purchase
      of a material portion of the Company's assets.

      The foregoing description of the Alliance Agreements and the Registration
      Rights Agreement is qualified in its entirety by reference to the actual
      text of such agreements, copies of which are being filed with the
      Commission as exhibits to this Quarterly Report on Form 10-Q.


                                            10
<PAGE>   11

                               i-STAT CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL; RECENT DEVELOPMENTS

      The Company was incorporated in Delaware in 1983 and develops,
manufactures and markets medical diagnostic products for blood analysis that
provide health care professionals with immediate and accurate critical,
diagnostic information at the point of patient care. The Company's current
products, known as the i-STAT(R) System, consist of portable, hand-held
analyzers and single-use disposable cartridges, each of which simultaneously
performs different combinations of commonly ordered blood tests in approximately
two minutes. The i-STAT(R) System also includes peripheral components that
enable the results of tests to be transmitted by infrared means to both a
proprietary information system for managing the user's point-of-care testing
program and to the user's information systems for billing and archiving.

      The i-STAT(R) System currently performs blood tests for sodium,
potassium, chloride, glucose, urea nitrogen, hematocrit, ionized calcium,
arterial blood gases, and bicarbonate, and to derive certain other values, such
as total carbon dioxide, base excess, anion gap, hemoglobin and O2 saturation,
by calculation from the tests performed. The Company continues to engage in
research and development in order to improve its existing products and develop
new products based on the i-STAT(R) System technology. The Company currently is
developing three tests for the measurement of coagulation: partial
thromboplastin time ("aPTT"), activated clotting time ("ACT") and prothombin
time ("PT"), and is studying the development of tests to measure enzymes,
hematology parameters (such as platelets and white blood cell counts) and other
analytes. The Company has not yet sought US Food and Drug Administration
clearance to market tests for ACT or PT and, on August 5, 1998, the Company
received notice from the FDA that it must resubmit its request for clearance of
the aPTT test. Subject to receipt of clearance to market by the FDA, the
Company expects to commence commercialization of its first coagulation test
during the first quarter of 1999.                                               

      The Company currently markets and distributes its products in the United
States and Canada principally through its own direct sales and marketing
organization, in Japan through Japanese marketing partners, in Europe through
Hewlett-Packard Company ("HP") and in Mexico, South America, China, Australia,
and certain other Asian and Pacific Rim countries, through selected distribution
channels. The Company and HP also jointly market the Company's products into the
critical care departments in hospitals in the United States which meet certain
criteria. Pursuant to a technology collaboration between the Company and HP, in
November 1997 HP commenced selling a patient monitoring system (the "Integrated
Analyzer") which integrates all of the blood diagnostics capabilities of the
i-STAT(R) System. In the long-term, the Company hopes to realize significant
cartridge revenue growth and royalty revenues from the sale of the Integrated
Analyzer by HP.

      On August 3, 1998, the Company entered into a long-term sales, marketing
and research alliance with Abbott Laboratories which, among other things, is
expected both to significantly affect the Company's research and development
programs and alter the manner in which the Company markets and sells its
products worldwide. See "Long-Term Sales, Marketing and Research Alliance".

RESULTS OF OPERATIONS

      THREE MONTHS ENDED JUNE 30, 1998

      The Company generated revenues of approximately $10.5 million and $9.1
million for the three months ended June 30, 1998 and 1997, respectively,
including international revenues (as a percentage of total revenues) of $3.1
million (29.7%) and $2.8 million (31.0%), respectively. Sales to the Company's
Japanese marketing partners represented approximately 10.7% and 18.5% of the
Company's worldwide sales for the three months ended June 30, 1998 and 1997,
respectively. International sales included deferred Japanese revenue of
approximately $0.8 million (8.5% of total revenues) for the three months ended
June 30, 1997. There was no comparable deferred revenue in the three months
ended June 30, 1998, as the balance of such deferred revenue was fully amortized
to income at December 31, 1997.

      The $2.1 million (24.9%) increase in product revenues (excluding the
deferred revenue of $0.8 million in the same period of the prior year) was
primarily due to increased shipment volume of the Company's cartridges
reflecting higher cartridge consumption by existing hospital customers and the
addition of new hospital customers in the U.S. and


                                       11
<PAGE>   12

                               i-STAT CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (continued)

internationally. Worldwide cartridge shipments increased 47.7% to 1,621,300
units in the three months ended June 30, 1998, from 1,097,693 units in the three
months ended June 30, 1997. Revenues from the increased cartridge shipments were
partially offset by lower worldwide average selling prices per cartridge, which
declined from approximately $5.40 to $4.68 per cartridge in the same periods.
Cartridge average selling prices are expected to continue to decline as the
customer mix shifts to higher volume customers that receive lower cartridge list
prices.

      Gross profit increased by approximately $0.1 million to $2.0 million in
the quarter ended June 30, 1998, compared with a gross profit of $1.9 million in
the quarter ended June 30, 1997. The prior year number for the same period
includes approximately $0.8 million of deferred Japanese revenue. Exclusive of
deferred revenue, gross profit on product revenue increased by approximately
$0.9 million (81.2%) from $1.1 million to $2.0 million. To the extent that sales
volume increases, the Company expects its gross profit to improve as
manufacturing costs (including direct labor and a large component of overhead)
are spread over a larger number of product units.

      The Company incurred research and development costs (as a percentage of
sales) of approximately $2.0 million (19.3%) and $1.8 million (19.8%) for the
three months ended June 30, 1998 and 1997, respectively, consisting of costs
associated with the personnel, material, equipment and facilities necessary for
conducting new product development.

      The Company incurred general and administrative expenses (as a percentage
of sales) of approximately $1.8 million (17.6%) and $1.5 million (16.6%) for the
three months ended June 30, 1998 and 1997, respectively. General and
administrative expenses consisted primarily of salaries and benefits of
personnel, office costs, professional fees and other costs necessary to support
the Company's infrastructure. The dollar increase from year to year is primarily
attributable to increased legal fees and expenses associated with the defense of
the Nova patent infringement action and other legal matters, and the Company's
increased need for management personnel and other services to support its
growth.

      The Company incurred sales and marketing expenses (as a percentage of
sales) of approximately $3.2 million (30.9%) and $3.3 million (36.5%) for the
three months ended June 30, 1998 and 1997, respectively, consisting primarily of
salaries, benefits, travel, and other expenditures for sales representatives,
product literature, market research, clinical studies, advertising and other
sales and marketing costs.

      Other income, net, which remains the same at approximately $0.3 million
for the three months ended June 30, 1998, and for the three months ended June
30, 1997, primarily reflects interest income earned on cash and cash equivalents
balances.

      Net losses for the three months ended June 30, 1998 increased 5.4 percent
to approximately $4.7 million, or 31 cents per share, compared with a net loss
of $4.5 million, or 32 cents per share, for the three months ended June 30,
1997. The weighted average number of shares used in computing basic and diluted
net loss per share was 15.369 million and 14.032 million in the 1998 and 1997
periods, respectively. The increase in the net loss, in part reflects the
reduction of deferred revenue ($0.8 million).

      SIX MONTHS ENDED JUNE 30, 1998

      The Company generated revenues of approximately $19.2 million and $17.0
million for the six months ended June 30, 1998 and 1997, respectively, including
international revenues (as a percentage of total revenues) of $5.6 million
(29.0%) and $5.1 million (30.0%), respectively. Sales to the Company's Japanese
marketing partners represented approximately 10.8% and 20.0% of the Company's
worldwide sales for the six months ended June 30, 1998 and 1997, respectively.
International sales included deferred Japanese revenue of approximately $1.5
million (9.1% of total revenues) for the six months ended June 30, 1997. There
was no comparable deferred revenue in the six months ended June 30, 1998, as the
balance of such deferred revenue was fully amortized to income at December 31,
1997.

      The $3.8 million (24.9%) increase in product revenues (excluding the
deferred revenue of $1.5 million in the same period of the prior year) was
primarily due to increased shipment volume of the Company's cartridges
reflecting higher cartridge consumption by existing hospital customers and the
addition of new hospital customers in the U.S. and internationally. Worldwide
cartridge shipments increased 42.3% to 2,905,875 units in the six months ended
June 30, 1998,


                                       12
<PAGE>   13

                               i-STAT CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (continued)

from 2,041,668 units in the six months ended June 30, 1997. Revenues from the
increased cartridge shipments were partially offset by lower worldwide average
selling prices per cartridge, which declined from approximately $5.51 to $4.77
per cartridge in the same periods. Cartridge average selling prices are expected
to continue to decline as the customer mix shifts to higher volume customers
that receive lower cartridge list prices.

      Gross profit decreased by approximately $0.3 million to $3.1 million in
the six months ended June 30, 1998, compared with a gross profit of $3.4 million
in the six months ended June 30, 1997. The prior year number for the same period
includes approximately $1.5 million of deferred Japanese revenue. Exclusive of
deferred revenue, gross profit on product revenue increased by approximately
$1.2 million (63.2%) from $1.9 million to $3.1 million. To the extent that sales
volume increases, the Company expects its gross profit to improve as
manufacturing costs (including direct labor and a large component of overhead)
are spread over a larger number of product units.

      The Company incurred research and development costs (as a percentage of
sales) of approximately $3.8 million (19.7%) and $3.4 million (20.2%) for the
six months ended June 30, 1998 and 1997, respectively, consisting of costs
associated with the personnel, material, equipment and facilities necessary for
conducting new product development.

      The Company incurred general and administrative expenses (as a percentage
of sales) of approximately $3.7 million (19.2%) and $3.0 million (17.6%) for the
six months ended June 30, 1998 and 1997, respectively. General and
administrative expenses consisted primarily of salaries and benefits of
personnel, office costs, professional fees and other costs necessary to support
the Company's infrastructure. The dollar increase from year to year is primarily
attributable to increased legal fees and expenses associated with the defense of
the Nova patent infringement action and other legal matters, and the Company's
increased need for management personnel and other services to support its
growth.

      In January 1998, the Company decided to consolidate all its cartridge
assembly operations in its manufacturing facility in Ontario, Canada. In order
to facilitate this move, the Company will relocate its cartridge assembly
operation in Plainsboro, New Jersey to its manufacturing facility in Ontario,
Canada. The relocation of cartridge assembly commenced in June 1998, with the
transfer of one assembly line to Canada, and is expected to be completed by
December 1998. As a result of this consolidation of operations, 66 employees in
the cartridge assembly operations were notified during the first quarter of 1998
that their employment would be terminated. The Company's lease for its
instrument operations, engineering, customer support, selected research and
development, marketing and administrative facility in Princeton, New Jersey,
expires in September 1998. The Company will relocate these activities, together
with product distribution operations currently located in the Plainsboro
facility, to a 37,474 square foot leased facility in East Windsor, New Jersey.
The charge to earnings in 1998 for these relocations, including severance and
retention payments to affected employees, the physical move of equipment, rent
and utilities on the unoccupied Plainsboro facility until that lease expires in
February 1999, and readdressing packaging, marketing materials and stationery,
and miscellaneous costs is estimated to be approximately $1.5 million, with
approximately $0.7 million being recorded as a charge to earnings in the six
months ended June 30, 1998. The charge to earnings in the first six months of
1998 comprises approximately $0.6 million for severance and retention payments,
and approximately $0.1 million for lease costs in respect of the unoccupied
Plainsboro facility. Retention payments are charged to expense over the
retention period. The Company expects the consolidation to reduce future
manufacturing and operating costs by approximately $2.0 million per year,
commencing in the first quarter of 1999. Such savings will come from lower
personnel costs, after hiring 52 employees for the expanded cartridge assembly
operations in Ontario, Canada, and lower rent, utilities and other overhead
expenses.

      The Company incurred sales and marketing expenses (as a percentage of
sales) of approximately $6.5 million (33.8%) and $6.1 million (35.8%) for the
six months ended June 30, 1998 and 1997, respectively, consisting primarily of
salaries, benefits, travel, and other expenditures for sales representatives,
product literature, market research, clinical studies, advertising and other
sales and marketing costs. The dollar increase from year to year is attributable
to increased sales and marketing personnel and other marketing costs necessary
to support the Company's growth in product sales.

      The increase in other income, net, to approximately $0.8 million for the
six months ended June 30, 1998, from approximately $0.6 million for the six
months ended June 30, 1997, primarily reflects higher interest income earned on
higher cash and cash equivalents balances.


                                       13
<PAGE>   14

                               i-STAT CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (continued)

      Net losses for the six months ended June 30, 1998 increased 28.1 percent
to approximately $10.9 million, or 71 cents per share, compared with a net loss
of $8.5 million, or 62 cents per share, for the six months ended June 30, 1997.
The weighted average number of shares used in computing basic and diluted net
loss per share was 15.363 million and 13.700 million in the 1998 and 1997
periods, respectively. The increase in the number of shares in 1998 primarily
reflects the private placement of 1.850 million shares in June 1997. The
increase in the net loss, in part reflects the reduction of deferred revenue
($1.5 million) and the charge for operations consolidation costs ($0.7 million)
discussed above.

LIQUIDITY AND CAPITAL RESOURCES

      At June 30, 1998, the Company had cash and cash equivalents of
approximately $22.0 million, a decline of approximately $10.9 million from the
December 31, 1997 balance of approximately $32.9 million. The decrease primarily
reflects approximately $7.6 million of cash used in operating activities and
equipment purchases of approximately $3.4 million during the six months ended
June 30, 1998. Working capital decreased by approximately $11.8 million from
$38.7 million to $26.9 million during the same period, primarily reflecting the
decrease in cash and cash equivalents, and an increase of approximately $1.4
million in accrued expenses. The increase in accrued expenses includes the
charge for operations consolidation expenses of approximately $0.7 million. The
Company expects its existing funds to continue to decline until its revenues are
sufficient to support its growth, but to be sufficient to meet its obligations
and its liquidity and capital requirements for the near term. Additional
liquidity is expected to be provided by the issuance of 2,000,000 shares of
common stock and the prepayments of future gross margin discussed below in
connection with the Long-term Sales, Marketing and Research Alliance. The
Company regularly monitors capital raising alternatives in order to take
advantage of opportunities to supplement its current working capital upon
favorable terms, including joint ventures, strategic corporate partnerships or
other alliances and the sale of equity and/or debt securities. The Company's
need, if any, to raise additional funds to meet its working capital and capital
requirements will depend upon numerous factors, including the results of its
marketing and sales activities, its new product development efforts,
manufacturing efficiencies and competitive conditions.

      The impact of inflation on the Company's business has been minimal and is
expected to be minimal for the near-term.

LONG-TERM SALES, MARKETING AND RESEARCH ALLIANCE

      On August 3, 1998, the Company and Abbott Laboratories ("Abbott") signed
agreements (the "Alliance Agreements") providing for a long-term sales,
marketing and research alliance. Abbott will become, subject to the existing
rights of the Company's other international distributors, the exclusive
worldwide distributor of the Company's hand-held blood analyzer products
(including cartridges) and any new products the Company may develop for use in
the professionally attended human healthcare delivery market. The closing of the
Alliance Agreements is expected to occur on or before the fifth business day
after the expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and satisfaction or waiver
of applicable closing conditions. Either party may terminate the Alliance
Agreements if the closing does not occur by December 11, 1998.

      Abbott will assume the Company's current product sales to U.S. customers
(the "Base Business") at no profit to Abbott, and the Company and Abbott will
share in the incremental profits derived from product sales beyond the Base
Business. Abbott will prepay to the Company a total of $25,000,000 during the
first three years of the Marketing and Distribution Agreement (the "Distribution
Agreement") as guaranteed future purchases of incremental units. Such
prepayments will be repaid by the Company to Abbott as a credit against actual
purchases by Abbott of incremental units above the Base Business. The parties
expect that distribution under the Distribution Agreement will commence in the
United States on January 1, 1999.

      The Distribution Agreement expires on December 31, 2003, subject to
automatic extensions for additional one-year periods, unless either party
provides the other with at least 12 months prior written notice, except that the
Company may terminate the Distribution Agreement on December 31, 2001 if Abbott
fails to achieve a three- year milestone


                                       14
<PAGE>   15

                               i-STAT CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                                   (continued)

minimum growth rate in sales of the Company's products covered by the
Distribution Agreement. If the Distribution Agreement is terminated, other than
(i) by the Company for cause or for Abbott's failure to achieve the three-year
milestone minimum growth rate; or (ii) by Abbott if Abbott delivers the
requisite notice terminating the Distribution Agreement after the initial term,
then, the Company will be obligated to pay to Abbott a one-time termination fee
calculated to compensate Abbott for a portion of its costs in undertaking the
distribution relationship, and residual payments for five years following
termination based on a percentage of Abbott's net sales of the Company's
products during the final twelve months of the Distribution Agreement. In the
event that such termination occurs within the first three years of the
Distribution Agreement, the Company also must refund Abbott for any gross margin
prepayments made and not yet credited to Abbott at the time of such termination.

      Under the terms of the Funded Research & Development and License Agreement
(the "Research Agreement"), the Company will conduct research and will develop
products primarily to be commercialized by Abbott. Such research and development
will be funded by Abbott and Abbott will have exclusive worldwide
commercialization rights to the products developed under the Research Agreement
subject to rights previously granted to third parties and certain other
limitations. The parties have identified two initial projects to pursue under
the Research Agreement, including the research and development of tests useful
in the diagnosis and treatment of myocardial infarction and coronary artery
disease. The Company and Abbott will jointly own the intellectual property which
is developed during the course of work performed under the Research Agreement.
In addition, Abbott will license certain of its intellectual property to the
Company which is necessary to develop and manufacture the products contemplated
by the Research Agreement. The Research Agreement terminates upon expiration or
termination of the Distribution Agreement, unless earlier terminated as provided
therein. Upon such expiration or earlier termination, both the Company and
Abbott will be permitted to distribute the products developed under the Research
Agreement in the territory covered by the Distribution Agreement.

      At the closing under the Stock Purchase Agreement, Abbott will purchase
2,000,000 shares (the "Purchased Shares") of the Company's Common Stock, par
value $0.15 per share, at a price of $11.35 per share, for an aggregate purchase
price of $22,700,000 before expenses. The Purchased Shares will represent, after
issuance, approximately 11.5% of the outstanding voting securities of the
Company. The Stock Purchase Agreement, together with a related Registration
Rights Agreement which is to be executed at closing, contains certain terms and
conditions pertaining to the voting and transfer of the Purchased Shares.

      In addition to the Distribution Agreement, the Research Agreement and the
Stock Purchase Agreement, on August 3, 1998, the Company and Abbott also entered
into a Standstill Agreement providing, among other things, for limitations on
Abbott's ability to purchase the Company's Common Stock, or to propose any
merger or business combination with the Company or purchase of a material
portion of the Company's assets.

      The foregoing description of the Alliance Agreements and the Registration
Rights Agreement is qualified in its entirety by reference to the actual text of
such agreements, copies of which are being filed with the Commission as exhibits
to this Quarterly Report on Form 10-Q.

      The alliance with Abbott is expected to strengthen the Company's marketing
and distribution capability, accelerate the development of new products, and
enhance liquidity.


                                       15
<PAGE>   16

                               i-STAT CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                   (continued)

IMPACT OF YEAR 2000

      The "Year 2000" issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

      Based on a recent assessment, the Company determined that it will be
required to modify some portions of its software so that its computer systems
will function properly with respect to dates in the year 2000 and thereafter.
The Company presently believes that with modifications to existing software and
conversions to new software, the Year 2000 issue will not pose significant
operational problems for its computer systems. However, if such modifications
and conversions are not made, or are not completed timely, the Year 2000 issue
could have a material impact on the operations of the Company.

      The Company has initiated formal communications with all of its
significant suppliers to determine the extent to which the Company is vulnerable
to those third parties' failure to remediate their own Year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company or a conversion that is incompatible with the
Company's system would not have an adverse effect on the Company's systems. The
Company has determined that it has no exposure to contingencies related to the
Year 2000 issue for the products it has sold.

      The Company will utilize both internal and external resources to reprogram
and test its computer software for Year 2000 modifications. The Company
anticipates completing the Year 2000 project prior to any anticipated impact on
its operating systems. The cost of the Year 2000 project is not expected to be
material, as the required changes to internally supported software are small
relative to the updates performed in the normal course of business and changes
to externally supported software are covered by service contracts. The
assessment of the costs of the project and the timing of the completion of Year
2000 modifications is based on management's best estimates, which were derived
utilizing numerous assumptions of future events, including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes, and similar
uncertainties.

      All statements contained in this management's discussion and analysis of
financial condition and results of operation other than statements of historical
financial information, are forward looking statements. Forward looking
statements include statements concerning plans, objectives, goals, strategies,
future events or performance and underlying assumptions and other statements
which are other than historical facts. Although the Company believes that its
expectations are based on reasonable assumptions, the Company operates in a high
technology, emerging market environment that involves significant risks and
uncertainties which may cause actual results to vary from such forward looking
statements and to vary significantly from reporting period to reporting period.
These risks include, among others, competition from existing manufacturers and
marketers of blood analysis products who have greater resources than the
Company, the uncertainty of new product development initiatives, difficulties in
transferring new technology to the manufacturing stage, market resistance to new
products and point-of-care blood diagnosis, domestic and international
regulatory constraints, uncertainties of international trade, pending and
potential disputes concerning ownership of intellectual property, dependence
upon strategic corporate partners for assistance in development of new markets
and other risks detailed from time to time in the Company's filings with the
Securities and Exchange Commission. The Company does not undertake to update the
results discussed herein as a result of changes in risks or operating results.


                                       16
<PAGE>   17

                               i-STAT CORPORATION

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is a defendant in a case entitled Nova Biomedical Corporation,
Plaintiff v. i-STAT Corporation, Defendant. The Complaint, which was filed in
the United States District Court for the District of Massachusetts on June 27,
1995, alleges infringement by i-STAT of Nova's U.S. Patent No. 4,686,479. In
February 1998, the Court entered summary judgment in favor of the Company on
the issue of patent infringement. Accordingly, the Company has been found not
to infringe, either literally or under the patent law "doctrine of
equivalents", Nova's patent. However, the plaintiff has appealed and should it
prevail on this issue, a prospect which the Company believes to be unlikely, it
could have a material impact on the financial position, results of operations
and cash flows of the Company. The Company had asserted and is pursuing
counterclaims under the antitrust laws alleging that Nova commenced the action
knowing that the patent was not infringed and that it had reason to believe
that the patent was invalid and unenforceable.

The Company is a defendant in a class action complaint entitled Susan Kaufman,
on behalf of herself and all other similarly situated, Plaintiff, v. i-STAT
Corporation, William P. Moffitt, Lionel M. Sterling, Imants R. Lauks and
Matthias Plum, Jr. The class action was brought by Susan Kaufman on her behalf
and on behalf of all purchasers of the Company's Common Stock between May 9,
1995 and March 19, 1996. The complaint, which was filed in the Superior Court of
New Jersey in Mercer County on June 19, 1996, alleges New Jersey common law
fraud and negligent misrepresentation, and is predicated on a "fraud on the
market" theory in connection with certain sales of i-STAT stock by the Company's
chief executive officer, chief technology officer and two outside directors
during a nine-month period. The plaintiffs seek unspecified compensatory
damages, interest and payment of all costs and expenses incurred in connection
with the class action. The Company believes the complaint is without merit and,
on April 28, 1998, the Court entered summary judgment in favor of all
defendants. However, the plaintiffs have appealed and, should they prevail in
this matter, it could have a material impact on the financial position, results
of operations and cash flows of the Company.

The Company is a defendant in a case entitled Customedix Corporation, Plaintiff
v. i-STAT Corporation, Defendant. The Complaint, which was filed in the United
States District Court for the District of Connecticut on December 26, 1996,
alleges infringement by i-STAT of Customedix's U.S. Patent No. 4,342,964. The
Plaintiff seeks injunctive relief and an accounting for i-STAT's profits and the
damages to Customedix from such alleged infringement. The case currently is in
the preliminary stages of discovery. The Company intends to contest the case
vigorously and does not believe that it has infringed the Customedix patent. The
Company has obtained an opinion from recognized patent counsel to the effect
that no infringement has occurred. However, if the plaintiff should prevail in
this matter, it could have a material impact on the financial position, results
of operation and cash flows of the Company.


                                       17
<PAGE>   18

                               i-STAT CORPORATION

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

      The company held its Annual Meeting of Stockholders on May 29, 1998, at
which time three matters were submitted to a vote of stockholders. A description
of the matters voted upon and a voting tabulation for each matter is as follows:

      I.    Election of seven members to the Board of Directors, each to serve
            until the next annual meeting.

<TABLE>
<CAPTION>
                                                   Number of Votes
                                       -------------------------------------------------------------
            Name of Nominee               For      Against/Withheld   Abstentions   Broker Non-Votes
            ----------------------------------------------------------------------------------------
            <S>                        <C>             <C>                <C>              <C>
            J. Robert Buchanan, M.D    11,141,703      334,940            N/A              N/A
            ----------------------------------------------------------------------------------------
            Curtis J. Crawford         11,141,903      334,740            N/A              N/A
            ----------------------------------------------------------------------------------------
            James A. Cyrier            10,977,803      498,840            N/A              N/A
            ----------------------------------------------------------------------------------------
            Richard Hodgson            11,141,603      335,040            N/A              N/A
            ----------------------------------------------------------------------------------------
            Imants R. Lauks            11,141,903      334,740            N/A              N/A
            ----------------------------------------------------------------------------------------
            William P. Moffitt         11,140,228      336,415            N/A              N/A
            ----------------------------------------------------------------------------------------
            Lionel N. Sterling         11,141,903      334,740            N/A              N/A
            ----------------------------------------------------------------------------------------
</TABLE>

      II.   Approval of the Company's 1998 Stock Option Plan.

<TABLE>
<CAPTION>
                                                   Number of Votes
                                       -------------------------------------------------------------
                                          For      Against/Withheld   Abstentions   Broker Non-Votes
                                       -------------------------------------------------------------
                                        <S>          <C>              <C>                  <C>
                                        5,217,765    2,472,496        334,108              N/A
</TABLE>

      III.  Ratification of the appointment of Coopers & Lybrand L.L.P., now
            known as PricewaterhouseCoopers L.L.P., as independent accountants
            to audit the Company's books and accounts for the year 1998.

<TABLE>
<CAPTION>
                                                   Number of Votes
                                       -------------------------------------------------------------
                                          For      Against/Withheld   Abstentions   Broker Non-Votes
                                       -------------------------------------------------------------
                                       <S>              <C>            <C>                 <C>
                                       11,430,778       29,157         16,708              N/A
</TABLE>


                                       18
<PAGE>   19

                               i-STAT CORPORATION

ITEM  6.    EXHIBITS AND REPORTS ON FORM 8-K

            (a)   Exhibits

                  3.1     Restated Certificate of Incorporation (Form S-8/S-3
                          Registration Statement, File No. 33-48889)*

                  3.2     By-Laws (Form 10-K for fiscal year ended December 31,
                          1996)*

                  3.3     Certificate of Designation, Preferences and Rights of
                          Series A Preferred Stock (Form 8-K, dated July 10,
                          1995 and amended on September 11, 1995)*

                  3.4     Certificate of Designation, Preferences and Rights of
                          Series B Preferred Stock (Form 8-K, dated July 10,
                          1995 and amended on September 11, 1995)*

                  4.1     Stockholder Protection Agreement, dated as of June 26,
                          1995, between Registrant and First Fidelity Bank,
                          National Association (Form 8-K, dated July 10, 1995
                          and amended on September 11, 1995)*

                  10.41   Lease Agreement, dated July 16, 1998, between
                          Brandywine Operating Partnership L.P. and Registrant
                          

                  10.42   Common Stock Purchase Agreement, dated as of August 3,
                          1998, between Registrant and Abbott Laboratories

                  10.43   Standstill Agreement, dated as of August 3, 1998,
                          between Registrant and Abbott Laboratories

                  10.44   Form of Registration Rights Agreement to be entered
                          into by Registrant and Abbott Laboratories

                **10.45   Marketing and Distribution Agreement, dated as of
                          August 3, 1998, between Registrant and Abbott
                          Laboratories

                **10.46   Funded Research & Development and License Agreement,
                          dated as of August 3, 1998, between Registrant and
                          Abbott Laboratories

                  27      Financial Data Schedule

                  *       These items are hereby incorporated by reference from
                          the exhibits of the filing or report indicated (except
                          where noted, Commission File No. 0-19841) and are
                          hereby made a part of this Report.

                  **      Confidential treatment requested as to certain
                          provisions

            (b)   Reports on Form 8-K

                  During the quarter for which this Report on Form 10-Q is
                  filed, no reports on Form 8-K were filed.


                                       19
<PAGE>   20

                               i-STAT CORPORATION

                                   SIGNATURES

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


DATE: August 14, 1998

                                               i-STAT CORPORATION
                                                   (Registrant)


                                           BY: /s/ William P. Moffitt
                                               --------------------------
                                               William P. Moffitt
                                               President and Chief
                                               Executive Officer
                                               (Principal Executive Officer)


                                           BY: /s/ Roger J. Mason
                                               --------------------------
                                               Roger J. Mason
                                               Vice President of Finance,
                                               Treasurer and Chief
                                               Financial Officer
                                               (Principal Financial Officer and
                                               Accounting Officer)


                                       20
<PAGE>   21

                                  EXHIBIT INDEX

EXHIBIT NO.
-----------

10.41   Lease Agreement, dated July 16, 1998, between Brandywine Operating
        Partnership L.P. and Registrant

10.42   Common Stock Purchase Agreement, dated as of August 3, 1998, between
        Registrant and Abbott Laboratories

10.43   Standstill Agreement, dated as of August 3, 1998, between Registrant and
        Abbott Laboratories

10.44   Form of Registration Rights Agreement to be entered into by Registrant
        and Abbott Laboratories

10.45   Marketing and Distribution Agreement, dated as of August 3, 1998,
        between Registrant and Abbott Laboratories

10.46   Funded Research & Development and License Agreement, dated as of August
        3, 1998, between Registrant and Abbott Laboratories

27      Financial Data Schedule