<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[ X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended                JUNE 30, 1998
                                -----------------------------------------------

                                       or

[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

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

Commission File Number:                  0-21330
                        -------------------------------------------------------

                           AVECOR CARDIOVASCULAR INC.
                       ----------------------------------
             (Exact name of registrant as specified in its charter)

               MINNESOTA                              41-1695729
-------------------------------------     -------------------------------------
   (State or other jurisdiction of          (I.R.S. Employer Identification No.)
    incorporation or organization)

   7611 NORTHLAND DRIVE, MINNEAPOLIS, MINNESOTA                 55428
--------------------------------------------------------------------------------
(Address of principal executive offices)                      (Zip Code)


                                 (612) 391-9000
--------------------------------------------------------------------------------
              (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 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.

                                                      [ X ]  Yes    [   ]  No

         As of August 3, 1998, there were 8,044,475 shares of the registrant's
$.01 par value Common Stock outstanding.



<PAGE>


                                      INDEX

<TABLE>
<CAPTION>

Part I.           FINANCIAL  INFORMATION                                                    Page(s)
                                                                                            -------
<S>               <C>                                                                       <C>

      Item 1.     Financial Statements

                  Consolidated Balance Sheets as of June 30, 1998 (Unaudited)
                  and December 31, 1997                                                              3

                  Consolidated Statements of Operations for the three and six months
                  ended June 30, 1998 and 1997  (Unaudited)                                          4

                  Consolidated Statements of Cash Flows for six months ended
                  June 30, 1998 and 1997  (Unaudited)                                                5

                  Notes to Consolidated Financial Statements  (Unaudited)                      6  -  8

      Item 2.     Management's Discussion and Analysis of Financial Condition and
                  Results of Operations                                                        9  -  16

      Item 3.     Quantitative and Qualitative Disclosures About Market Risk                         16

Part II.          OTHER  INFORMATION

      Item 1.     Legal Proceedings.                                                                 17

      Item 2.     Changes in Securities and Use of Proceeds.                                         17

      Item 3.     Defaults Upon Senior Securities.                                                   17

      Item 4.     Submission of Matters to a Vote of Security Holders.                        17  -  18

      Item 5.     Other Information.                                                          18  -  19

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


SIGNATURES                                                                                           20

EXHIBIT  INDEX                                                                                       21

</TABLE>


                                       2

<PAGE>



PART  I.  FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                           AVECOR CARDIOVASCULAR INC.

                           CONSOLIDATED BALANCE SHEETS
                            ------------------------

<TABLE>
<CAPTION>

              ASSETS                                              June 30,                   December 31,
                                                                    1998                         1997
                                                             --------------------         -------------------
                                                                (Unaudited)
<S>                                                         <C>                           <C>
Current assets:
   Cash and cash equivalents                                          $3,837,000                  $1,215,000
   Short-term investments                                              1,966,000                   3,727,000
   Accounts receivable, net                                            9,443,000                   8,277,000
   Inventories                                                        10,837,000                  10,634,000
   Deferred taxes                                                      1,315,000                   1,315,000
   Other current assets                                                  412,000                     330,000
                                                             --------------------         -------------------
      Total current assets                                            27,810,000                  25,498,000

Property, plant and equipment, net                                    17,658,000                  16,689,000
Other assets                                                             581,000                     572,000
                                                             --------------------         -------------------

      Total assets                                                   $46,049,000                 $42,759,000
                                                             --------------------         -------------------
                                                             --------------------         -------------------

            LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                   $3,845,000                  $1,978,000
   Accrued expenses                                                    3,733,000                   3,058,000
   Current portion of long-term debt                                     258,000                     258,000
                                                             --------------------         -------------------
      Total current liabilities                                        7,836,000                   5,294,000

Deferred grant                                                           136,000                     153,000
Long-term debt                                                         4,632,000                   4,694,000

Shareholders' equity:
   Serial preferred stock, par value $.01 per share;
      authorized 2,000,000 shares; none
      issued 
   Common stock, par value $.01 per
      share; authorized 20,000,000 shares;
      issued and outstanding shares 8,042,000
      and 8,021,000 shares at June 30, 1998 and
      December 31, 1997, respectively                                     80,000                      80,000 
   Additional paid-in capital                                         30,622,000                  30,482,000
   Retained earnings                                                   2,566,000                   1,936,000
   Cumulative translation adjustments                                    177,000                     120,000
                                                             --------------------         -------------------
      Total shareholders' equity                                      33,445,000                  32,618,000
                                                             --------------------         -------------------

      Total liabilities and shareholders' equity                     $46,049,000                 $42,759,000
                                                             --------------------         -------------------
                                                             --------------------         -------------------
</TABLE>

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


                                      3

<PAGE>


                           AVECOR CARDIOVASCULAR INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                                         Three months ended                          Six months ended
                                                             June 30,                                    June 30,
                                              ---------------------------------------    --------------------------------------
                                                    1998                  1997                 1998                  1997
                                              ------------------   ------------------    ------------------   -----------------
<S>                                           <C>                  <C>                   <C>                  <C>

Net sales                                           $13,565,000          $11,961,000           $26,021,000         $24,004,000
Cost of sales                                         7,963,000            6,900,000            15,437,000          13,960,000
                                              ------------------   ------------------    ------------------   -----------------

       Gross profit                                   5,602,000            5,061,000            10,584,000          10,044,000

Operating expenses:
   Selling, general and
       administrative                                 4,075,000            3,482,000             7,883,000           6,832,000
   Research and development                             895,000              974,000             1,726,000           2,076,000
                                              ------------------   ------------------    ------------------   -----------------

       Operating income                                 632,000              605,000               975,000           1,136,000

   Interest income                                       78,000              129,000               164,000             273,000
   Interest expense                                     (99,000)            (105,000)             (199,000)           (176,000)
                                              ------------------   ------------------    ------------------   -----------------

Income before income taxes                              611,000              629,000               940,000           1,233,000
Income tax provision                                    201,000              226,000               310,000             443,000
                                              ------------------   ------------------    ------------------   -----------------

        Net income                                     $410,000             $403,000              $630,000            $790,000
                                              ------------------   ------------------    ------------------   -----------------
                                              ------------------   ------------------    ------------------   -----------------

Earnings per share:
   Basic                                                  $0.05                $0.05                 $0.08               $0.10
                                              ------------------   ------------------    ------------------   -----------------
                                              ------------------   ------------------    ------------------   -----------------

   Diluted                                                $0.05                $0.05                 $0.08               $0.10
                                              ------------------   ------------------    ------------------   -----------------
                                              ------------------   ------------------    ------------------   -----------------

Weighted average common shares
   outstanding                                        8,032,000            7,914,000             8,027,000           7,880,000

   Common equivalents:
      Options                                             2,000               63,000                 2,000              97,000
      Warrants                                                -                2,000                     -               2,000
                                              ------------------   ------------------    ------------------   -----------------

Weighted average common and
   common equivalents                                 8,034,000            7,979,000             8,029,000           7,979,000
                                              ------------------   ------------------    ------------------   -----------------
                                              ------------------   ------------------    ------------------   -----------------

</TABLE>

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


                                       4

<PAGE>

                           AVECOR CARDIOVASCULAR INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                   For the six months ended June 30,
                                                                            ------------------------------------------------
                                                                                   1998                         1997
                                                                            -------------------          -------------------
<S>                                                                         <C>                          <C>

Cash flows from operating activities:
      Net income                                                                      $630,000                     $790,000
      Adjustments to reconcile net income to net cash provided by
      operating activities:
          Depreciation and amortization                                              1,191,000                      737,000
          Accretion of discount on investments                                         (83,000)                    (170,000)
          Changes in operating assets and liabilities:
               Accounts receivable                                                  (1,118,000)                  (1,524,000)
               Inventories                                                            (197,000)                    (782,000)
               Other current assets                                                    (80,000)                     277,000
               Accounts payable                                                      1,845,000                      758,000
               Accrued expenses                                                        660,000                      393,000
                                                                            -------------------          -------------------
                   Net cash provided by operating activities                         2,848,000                      479,000
                                                                            -------------------          -------------------

Cash flows from investing activities:
      Purchase of property, plant and equipment                                     (2,090,000)                  (9,911,000)
      Purchase of investments                                                                -                   (8,768,000)
      Proceeds upon sale or maturity of short-term investments                       1,844,000                    5,140,000
      Cash and investments restricted as to use                                              -                    3,450,000
      Increase in other assets                                                         (11,000)                    (154,000)
                                                                            -------------------          -------------------
          Net cash used in investing activities                                       (257,000)                 (10,243,000)
                                                                            -------------------          -------------------

Cash flows from financing activities:
      Net proceeds from sales of common stock                                          140,000                      130,000
      Net proceeds from options exercised                                                    -                      582,000
      Borrowings on long-term debt                                                           -                    5,167,000
      Principal payments on long-term debt                                            (129,000)                     (86,000)
                                                                            -------------------          -------------------
          Net cash provided by financing activities                                     11,000                    5,793,000
                                                                            -------------------          -------------------

Effect of exchange rates on cash                                                        20,000                      (35,000)
                                                                            -------------------          -------------------

Net increase (decrease) in cash and cash equivalents                                 2,622,000                   (4,006,000)

Cash and cash equivalents at beginning of period                                     1,215,000                    6,114,000
                                                                            -------------------          -------------------

Cash and cash equivalents at end of period                                          $3,837,000                   $2,108,000
                                                                            -------------------          -------------------
                                                                            -------------------          -------------------

Significant non-cash investing and financing transactions:
      Acquistion of equipment through capital leases                                   $67,000                            -
                                                                            -------------------          -------------------
                                                                            -------------------          -------------------

      Use of restricted funds for purchase of the U.S. facility                              -                   $1,000,000
                                                                            -------------------          -------------------
                                                                            -------------------          -------------------
</TABLE>

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

                                     5
<PAGE>

                           AVECOR CARDIOVASCULAR INC.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

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

1.   BASIS OF PRESENTATION

     The consolidated financial statements included in this Form 10-Q have been
prepared by AVECOR Cardiovascular Inc. (the Company), without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission (SEC).
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 these rules and regulations. The
year-end balance sheet was derived from audited financial statements, but does
not include all disclosures required by generally accepted accounting
principles. These unaudited consolidated interim financial statements should be
read in conjunction with the financial statements and related notes included in
the Company's 1997 Annual Report on Form 10-K as filed with the SEC.

     The consolidated interim financial statements presented herein as of June
30, 1998 and for the three and six month periods ended June 30, 1998 and 1997
reflect, in the opinion of management, all adjustments (which include only
normal, recurring adjustments) necessary for a fair presentation of financial
position and the results of operations and cash flows for the periods presented.
The results of operations for any interim period are not necessarily indicative
of results for the full year.

2.   ORGANIZATION

     The Company was incorporated on December 13, 1990. The Company designs,
develops, manufactures and markets specialty medical devices for heart/lung
bypass surgery and long-term respiratory support.

     The consolidated financial statements include the accounts of AVECOR
Cardiovascular Inc. and its wholly-owned subsidiaries, AVECOR Cardiovascular
Ltd. and AVECOR Foreign Sales Corporation after elimination of all significant
intercompany transactions and accounts.


                                      6

<PAGE>


3.   INVENTORIES

     Inventories consist of the following:

<TABLE>
<CAPTION>
                                                      June 30,                   December 31,
                                                       1998                         1997
                                                --------------------         --------------------
                                                    (Unaudited)
<S>                                              <C>                         <C>
            Raw materials                                $3,735,000                   $3,758,000
            Work-in-process                               2,121,000                    2,189,000
            Finished goods                                4,981,000                    4,687,000
                                                --------------------         --------------------

                                                        $10,837,000                  $10,634,000
                                                --------------------         --------------------
                                                --------------------         --------------------
</TABLE>


4.   INDUSTRY SEGMENT INFORMATION

     The Company distributes its products through its direct sales force and
independent sales representatives in the United States, Canada, the United
Kingdom and France. Additionally, the Company distributes its products through
foreign independent distributors who then market the products directly to
medical institutions. No one independent distributor or other customer accounted
for 10% or more of the Company's net sales for the six months ended June 30,
1998 or 1997.

     Total export sales from the U.S. to unaffiliated entities (primarily to
Europe and payable in U.S. dollars) were $1,960,000 and $3,338,000 for the three
and six month periods ended June 30, 1998, respectively, compared to $1,248,000
and $2,563,000 for the three and six month periods ended June 30, 1997,
respectively. Sales to customers located outside of the United States were
approximately 41% and 40% of net sales for the three and six month periods ended
June 30, 1998, respectively, compared to 41% for the three and six month periods
ended June 30, 1997.

     At June 30, 1998 and December 31, 1997, consolidated accounts receivable
included $4,943,000 and $4,366,000, respectively, due from customers located
outside of the U.S.

     In June 1997, the Financial Accounting Standards Board issued Statement
131, "Disclosures About Segments of an Enterprise and Related Information," a
new standard of reporting information about operating or business segments in
financial statements. The new standard will be effective for the Company's
annual financial statements in 1998. Although the Company has not specifically
evaluated what impact, if any, this new standard will have on the Company's
current reporting of operating and business segments, the Company believes it
will continue reporting as one operating and business segment.

5.   COMPREHENSIVE INCOME

     In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." The standard
requires the display and reporting of comprehensive income, which includes all
changes in shareholders' equity with the 


                                       7

<PAGE>


exception of additional investments by shareholders or distributions to 
shareholders. Comprehensive income for the Company includes net income and 
foreign currency translation which is charged or credited to the cumulative 
translation account within shareholders' equity. Comprehensive income for the 
three and six months ended June 30, 1998 and 1997 and the year ended December 
31, 1997, was as follows:

<TABLE>
<CAPTION>

                                   Three Months Ended                  Six Months Ended,              Year Ended
                                        June 30,                           June 30,                  December 31,
                                  1998             1997              1998             1997               1997
                              -------------     ------------     -------------    -------------    ------------------
<S>                           <C>               <C>              <C>              <C>               <C>
Net income                      $410,000          $403,000         $630,000         $790,000           $1,327,000

Changes in cumulative
  translation                     (9,000)           74,000           58,000          (90,000)            (107,000)
                              -------------     ------------     -------------    -------------    ------------------

Comprehensive income            $401,000          $477,000         $688,000         $700,000           $1,220,000
                              -------------     ------------     -------------    -------------    ------------------
                              -------------     ------------     -------------    -------------    ------------------

</TABLE>


6.   PATENT MATTERS

     In March 1997, the Company filed suit in U.S. District Court for the
District of Minnesota, seeking to invalidate a newly issued U.S. patent held by
a competing manufacturer of blood oxygenators and other medical devices, and
requesting a determination that the Company's Affinity oxygenator does not
infringe the competitor's patent. The Company filed suit in response to a
December 1996 letter from the competitor, alleging that the Affinity oxygenator
infringes certain claims under the competitor's patent, and requesting
discussion regarding a possible license agreement. The Company reviewed the
subject patent and concluded, based on an opinion from its patent counsel, that
none of the claims in the patent are infringed by the Affinity oxygenator, and
that the patent is, in any event, invalid. On October 6, 1997, the Magistrate
Judge of the U.S. District Court vacated a previous order and granted a stay in
the proceedings, including the suspension of discovery, pending the outcome of
the competitor's request for re-issuance of the aforementioned patent. The
expense and effort potentially required to bring this action, as well as the
outcome of any counterclaim successfully brought against the Company by the
competitor, could have a material adverse effect on the Company's business,
financial condition and results of operations. See Part II, Item 1, "Legal
Proceedings."

7.   ACQUISITION OF THE COMPANY

     On July 12, 1998, Medtronic, Inc. ("Medtronic") and the Company entered 
into an agreement under which Medtronic will acquire the Company in a 
transaction valued at approximately $91 million. The transaction calls for 
the Company's shareholders to receive $11.125 in Medtronic stock for each 
share of the Company's stock they hold at the transaction close date. In 
addition to shareholder approval, the transaction is subject to customary 
conditions including Hart-Scott-Rodino clearance. The companies expect 
completion of the transaction in late 1998. See Part II, Item 5, "Other 
Information."

                                       8

<PAGE>





ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

     The following is a discussion of the results of operations and financial
condition for the three and six month periods ended June 30, 1998 compared with
the three and six month periods ended June 30, 1997 and should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto.

OVERVIEW

     AVECOR Cardiovascular Inc. (the "Company") develops, manufactures and
markets specialty medical devices for heart/lung bypass surgery and long-term
respiratory support. The Company was incorporated on December 13, 1990, and in
June 1991, acquired the business and assets and assumed certain liabilities of
the surgical division of SCIMED Life Systems, Inc. (the "Predecessor Business").
On December 1, 1992, the Company acquired AVECOR Cardiovascular Ltd. (formerly
Cardio Med Ltd.), which previously had been a distributor for the Company in the
United Kingdom. In October 1995, the Company opened a sales office in France
which is organized as a wholly-owned subsidiary of AVECOR Cardiovascular Ltd.

     The assets acquired by the Company from the Predecessor Business included
the Company's line of solid silicone membrane oxygenators. Since that time, the
Company has engaged in extensive product development, resulting in the
introduction and receipt of regulatory approval from the U.S. Food and Drug
Administration (the "FDA") for the following proprietary products:

<TABLE>
<CAPTION>
                                        PRODUCT                                 APPROVAL DATE
     ---------------------------------------------------------------------- ---------------------
     <S>                                                                    <C>
     MYOtherm cardioplegia delivery system................................  October 1991
 
     Signature custom tubing packs........................................  July 1993

     Affinity oxygenator..................................................  November 1993

     Affinity blood reservoirs............................................  July 1994

     Affinity arterial filter.............................................  October 1995

     MYOtherm XP (improved cardioplegia delivery system)..................  July 1997

     Affinity blood pump..................................................  August 1997

     Affinity oxygenator with Trillium bio-passive surface................  February 1998

</TABLE>

ACQUISITION OF THE COMPANY

     On July 12, 1998, Medtronic, Inc. ("Medtronic") and the Company entered 
into an agreement under which Medtronic will acquire the Company in a 
transaction valued at approximately $91 million. The transaction calls for 
the Company's shareholders to receive $11.125 in Medtronic stock for each 
share of the Company's stock they hold at the transaction close date. In 
addition to shareholder approval, the transaction is subject to customary 
conditions including Hart-Scott-Rodino clearance. The companies expect 
completion of the transaction in late 1998.

                                       9

<PAGE>


RESULTS OF OPERATIONS

NET SALES

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 
1997

     Net sales increased 13% to $13,565,000 for the three months ended June 30,
1998 from $11,961,000 for the three months ended June 30, 1997. This increase
was primarily the result of a higher volume of product shipments of the
Company's Affinity line, Signature custom tubing pack line and the silicone
membrane oxygenator line. Sales growth in the Affinity line was positively
influenced by revenues from the Affinity blood pump. U.S. marketing approval for
the blood pump was received from the FDA in August 1997. Overall, average prices
of product shipments declined slightly when compared to the corresponding period
in 1997, principally due to competitive pressures.

     Sales from the Affinity, Signature custom tubing pack and silicone membrane
oxygenator lines increased approximately $974,000 (14.5%), $319,000 (12.7%) and
$234,000 (13.6%), respectively, during the three months ended June 30, 1998 as
compared to the three months ended June 30, 1997.

     During the third quarter of 1997, the Company terminated agreements with 
its last remaining United States distributor and its only Canadian 
distributor. These markets are now being served by the Company's direct sales 
force. Sales in the territories formerly represented by these distributors 
increased approximately $650,000 in the three month period ended June 30, 
1998 as compared to the corresponding period in 1997. The Company cannot be 
certain whether revenues in these territories will be maintained, improve or 
decline.

     Sales to customers located outside of the United States were approximately
41% of net sales for each of the three month periods ended June 30, 1998 and
1997.

     The Company has continued to experience decreased sales to contract
perfusion groups controlled by certain of its competitors. Sales to contract
perfusion groups controlled by one of the Company's competitors decreased
$235,000 to $117,000 for the three months ended June 30, 1998 from $352,000 for
the three months ended June 30, 1997. The Company believes that control of
contract perfusion groups by its competitors will continue to have a negative
impact on the Company's ability to market its products to such groups or to
hospitals or other medical providers that contract with competitor-controlled
groups for perfusion services, and could have a material adverse effect on the
Company's business, financial condition and results of operation. This
forward-looking statement is subject to the degree of control exerted by the
Company's competitors with respect to purchasing decisions made by controlled
groups of perfusionists, the extent of future acquisitions of contract perfusion
groups by the Company's competitors, the breadth of the Company's product
offerings relative to those competitors controlling contract perfusion groups,
and the degree to which the Company's research and development and marketing
efforts result in the successful commercialization of products with enhanced or
superior performance characteristics.


                                   10

<PAGE>


SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997

     Net sales increased 8% to $26,021,000 for the six months ended June 30,
1998 from $24,004,000 for the six months ended June 30, 1997. This increase was
primarily the result of a higher volume of product shipments of the Company's
Signature custom tubing pack line, Affinity line and the Myotherm cardioplegia
line. The Company received FDA marketing approval for a new Affinity blood pump
in August 1997 and the Myotherm XP cardioplegia delivery system in July 1997.
These products positively influenced the comparative sales growth. Overall,
average prices of product shipments declined slightly when compared to the
corresponding period in 1997, principally due to competitive pressures.

     Sales from the Signature custom tubing pack, Affinity and Myotherm
cardioplegia lines increased approximately $789,000 (16.5%), $784,000 (5.8%) and
$269,000 (13.8%), respectively, during the six months ended June 30, 1998 as
compared to the corresponding period in 1997.

     As noted above, the Company terminated agreements with its last 
remaining United States distributor and its only Canadian distributor during 
the third quarter of 1997 and these markets are now being served by the 
Company's direct sales force. Sales in the territories formerly represented 
by these distributors increased approximately $1,200,000 in the six months 
ended June 30, 1998 as compared to the six months ended June 30, 1997. The 
Company cannot be certain whether revenues in these territories will be 
maintained, improve or decline.

     Sales to customers located outside of the United States were approximately
40% and 41% of net sales for the six month periods ended June 30, 1998 and 1997,
respectively.

     Sales to contract perfusion groups controlled by one of the Company's
competitors decreased $458,000 to $258,000 for the six months ended June 30,
1998 from $716,000 for the six months ended June 30, 1997.

COST OF SALES / GROSS PROFIT

     Gross profit as a percentage of net sales decreased 1.0% to 41.3% for 
the three months ended June 30, 1998 from 42.3% for the three months ended 
June 30, 1997. Similarly, gross profit as a percentage of net sales decreased 
1.1% to 40.7% for the six months ended June 30, 1998 from 41.8% for the six 
months ended June 30, 1997. The gross profit percentage for the three and six 
month periods ended June 30, 1998 was unfavorably impacted by significant 
increases in sales of the Company's lower-margin Signature custom tubing pack 
line as well as competitive pricing pressures in the marketplace. Gross 
margins during the six month period ended June 30, 1998 were also negatively 
impacted by the lower production volumes experienced late in the fourth 
quarter of 1997 which continued into the first quarter of 1998. The mix of 
products sold in any period will influence the cost of sales and gross profit 
for the period.

     Affinity oxygenator product costs continued to decline due to efficiency
and material cost improvements, although these improvements were largely offset
by an ongoing decrease in average selling prices.


                                        11

<PAGE>

     The Company's future gross profit margin percentages will be influenced by
the ongoing pressures of the competitive pricing environment, changes in the
sales mix, the required levels of production, new product introductions and the
extent of further product cost improvements through increased manufacturing
efficiencies and reduced material costs, if any. Given the uncertainty
associated with new product introductions, the ultimate realization of any such
product cost improvements and the continuing price pressures characteristic of
the Company's markets, the Company cannot be certain if its gross profit margin
will be maintained, improve or decline.

SELLING, GENERAL AND ADMINISTRATIVE

     Selling, general and administrative expenses increased 17% to $4,075,000
for the three months ended June 30, 1998 from $3,482,000 for the three months
ended June 30, 1997. Selling, general and administrative expenses increased 15%
to $7,883,000 for the six months ended June 30, 1998 from $6,832,000 for the six
months ended June 30, 1997. These increases are primarily attributed to costs
associated with the continuing development of a direct sales force in certain of
the Company's territories formerly served by distributors and independent sales
representatives, marketing costs incurred for the introduction of new products,
including the Affinity blood pump, and increased seasonal trade show costs.
Various costs associated with the acquisition of the Company also contributed to
the incremental increase in selling, general and administrative expenses during
the three and six month periods ended June 30, 1998 as compared to the
corresponding periods in 1997. As a percent of sales, selling, general and
administrative expenses increased to 30.0% and 30.3% for the three and six month
periods ended June 30, 1998, respectively, from 29.1% and 28.5% for the three
and six month periods ended June 30, 1997, respectively.

     Without considering the impact of the acquisition of the Company,
management anticipates that selling, general and administrative expenses for
1998 will be higher than 1997 and will approximate 1997 levels as a percentage
of sales. These forward-looking statements will be influenced by revenue
increases achieved by the Company, its ability to attract and retain qualified
sales personnel as the Company continues to develop its direct sales force, and
the timing and extent of promotional activities associated with the Affinity
oxygenator with Trillium bio-passive surface, the new oxygen saturation/hemocrit
monitor and other new product introductions, if any.

RESEARCH AND DEVELOPMENT

     Research and development expenses decreased 8% to $895,000 from $974,000
for the three month period ended June 30, 1998 and decreased 17% to $1,726,000
from $2,076,000 for the six month periods ended June 30, 1997. This decreased
spending is a result of the transition from the completion or near completion of
major projects including the Affinity blood pump, Myotherm XP and the Affinity
oxygenator with Trillium bio-passive surface to a new generation of products
including the new oxygen saturation/hematocrit monitor.

     Without considering the impact of the acquisition of the Company,
management anticipates that research and development expenses for 1998 will
approximate 1997 levels, as the Company continues to expand and improve its
proprietary line of disposable medical devices. This forward-looking projection
is dependent upon the extent and timing of new product 


                                      12

<PAGE>


development and the impact of the regulatory process in obtaining marketing 
clearance for new products, including the new oxygen saturation/hematocrit 
device which was submitted for approval to the FDA near the end of the second 
quarter of 1998, and the extent of expenses related to research studies 
commenced in an attempt to prove the clinical efficacy and, thus, market 
advantage of the Trillium coating. The need or desire to modify the Company's 
existing products could also influence the level of research and development 
expenses. There can be no assurance, however, that the Company's research and 
development efforts will result in any additional regulatory submissions to 
the FDA or will result in any commercially successful products. The 
forward-looking statements regarding anticipated regulatory submissions 
contained in this paragraph will be impacted by the results of the Company's 
development efforts, the availability of any required clinical data, any 
changes in the regulatory scheme for such products, and the Company's 
assessment of the cost and anticipated benefit of such submissions.

INTEREST INCOME AND EXPENSE

     Interest income decreased to $78,000 for the three months ended June 30,
1998 from $129,000 for the three months ended June 30, 1997. Similarly, interest
income decreased to $164,000 for the six months ended June 30, 1998 from
$273,000 for the six months ended June 30, 1997. This decrease in interest
income is primarily due to the use of cash and cash equivalents and investments
for the purchase of manufacturing molds and equipment and additional inventories
needed to support the Company's new products and revenue growth. At June 30,
1998, the majority of the Company's cash and cash equivalents were invested with
two investment portfolio managers who invested in bank certificates of deposit,
U.S. government securities, agency paper, money markets, commercial paper and
corporate obligations.

     Interest expense for the three and six month periods ended June 30, 1998
was $99,000 and $199,000, respectively, compared to $105,000 and $176,000 for
the three and six month periods ended June 30, 1997, respectively. The interest
expense was exclusively due to the mortgage on the Company's U.S. facility. The
closing on the facility purchase occurred in late January 1997.

INCOME TAX PROVISION

     For the three and six month periods ended June 30, 1998 tax provisions of
$201,000 and $310,000 were recorded compared to tax provisions of $226,000 and
$443,000 for three and six month periods ended June 30, 1997. The tax provisions
recorded correspond to the pretax income for those respective periods. These
provisions vary from the statutory U.S. federal corporate rate primarily due to
losses incurred by the Company's French subsidiary for which no tax benefit has
been recognized because of uncertainty of realization, partially offset by the
generation of research and experimentation credits.

NET INCOME

     Net income was $410,000 or $.05 per share, on a diluted basis, and $630,000
or $.08 per share, on a diluted basis, for the three and six month periods ended
June 30, 1998, respectively, compared to $403,000 or $.05 per share, on a
diluted basis, and $790,000 or $.10 per share, on a diluted basis, for the three
and six month periods ended June 30, 1997, respectively.


                                      13

<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

     For the six months ended June 30, 1998, the Company's operating activities
provided net cash of $2,848,000 compared to $479,000 provided by operating
activities for the same period in 1997. Net income after adjustments for
depreciation and amortization was $294,000 greater in the six months ended June
30, 1998 as compared to the same period in 1997. The net change of approximately
$2,369,000 is primarily the result of increased accounts payable balances
principally due to the timing of check runs and increased accrued expenses, and
smaller increases in inventories and accounts receivable when compared to the
six months ended June 30, 1997. These net sources of cash were partially offset
by the use of cash for increased other current assets during the six months
ended June 30, 1998.

     Cash expenditures for capital additions totaled $2,090,000 for the six
months ended June 30, 1998 compared to $1,911,000 for six months ended June 30,
1997 when excluding the 1997 cash expenditures for the Company's U.S. facility
and related furniture, fixtures and equipment. These expenditures were primarily
related to equipment, molds and tooling necessary to further production,
increase production efficiencies, improve quality and reduce raw material costs
of the Affinity blood pump, Myotherm XP and the Affinity oxygenator and related
blood reservoirs. The investment in equipment for the six months ended June 30,
1998 includes $300,000 related to the Affinity blood pump. This pump equipment
is placed with customers in exchange for a long-term commitment to purchase
disposable products from the Company.

     Without considering the impact of the acquisition of the Company,
management anticipates capital expenditures for 1998 will be approximately
$4,000,000. This estimate includes additional equipment, molds and tooling for
the new oxygen saturation/hematocrit device, Affinity blood pump, Myotherm XP,
and for furthering production and related efficiencies of the Affinity
oxygenator line.

     The Company believes that its existing cash and cash equivalents and
investments as well as anticipated cash generated from operations will be
sufficient to satisfy the Company's cash requirements for the foreseeable
future.

     The foregoing forward-looking statements relating to the amount of capital
expenditures and ultimate cash usage are dependent on the progress of the
Company's product development efforts, the outcome of certain patent matters
(see Note 6), the timing of the receipt of FDA marketing clearances for any
future products and the investment made in opportunities to further existing
products' production related to production efficiencies and quality, and reduced
cost.

FOREIGN CURRENCY TRANSACTIONS

     Transactions by the Company's international subsidiaries are negotiated,
invoiced and paid in various foreign currencies, primarily pounds sterling, and
U.S. dollars. Accordingly, the Company is currently subject to risks associated
with fluctuations in exchange rates between the various currencies.

     Substantially all of the Company's other international transactions are
denominated in U.S. dollars. Fluctuations in currency exchange rates in other
countries may therefore reduce the


                                       14

<PAGE>


demand for the Company's products by increasing the price of the Company's 
products in the currency of the countries in which the products are sold.

YEAR 2000 ISSUES

     Computer programs have historically been written to abbreviate dates by
using two digits instead of four digits to identify a particular year. The
so-called "Year 2000" problem or "millennium bug" is the inability of computer
software or hardware to recognize or properly process dates ending in or after
"00." As the year 2000 approaches, significant attention is being focused on
updating or replacing such software and hardware in order to avoid system
failures, miscalculations or business interruptions that might otherwise result.

     The Company has reviewed its internal information systems and believes that
the costs and effort to address the Year 2000 problem will not be material to
its business, financial condition or results of operations, and, to the extent
necessary, may be resolved through replacement and upgrades to the software it
licenses from third parties. The Company has also reviewed its OnCourse software
product, the software embedded in its Affinity blood pump console and the
software for its saturation/hematocrit monitor under development and believes
them to be Year 2000 compliant. However, the Year 2000 problem may also
adversely impact the Company by affecting the business and operations of parties
with which the Company transacts business. The Company expects to initiate
formal communication with such parties regarding the Year 2000 problem later in
1998. There can be no assurance that the Company will be able to effectively
address Year 2000 issues internally in a cost-efficient manner and without
interruption to its business, or that Year 2000 difficulties encountered by its
suppliers, customers or other parties will not have a material impact on the
Company's business, financial condition and results of operations.

NEW ACCOUNTING PRONOUNCEMENTS

     In June 1997, the Financial Accounting Standards Board issued Statement
131, "Disclosures About Segments of an Enterprise and Related Information," a
new standard of reporting information about operating or business segments in
financial statements. The new standard will be effective for the Company's
annual financial statements in 1998. Although the Company has not specifically
evaluated what impact, if any, this new standard will have on the Company's
current reporting of operating and business segments, the Company believes it
will continue reporting as one operating and business segment.

CERTAIN IMPORTANT FACTORS

     Except for the historical financial information contained herein, this Form
10-Q contains certain forward-looking statements. For this purpose, any
statements contained in this Form 10-Q that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"estimate" or "continue," the negative or other variations thereof, or
comparable terminology, are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
and actual results may differ materially depending on a variety of factors,
including the progress of product development and clinical studies, the timing
of and ability to obtain regulatory approvals, the extent to which the 


                                       15

<PAGE>



Company's products gain market acceptance, the introduction of competitive 
products by others, the pricing related to competitive products, litigation 
regarding patent and other intellectual property rights, the availability of 
third-party reimbursement and other factors. Additional information regarding 
these factors is contained in the Company's Annual Report on Form 10-K for 
the year ended December 31, 1997 under the heading "Important Factors".

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Not applicable.


                                        16

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS.

          During the quarter ended June 30, 1998, there were no material
          developments in the Company's suit seeking to invalidate a newly
          issued U.S. patent held by a competing manufacturer of blood
          oxygenators and other medical devices, and requesting a determination
          that the Company's Affinity oxygenator does not infringe the
          competitor's patent. Information regarding the suit was previously
          reported in the Company's Annual Report on Form 10-K for the year
          ended December 31, 1997.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS.

          In approving the execution and delivery of an Agreement and Plan of
          Merger between the Company and Medtronic, dated July 12, 1998 (the
          "Merger Agreement"), on July 12, 1998 the Company's Board of Directors
          also approved certain amendments to the Rights Agreement, dated June
          26, 1996 and as first amended July 22, 1997, by and between the
          Company and Norwest Bank Minnesota, N.A. (the "Rights Agreement").
          These amendments are reflected in a second amendment to the Rights
          Agreement also dated July 12, 1998 (the "Second Amendment to Rights
          Agreement") and were adopted for the purpose of clarifying certain
          provisions of the Rights Agreement with respect to the Company's
          merger with Medtronic or any similar transaction.

          The Second Amendment to Rights Agreement is attached hereto as
          Exhibit 4.1 and is incorporated herein by reference.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.

          None

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

          At the Annual Meeting of Shareholders of AVECOR Cardiovascular Inc.,
          held May 7, 1998, the shareholders voted as follows on each matter
          considered at the meeting:

          1.  The election of the following directors:

<TABLE>
<CAPTION>

                                                   Affirmative Votes                Withhold Authority
                                                   -----------------                ------------------
               <S>                                 <C>                              <C>
               Anthony Badolato                        6,946,384                          441,102
               David W. Stassen                        7,029,218                          358,268
               Edward E. Strickland                    6,959,549                          427,937
               J. Gordon Wright                        6,965,819                          421,667
</TABLE>


                                       17

<PAGE>



          2.  Proposal to amend the Company's 1991 Stock Incentive Plan
              to increase the number of shares of the Company's common
              stock reserved for issuance under such plan by 450,000
              shares, from 1,050,000 shares to 1,500,000 shares:

<TABLE>
<CAPTION>
                     Affirmative Votes              Withhold Authority                 Abstaining
                     -----------------              ------------------                 -----------
                     <S>                             <C>                                <C>
                         3,254,346                       1,547,943                       45,501
</TABLE>

             The number of broker non-votes was 2,539,696.

          3. Proposal to amend the Company's Employee Stock Purchase
             Plan to increase the number of shares of the Company's
             common stock reserved for issuance under such plan by
             125,000 shares, from 100,000 shares to 225,000:

<TABLE>
<CAPTION>

                     Affirmative Votes              Withhold Authority                 Abstaining
                     -----------------              ------------------                 -----------
                     <S>                             <C>                                <C>

                         4,568,074                        236,124                        43,592
</TABLE>


             The number of broker non-votes was 2,539,696.

ITEM 5.   OTHER INFORMATION.

          ACQUISITION OF THE COMPANY

          On July 12, 1998, the Company and Medtronic entered into an Agreement
          and Plan of Merger (the "Merger Agreement") pursuant to which a newly 
          formed subsidiary of Medtronic will be merged into the Company, with 
          the Company surviving as a wholly owned subsidiary of Medtronic (the 
          "Merger"). Under the Merger Agreement, each outstanding share of the
          Company's common stock will be converted into $11.125 worth of 
          Medtronic common stock (based on the average closing sale price of 
          Medtronic common stock for 18 consecutive trading days ending two 
          trading days before the effective time of the Merger). The Merger is
          intended to be tax free for federal income tax purposes to the 
          Company's shareholders who receive shares of Medtronic common stock.

          In connection with the Merger Agreement, the Company and Medtronic
          also entered into a Stock Option Agreement pursuant to which Medtronic
          has the right to purchase, under certain conditions, 1,600,851 shares
          of Company common stock (representing 19.9% of the Company's
          currently outstanding shares) at a price of $11.125 per share. This
          option is exercisable only upon the occurrence of certain events
          resulting in a termination of the Merger Agreement or that would
          otherwise jeopardize completion of the Merger, and, in certain 
          cases involving an alternative transaction proposed by a third party,
          only if the Company, within 12 months, enters into such an alternative
          transaction.

          In approving the Merger Agreement, the Company's Board of Directors
          approved the Second Amendment to Rights Agreement, as discussed above,
          and a committee of the Company's Board of Directors also determined
          that the Merger constitutes a "Permitted Offer" as defined in the
          Rights Agreement.


                                      18

<PAGE>


          Completion of the Merger is subject to various conditions, including
          approval of the Company's shareholders and receipt of all required
          regulatory approvals.

          The Merger Agreement and Stock Option Agreement are attached hereto as
          Exhibits 2.1 and 2.2, respectively, and are incorporated herein by
          reference.

          SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING

          The Securities and Exchange Commission (the "SEC") has amended
          recently Rule 14a-4 under the Securities Exchange Act of 1934, as
          amended, which governs the use by the Company of discretionary voting
          authority with respect to certain shareholder proposals. SEC
          Rule14a-4(c)(1) provides that, if the proponent of a shareholder
          proposal fails to notify the Company at least 45 days prior to the
          month and day of mailing the prior year's proxy statement, the proxies
          of the Company's management would be permitted to use their
          discretionary authority at the Company's next annual meeting of
          shareholders if the proposal were raised at the meeting without
          discussion of the matter in the proxy statement. In order to provide
          shareholders with notice of the deadline for the submission of such
          proposals for the Company's 1999 Annual Meeting of Shareholders, the
          Company hereby notifies all shareholders of the Company that after
          February 18, 1999, any shareholder proposal submitted outside the
          process of SEC Rule 14a-8 will be considered untimely for purposes of
          SEC Rules 14a-4 and 14a-5(e).

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.

                    (a)    Exhibits:

                           The exhibits to this  Quarterly  Report on Form 10-Q
                           are listed in the Exhibit Index  beginning on page 
                           18 of this Report.

                    (b)    Reports on Form 8-K:

                           None


                                        19

<PAGE>




                                   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.


                                   AVECOR  CARDIOVASCULAR  INC.


        August 11, 1998            By /s/ Anthony Badolato
--------------------------------   --------------------------------------
             Date                  Anthony Badolato
                                   Chief Executive Officer


        August 11, 1998            By /s/ Gregory J. Melsen
--------------------------------   --------------------------------------
             Date                  Gregory J. Melsen
                                   Vice President-Finance, Treasurer and Chief
                                   Financial Officer
                                   (Principal Financial and Accounting Officer)


                                20


<PAGE>


                           AVECOR CARDIOVASCULAR INC.

                        EXHIBIT INDEX TO QUARTERLY REPORT
                                  ON FORM 10-Q
                       For the Quarter Ended June 30, 1998

<TABLE>
<CAPTION>

Item No.                   Description                                                       Method of Filing
--------                   -----------                                                       ----------------
<S>        <C>                                                                       <C>
2.1        Agreement and Plan of Merger, dated July 12, 1998, by and among
           AVECOR Cardiovascular Inc., AC Merger Corp. and Medtronic, Inc.
           (Omitted from this Exhibit, as filed, are the exhibits referenced in
           such agreement. AVECOR will furnish supplementally a copy of any such
           exhibits to the Commission upon request.)                                 Filed herewith electronically
                                                    

2.2        Stock Option Agreement, dated July 12, 1998, by and
           between AVECOR Cardiovascular Inc. and Medtronic, Inc.                    Filed herewith electronically
                                                                 

4.1        Second Amendment to Rights Agreement, dated July 12, 1998,
           by and between AVECOR Cardiovascular Inc. and Norwest Bank
           Minnesota, N.A.                                                           Filed herewith electronically
                          

27.1       Financial Data Schedule                                                   Filed herewith electronically
</TABLE>








                                        21