SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 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 September 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 0-22146

                            APPLIED BIOMETRICS, INC.

                           (Exact name of registrant)

               Minnesota                              41-1508112
      (State of other jurisdiction of              (I.R.S. Employer
      incorporation or organization)              Identification No.)

               501 E. Highway 13, Burnsville, MN  55337
          (Address of principal executive office and zip code)

          Issuer's telephone number, including area code (612) 890-1123

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

                           Yes __X__     No _____

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

       At November 6, 1998, there were outstanding 4,336,117 shares of common 
       stock,  $0.01 par value.




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                            APPLIED BIOMETRICS, INC.

                                 Form 10-Q Index
                               September 30, 1998

                                                                            Page
                                                                            ----

Part I:    Financial Information.............................................3

Item 1.    Financial Statements..............................................3

           Balance Sheets Unaudited at September 30, 1998 and
           Audited at December 31, 1997......................................3

           Unaudited Statements of Operations for the
           Three Month and Nine Month Periods ended
           September 30, 1998 and 1997.......................................4

           Audited Statements of Shareholders' Equity for the year
           Ended December 31, 1997 and for the Unaudited Nine Month
           Period ended September 30, 1998...................................5

           Unaudited Statement of Cash Flows for the Nine
           Month Periods Ended September 30, 1998 and 1997...................6

           Notes to Unaudited Financial Statements...........................7

Item 2.    Management's Discussion and Analysis of
           Financial Condition and Results of Operation......................8

Item 3.    Quantitative and Qualitative Disclosure about Market Risk.........10

Part II:   Other Information.................................................10

Item 1.    Legal Proceedings.................................................10

Item 2.    Changes in Securities and Use of Proceeds.........................10

Item 3.    Defaults Upon Senior Securities...................................10

Item 4.    Submission of Matters to a Vote of Security Holders...............11

Item 5.    Other Information.................................................11

Item 6.    Exhibits and Reports on Form 8-K..................................11

Signatures ..................................................................12



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                          Part I: Financial Information

Item 1.  Financial Statements

                            APPLIED BIOMETRICS, INC.
                                 Balance Sheets
<TABLE>
<CAPTION>
                                                              September 30,     December 1,
                                                                 1998     .       1997    .
                                                               -------------   ------------
                                                                (Unaudited)
<S>                                                            <C>             <C>         
ASSETS
Current Assets:
     Cash and cash equivalents                                 $    881,073    $    821,673
     Short-term investments                                       2,098,116       3,598,507
     Inventory                                                      216,355         150,493
     Prepaid expenses and other current assets                       86,374          86,166
                                                               -------------   ------------

     TOTAL CURRENT ASSETS                                         3,281,918       4,656,839

Property and equipment, net                                         485,620         571,374
Patents, net                                                        180,739         200,125
Other assets                                                          9,585           9,585
                                                               -------------   ------------

     TOTAL ASSETS                                              $  3,957,862    $  5,437,923
                                                               =============   ============

LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities:
     Trade accounts payable                                    $    111,932    $     76,042
     Accrued expenses and other liabilities                          97,014          90,679
                                                               -------------   ------------

     TOTAL CURRENT LIABILITIES                                      208,946         166,721

SHAREHOLDERS' EQUITY
     Common stock, $.01 par value, 10,000,000 shares
         authorized:  4,336,117 and 4,276,117 shares
         issued and outstanding at September 30, 1998 and
         December 31, 1997, respectfully                             43,361          42,761
     Additional paid-in capital                                  20,555,859      20,278,959
     Accumulated deficit                                        (16,850,304)    (15,050,518)
                                                               -------------   ------------

     TOTAL SHAREHOLDERS' EQUITY                                   3,748,916       5,271,202
                                                               -------------   ------------

     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                $  3,957,862    $  5,437,923
                                                               =============   ============

</TABLE>



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                            APPLIED BIOMETRICS, INC.
                             Statement of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>
                                     Three Months Ended                    Nine Months Ended
                                     ------------------                    -----------------
                                  September 30,     September 30,    September 30,      September 30,
                                      1998   .          1997   .         1998   .           1997   .
                                   -----------       -----------       -----------       -----------
<S>                                <C>               <C>               <C>               <C>        
Net Sales                          $    40,200       $         0       $    77,640       $    64,940

Cost of sales                            8,244                 0            15,732            32,175
                                   -----------       -----------       -----------       -----------

   Gross profit                         31,956                 0            61,908            32,765
                                   -----------       -----------       -----------       -----------

OPERATING EXPENSES:
   Research and Development            279,569           401,236           905,560         1,111,509
   Sales and Marketing                 198,409            97,681           562,704           280,103
   General and Administrative          205,992           159,615           547,219           519,468
                                   -----------       -----------       -----------       -----------

   Total Operating Expenses            683,970           658,532         2,015,483         1,911,080
                                   -----------       -----------       -----------       -----------

OPERATING LOSS                        (652,014)         (658,532)       (1,953,575)       (1,878,315)

Interest income                         44,171            73,955           153,789           238,873
                                   -----------       -----------       -----------       -----------

NET LOSS                           ($  607,843)      ($  584,577)      ($1,799,786)      ($1,639,442)
                                   ===========       ===========       ===========       ===========

BASIC AND DILUTED
LOSS PER COMMON SHARE              ($     0.14)      ($     0.14)      ($     0.42)      ($     0.39)
                                   ===========       ===========       ===========       ===========

Weighted average common
Shares outstanding                   4,329,264         4,171,109         4,303,917         4,170,067
                                   ===========       ===========       ===========       ===========

</TABLE>


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                            APPLIED BIOMETRICS, INC.
                        Statement of Shareholders' Equity
<TABLE>
<CAPTION>
                                                       
                                           Common Stock          Additional
                                           ------------            Paid-In      Accumulated
                                       Shares        Amount        Capital        Deficit
                                       ------        ------        -------        -------
<S>                                  <C>          <C>            <C>            <C>          
December 31, 1996                    4,168,987    $     41,690   $ 19,703,468   $(12,458,048)

Shares issued for purchase
Of Transcatheter Closure
Product Line                            85,000             850        509,150

Exercise of stock options               22,130             221         66,341

1997 Net Loss                                                                     (2,592,470)
                                  ------------    ------------   ------------   ------------
December 31, 1997                    4,276,117          42,761     20,278,959    (15,050,518)

Exercise of stock options
(unaudited)                             60,000             600        276,900

Net loss nine months ended
September 30, 1998 (unaudited)                                                    (1,799,786)
                                  ------------    ------------   ------------   ------------
September 30, 1998 (unaudited)       4,336,117          43,361     20,555,859   $(16,850,304)
                                  ============    ============   ============   ============

</TABLE>







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<PAGE>




                            APPLIED BIOMETRICS, INC.
                             Statement of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                      Nine Months Ended
                                                                      -----------------
                                                               September 30,    September 30,
                                                                  1998   .           1997  .
                                                               -----------       -----------
<S>                                                            <C>               <C>        
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                  $(1,799,786)      $(1,639,942)
     Adjustments to reconcile net loss to net
     Cash provided by operating activities:
         Depreciation and amortization                             174,189           124,218
         Cash flows provided by (used for) changes in:
         Accounts receivable                                            --             3,438
         Inventory                                                 (65,862)           42,079
         Prepaid expenses and other assets                            (208)          101,347
         Accounts payable                                           35,890           (21,024)
         Accrued expenses and other liabilities                      6,335            24,034
                                                               -----------       -----------
         Net cash flows used by operating activities            (1,649,442)       (1,365,850)
                                                               -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Sales and maturities of short-term investments              2,000,391         3,259,009
     Purchases of short-term investments                          (500,000)       (1,600,526)
     Purchase of property and equipment                            (69,049)         (192,669)
                                                               -----------       -----------
         Net cash provided by investing activities               1,431,342         1,465,814
                                                               -----------       -----------

CASH FLOW FROM FINANCING ACTIVITIES:
     Proceeds from exercise of stock options                       277,500            10,813
                                                               -----------       -----------
         Net cash provided by financing activities                 277,500            10,813
                                                               -----------       -----------

     Net (decrease) increase in cash and cash equivalents           59,400           110,777

CASH AND CASH EQUIVALENTS:
     Beginning of period                                           821,673           741,661
                                                               -----------       -----------

     End of period                                             $   881,073       $   852,438
                                                               ===========       ===========

</TABLE>



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                            APPLIED BIOMETRICS, INC.


                     NOTES TO UNAUDITED FINANCIAL STATEMENTS



Note 1.  Unaudited Interim Results

The accompanying unaudited financial statements have been prepared in accordance
with the instructions to form 10-Q and do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.

Operating results for the three and nine months ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year of 1998.

These statements should be read in conjection with the audited financial
statements and related notes for the year ended December 31, 1997 included in
the Company's Form 10-KSB for the year ended December 31, 1997.

Note 2.  Purchase of Product Line

In November 1997, the Company acquired the technology and assets (including the
in-process research and development) of the transcatheter closure product line
of Schneidt Implantate, GmbH of Frankfurt, Germany. The total purchase price was
$541,457, which included 85,000 shares of common stock and $31,457 of
acquisition related costs. The assets acquired consisted exclusively of patents
and other intangibles. The in-process research and development costs of $441,457
were charged against income in 1997, as the underling research and development
projects had not yet reached technologic feasibility.




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

RESULTS OF OPERATIONS

For the three and nine months ended September 30, 1998 and 1997.

NET SALES. For the three and nine months ended September 30, 1998 the Company
had net sales of $40,200 and $77,640 compared to $-0- and $64,940 in the same
periods of 1997. Sales in 1998 resulted entirely from shipments of the
transcatheter product line that was acquired in November 1997. The Company
expects limited but growing sales of this new product line in the second half of
1998. The sales in 1997 were from the Company's cardiac output monitoring
system. There were no sales of this system in 1998 as a result of the Company
making a strategic decision in the third quarter of 1997 not to continue
marketing its cardiac output monitoring system until completion of the
development of the next generation system. The development of the new system is
essentially complete and is undergoing clinical testing and evaluation before
being released to the market place. The Company believes that, because of the
early stage of its sales, its revenue will continue to fluctuate in future
periods.

GROSS PROFIT. The Company's gross profit margin as a percentage of sales were
79.5% and 79.7% for the three and nine months ended September 30, 1998 compared
to -0-% and 50.5% in the same periods of 1997. The increase in gross margins in
1998 resulted because all the Company's sales in 1998 were from the
transcatheter closure product line which has a higher gross margin than its
cardiac output monitoring system. The 1997 sales were exclusively from the
Company's cardiac output monitoring system. The Company believes that these
margins are not necessarily representative of the margins it will realize in
future periods.

RESEARCH AND DEVELOPMENT. For the three and nine months ended September 30, 1998
research and development expenses decreased $121,667 and $205,449 or 30.3% and
18.5%, respectively, as compared to the same periods in 1997. This decrease
resulted from completion of development of the cardiac output monitoring system
in 1998. The system is presently undergoing clinical testing and evaluation
before beginning production and releasing the product to the market. The Company
spent approximately $158,000 in new direct costs in 1998 on the development of
the new transcatheter product line that was purchased in November 1997. The
Company expects these expenditures on the transcatheter products to continue in
the second half of 1998.

SALES AND MARKETING. For the three and nine months ended September 30, 1998
sales and marketing expenses increased $100,728 and $282,601 or 103.1% and
100.9%, respectively, as compared to the same periods in 1997. The increase is
the result of the following: (1) increased personnel expenditures, (2)
commencement of marketing of the transcatheter closure product line in Europe
(3) expenditures to obtain ISO 9000 certification and the CE mark in Europe and,
(4) expenditures to begin clinical trials of the transcatheter product line in
the United States. The Company expects its sales and marketing expenditures to
continue to increase in 1998 as it continues its expenditures in these areas.


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GENERAL AND ADMINISTRATIVE. For the three and nine months ended September 30,
1998 general and administrative expenses increased $46,377 and $27,751 or 29.1%
and 5.3%, respectively, as compared to the same periods in 1997. This increase
is the result of an increase in corporate and patent counsel legal fees. The
Company expects these costs to remain stable or increase slightly for the
balance of 1998.

INTEREST INCOME. For the three and nine months ended September 30, 1998,
interest income decreased $29,784 and $85,084, respectively over the same period
in 1997 primarily as a result of fewer funds available for investment.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1998, the Company had cash and short-term investments of
$2,979,189 and working capital of $3,072,972. The Company used cash of
$1,649,442 in operating activity during the first nine months of 1998 including
a net loss of $1,799,786. The Company generated funds to support this loss
primarily through sales and maturities of short-term investments in the amount
of $2,000,391 and $277,500 generated from the exercise of stock options.

The Company believes that its existing cash, cash equivalents and short-term
investments together with funds generated from operations will enable the
Company to meet its liquidity and capital resources needs for approximately the
next twelve months.

YEAR 2000 COMPLIANCE

The Company has commenced an assessment of its major information technology
systems and believes that all necessary modifications or replacements of
existing systems have been completed. The Company's progress in this area is
being monitored by senior management. Based upon current expenditures and
estimates, the Company does not believe the costs of addressing the Year 2000
issues to be material to the financial results or operations of the Company. At
this time, the impact on the Company if significant vendor or suppliers are not
in compliance cannot be reasonably estimated. The Company intends to develop
plans to mitigate the impact of vendors or suppliers who are not in compliance
with the Year 2000 issue.

PURCHASE OF PRODUCT LINE

In November 1997, the Company acquired the technology and assets (including the
in-process research and development) of the transcatheter closure product line
of Schneidt Implantate, GmbH of Frankfurt, Germany. The Transcatheter closure
devices are a new generation of small, implantable devices which are delivered
through a catheter to permanently repair certain cardiac defects in children and
adults. The total purchase price was $541,457, which included 85,000 shares of
common stock and $31,457 of acquisition related costs. The assets acquired
consisted exclusively of patents and other intangibles.


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The Company began limited sales of this product line in Europe in 1998 and
through September 30, 1998, had generated sales of $77,640. The Company intends
to further develop and expand this product line in 1998 and 1999 and is also
pursuing the steps required to obtain ISO certification and the CE mark in 1999
to allow the Company to sell the product line throughout Europe. The Company
also intends to obtain market clearance from the United States Food and Drug
Administration ("FDA") to market the product in the United States. The Company
intends to file an Investigation Device Exemption (IDE) for the United States
clinical trials with a view to commencing clinical trials sometime in 1999 or
2000. The Company expects expenditures for research and development and sales
and marketing for this product line to total approximately $500,000 for 1998 and
1999.

FORWARD LOOKING STATEMENTS

Statements included in this Form 10-Q that are not historical in nature or
current facts are "forward-looking statements" made pursuant to the safe harbor
provisions of the Private Securities Reform Act of 1995 and are subject to
certain risks and uncertainties that could cause actual results to differ
materially. Among these risks and uncertainties are (1) the Company's limited
revenues, history of losses and uncertainty of future results, (2) the
uncertainty of market acceptance of the Company's products, and (3) the fact
that the Company has limited experience in manufacturing its products in
commercial quantities.


Item 3.  Quantitative and Qualitative Disclosure About Market Risk

          Not Applicable


                                     PART II

                                OTHER INFORMATION

Item 1.  Legal Proceedings

                    NONE


Item 2.  Change in Securities and Use of Proceeds

                    NONE


Item 3.  Defaults Upon Senior Securities

                    NONE


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Item 4.  Submission of Matters to a Vote of Security Holders

                    NONE

Item 5.  Other Information

                    NONE

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibit 27 - Financial Data Schedule
         (b)  No reports on Form 8-K were filed during the quarter ended
              September 30, 1998






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                                   SIGNATURES


In accordance with 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.




                                           Applied Biometrics, Inc.
                                           ------------------------
                                                Registrant


                                             /s/ Joseph A. Marino
                                             --------------------
                                                Joseph A. Marino
                                                 President, CEO



                                           /s/ Gerald J. Prescott
                                           ----------------------
                                             Gerald J. Prescott
                                             Vice President and
                                          Chief Financial Officer


Date:  November 10, 1998




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