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

                       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 quarterly period ended June 30, 1999
                                       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 as specified in its charter)

                        State of Incorporation: Minnesota
                 I.R.S. Employer Identification No.: 41-1508112

        Principal Executive Offices: 501 East Highway Thirteen, Suite 108
                           Burnsville, Minnesota 55337
                        Telephone Number: (612) 890-1123

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



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 ______

On August 6, 1999, there were 4,484,004 shares of the Registrant's common stock,
par value $.01 per share, outstanding.



<PAGE>


ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
APPLIED BIOMETRICS, INC.
CONDENSED BALANCE SHEETS
AS OF JUNE 30, 1999 AND DECEMBER 31, 1998
----------------------------------------------------------------------------------------------

                                                                   June 30,        December 31,
                                                                    1999              1998
                                                                    ----              ----
                                                                 (Unaudited)

<S>                                                              <C>              <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................    $  1,407,330     $  1,869,413
Marketable securities, short-term ...........................              --          500,000
Inventories, net ............................................          99,598          175,078
Other .......................................................          58,704           37,833
                                                                 ------------     ------------
    Total current assets ....................................       1,565,632        2,582,324

Equipment and leasehold improvements, net ...................         380,623          427,086
Patents, net ................................................          66,541           75,074
Other .......................................................           9,585            9,585
Net assets of discontinued operations .......................              --          202,642
                                                                 ------------     ------------
    Total assets ............................................    $  2,022,381     $  3,296,711
                                                                 ============     ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ............................................    $     17,870     $     56,186
Accrued expenses ............................................         104,233           87,200
                                                                 ------------     ------------
    Total current liabilities ...............................         122,103          143,386

Non-current liabilities:
Liability for pending issuance of common stock ..............              --        1,001,761
Capital lease obligation ....................................           6,306               --
                                                                 ------------     ------------
    Total non-current liabilities ...........................           6,306        1,001,761

Shareholders' equity:
Common stock: authorized 10,000,000 shares of $.01 par value;
    4,484,004 issued and outstanding at June 30, 1999 and
    4,337,117 at December 31, 1998 ..........................          44,840           43,371
Additional paid-in capital ..................................      21,636,144       20,560,849
Accumulated deficit .........................................     (19,787,012)     (18,452,656)
                                                                 ------------     ------------
    Total shareholders' equity ..............................       1,893,972        2,151,564
                                                                 ------------     ------------
    Total liabilities and shareholders' equity ..............    $  2,022,381     $  3,296,711
                                                                 ============     ============
</TABLE>


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


                                       2
<PAGE>


<TABLE>
<CAPTION>
APPLIED BIOMETRICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
-------------------------------------------------------------------------------------------------------------

                                                       Three Months Ended              Six Months Ended
                                                            June 30,                       June 30,
                                                      1999            1998           1999            1998
                                                      ----            ----           ----            ----
                                                           (Unaudited)                   (Unaudited)

<S>                                               <C>             <C>             <C>             <C>
Operating expenses:
General and administrative ...................    $   313,432     $   197,050     $   491,324     $   402,961
Research and development .....................        348,734         226,488         555,018         479,342
                                                  -----------     -----------     -----------     -----------

Operating loss ...............................       (662,166)       (423,538)     (1,046,342)       (882,303)

Other income, net ............................         21,914          52,214          46,157         109,618
                                                  -----------     -----------     -----------     -----------

Net loss from continuing operations ..........       (640,252)       (371,324)     (1,000,185)       (772,685)

Discontinued operations:
         Loss from operations of transcatheter
         closure business ....................             --        (253,712)             --        (419,258)
                                                  -----------     -----------     -----------     -----------

Net loss .....................................    $  (640,252)    $  (625,036)    $(1,000,185)    $(1,191,943)
                                                  ===========     ===========     ===========     ===========

Basic and diluted loss per share:
         Continuing operations ...............    $     (0.14)    $     (0.09)    $     (0.23)    $     (0.18)
         Discontinued operations .............          (0.00)          (0.06)          (0.00)          (0.10)
                                                  -----------     -----------     -----------     -----------
         Net loss ............................    $     (0.14)    $     (0.15)    $     (0.23)    $     (0.28)
                                                  ===========     ===========     ===========     ===========

Weighted-average common shares outstanding ...      4,468,619       4,300,732       4,414,895       4,291,034
                                                  ===========     ===========     ===========     ===========
</TABLE>


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


                                       3
<PAGE>


<TABLE>
<CAPTION>
APPLIED BIOMETRICS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIODS ENDED DECEMBER 31, 1997, DECEMBER 31, 1998 AND JUNE 30, 1999
-------------------------------------------------------------------------------------------------------------------------


                                                                          Common Stock         Additional     Accumulated
                                                                      Shares       Amount   Paid in 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

Net loss .......................................................                                               (2,592,470)

                                                                     ----------------------------------------------------
December 31, 1997 ..............................................     4,276,117      42,761     20,278,959     (15,050,518)

Exercise of stock options ......................................        61,000         610        281,890

Net loss .......................................................                                               (3,402,138)

                                                                     ----------------------------------------------------
December 31, 1998 ..............................................     4,337,117      43,371     20,560,849     (18,452,656)

Exercise of stock options ......................................       146,887       1,469      1,075,295

Distribution of the net assets of Cardia, Inc. .................                                                 (334,171)

Net loss for the six months ended
June 30, 1999 ..................................................                                               (1,000,185)

                                                                     ----------------------------------------------------
June 30, 1999 ..................................................     4,484,004     $44,840    $21,636,144    $(19,787,012)
                                                                     ====================================================
</TABLE>


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


                                       4
<PAGE>


<TABLE>
<CAPTION>
APPLIED BIOMETRICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND 1998
----------------------------------------------------------------------------------------------------------------

                                                                                         Six Months Ended
                                                                                             June 30,
                                                                                       1999            1998
                                                                                       ----            ----
                                                                                           (Unaudited)
<S>                                                                                 <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................................    $(1,000,185)    $(1,191,943)
Net loss from discontinued operations ..........................................             --         419,258
                                                                                    -----------     -----------
Loss from continuing operations ................................................     (1,000,185)       (772,685)

Adjustments to reconcile net loss from continuing operations to net cash used by
  operating activities:
Depreciation ...................................................................         88,585         104,868
Amortization ...................................................................          8,553           4,590

Changes in operating assets and liabilities:
Inventory ......................................................................         75,480            (732)
Prepaid expenses and other current assets ......................................        (20,871)         17,039
Accounts payable and accrued expenses ..........................................        (25,571)        (12,680)
                                                                                    -----------     -----------
     Net cash used by continuing operations ....................................       (874,009)       (659,600)
     Net cash used by discontinued operations ..................................       (120,548)       (456,040)
                                                                                    -----------     -----------
     Net cash used by operating activities .....................................       (994,557)     (1,115,640)
                                                                                    -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Sales and maturities of short-term investments .................................        500,000       1,082,340
Purchase equipment and improvements ............................................        (31,280)        (45,707)
Discontinued operations, purchase of equipment .................................        (10,981)         (5,225)
                                                                                    -----------     -----------
     Net cash provided by investing activities .................................        457,739       1,031,408
                                                                                    -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options ........................................         75,001         185,000
Repayment of capital lease obligations .........................................           (266)             --
                                                                                    -----------     -----------
     Net cash provided by financing activities .................................         75,001         185,000
                                                                                    -----------     -----------

Net increase in cash and cash equivalents ......................................       (462,083)        100,768
Cash and cash equivalents at beginning of year .................................      1,869,413         821,673
                                                                                    -----------     -----------
Cash and cash equivalents at end of the period .................................    $ 1,407,330     $   922,441
                                                                                    ===========     ===========
</TABLE>


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



                                       5
<PAGE>

APPLIED BIOMETRICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(1) BASIS OF PRESENTATION:

The accompanying unaudited condensed financial statements of Applied Biometrics,
Inc. ("Applied Biometrics" or "the Company") have been prepared by the Company
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the financial statements
and footnotes thereto included in the Company's 1999 Annual Report to
Shareholders and incorporated by reference in the Company's Form 10-K for the
year ended December 31, 1998.

In the opinion of management, all adjustments considered necessary, consisting
only of items of a normal recurring nature, for a fair presentation of the
financial position, results of operations and cash flows of the Company as of
and for the interim periods presented have been included. Operating results and
cash flows for the six months ended June 30, 1999 are not necessarily indicative
of the results of operations and cash flows of the Company that may be expected
for the year ending December 31, 1999.


(2) DISCONTINUED OPERATIONS:

In December 1998, the Board of Directors of the Company approved a plan to
distribute its transcatheter closure business through a wholly owned subsidiary,
Cardia, Inc. ("Cardia") to the shareholders. The distribution was completed on
February 11, 1999 to shareholders of record on January 25, 1999. Shareholders
received one share of Cardia, Inc. common stock for every 11.563 common shares
of Applied Biometrics held. The Company's financial statements report Cardia as
a discontinued operation.

Cardia's 1999 operating results through the distribution date were breakeven.
Net assets attributable to Cardia of $334,171 were distributed at their net book
value and were reflected as a dividend and no gain or loss was recorded by the
Company as a result of the distribution.





                                       6
<PAGE>

APPLIED BIOMETRICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(3) EARNINGS PER SHARE:

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 128,
Earnings Per Share, during fiscal year 1998. Earnings per share for the periods
presented have been prepared in accordance with the provisions of SFAS No. 128.
The following table sets forth the computation of shares outstanding used in the
calculation of basic and diluted earnings per share:

<TABLE>
<CAPTION>
                                                               Three Months Ended          Six Months Ended
                                                                     June 30,                  June 30,
                                                                 1999         1998         1999         1998
                                                                 ----         ----         ----         ----
                                                                   (Unaudited)                (Unaudited)
<S>                                                            <C>          <C>          <C>          <C>
Denominator for basic earnings per share:
     Weighted-average common shares .......................    4,468,619    4,300,732    4,414,895    4,291,034
Effect of dilutive securities:
     Shares associated with option plans ..................           --           --           --           --
     Dilutive potential common shares .....................           --           --           --           --
                                                               ---------    ---------    ---------    ---------
Denominator for diluted earnings per share:
     Adjusted weighted-average common shares
     and dilutive potential common shares .................    4,468,619    4,300,732    4,414,895    4,291,034
                                                               =========    =========    =========    =========
</TABLE>


<TABLE>
<CAPTION>
                                                                    As of June 30,
                                                             1999                    1998
                                                             ----                    ----
                                                                     (Unaudited)

<S>                                                       <C>                      <C>
Options outstanding.......................                    508,400                  875,037
Exercise prices...........................             $3.00 - 12.625            3.00 - 12.625
Expiration dates..........................                2000 - 2009              1999 - 2008
</TABLE>

For the three and six-month periods ended June 30, 1999 and 1998, none of the
options outstanding were included in the computation of diluted earnings per
share for those periods because the Company had incurred net losses, and the
inclusion of options would have been anti-dilutive.


(4) COMPREHENSIVE INCOME:

Effective January 1, 1999, the Company adopted SFAS No. 130 ("SFAS 130"),
Reporting Comprehensive Income, which establishes standards for reporting and
displaying comprehensive income and its components (revenues, expenses, gains
and losses) in the financial statements. The Company currently has no items that
would be included as a component of other comprehensive income.



                                       7
<PAGE>



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


FORWARD-LOOKING STATEMENTS:

CERTAIN STATEMENTS CONTAINED IN THIS FORM 10-Q INCLUDE "FORWARD LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. SUCH STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULT TO DIFFER MATERIALLY FROM ANY
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED IN OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. SUCH FACTORS MAY INCLUDE, THE COMPANY'S LIMITED
EXPERIENCE AND FINANCIAL RESOURCES AND UNCERTAINTY OF FUTURE RESULTS, THE
UNCERTAINTY OF MARKET ACCEPTANCE OF THE COMPANY'S PRODUCT, THE REGULATED NATURE
OF THE MEDICAL DEVICE MARKET, COMPETITIVE FACTORS AND OTHER RISK FACTORS LISTED
FROM TIME TO TIME IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION.


OVERVIEW

Applied Biometrics, Inc. ("Applied Biometrics" or "the Company") is a
late-development stage medical device company in the business of development and
commercialization of advanced medical diagnostic and monitoring systems. The
Company has core competencies in ultrasound transducer technology, signal
processing, cardiac anatomy and pathology, and the fluid dynamics of blood flow
which position it to develop and commercialize a range of cardiac diagnostic and
patient monitoring products. The Company is currently developing a new medical
device which monitors the amount of blood pumped by a patient's heart: called
cardic output. The cardiac output monitoring system is for use during and after
open-heart surgery.

During the six months ended June 30, 1999, the Company made substantial progress
toward completing development of its cardiac output monitoring system. The
Company's plans are for commercialization the first half of 2000. Critical
objectives focused on during the period were: hiring key management and
technical personnel, assessing requirements needed for manufacturing, quality
systems and clinical validation, and mammal testing. To meet its development and
commercialization objectives during the second half of the year the Company
plans to continue adding management, technical and other personnel, to upgrade
its manufacturing facility for commercial production and to conduct clinical
marketing validation.

Also during the period the Company completed the distribution of Cardia, Inc.
("Cardia"). The distribution of Cardia's common stock occurred on February 11,
1999 to the shareholders of record on January 25, 1999. The completion of the
Cardia distribution allows the Company to focus all of its resources on
completing the development of its cardiac output monitoring system.

RESULTS OF CONTINUING OPERATIONS

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1999 WITH
THE THREE MONTHS ENDED JUNE 30, 1998

General and administrative expenses increased $116,000 in the second quarter of
1999 from $197,000 to $313,000 over the same quarter last year. General and
administrative costs for the 1998 period were allocated between continuing and
discontinued operations, while general and administrative costs for the 1999
period were fully absorbed by continuing operations. Increased costs are related
to personnel additions, corporate logo and image development and general legal
matters.

Research and development expenses increased $123,000 from $226,000 in 1998 to
$349,000 in 1999, due to increased engineering, operations and quality personnel
costs and prototype testing in the 1999 period and reduced costs in the 1998
period due to the allocation of costs to discontinued operations.



                                       8
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
--------------------------------------------------------------------------------

Operating costs are expected to increase as the Company adds personnel,
equipment and other costs to complete the development and brings to market its
cardiac output monitoring system. This forward looking statement will be
influenced primarily by the Company's estimate of time and resources needed to
complete development, the Company's ability to establish manufacturing and
quality systems necessary to produce the product and market acceptance of the
cardiac output monitoring system.

Other income, primarily interest income, decreased $30,000 from $52,000 in the
second quarter of 1998 to $22,000 in the 1999 quarter. The decrease is due to
lower average investment balances in the 1999 quarter than in the 1998 quarter.
Investment resources were used throughout the 1998 year and first quarter of
1999 for development efforts toward both the Company's cardiac output monitoring
system and the transcatheter closure device, which comprised the core technology
distributed with Cardia, Inc.

The 1999 second quarter net loss was $640,000, or $0.14 per share, compared to a
net loss of $625,000, or $0.15 per share in 1998, including a $254,000 or $.06
per share loss from discontinued operations.


COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1999 WITH
THE SIX MONTHS ENDED JUNE 30, 1998

General and administrative expenses increased $88,000 from $403,000 in the first
half of 1998 to $491,000 in the first half of 1999. Similar to the three month
results, 1999 costs are higher than the 1998 period due to 1998 costs allocated
between continuing and discontinuing operations. Additionally, the 1999 period
had higher spending for legal, shareholder meeting and communication and
corporate logo and image development.

Research and development expenses increased $76,000 from $479,000 in 1998 to
$555,000 in 1999 as increased spending for engineering, operations and quality
personnel and prototype testing more than offset costs that were shared between
continuing and discontinued operations in the 1998 period.

Other income, primarily interest income, decreased $63,000 from $109,000 in the
first half of 1998 to $46,000 in the first half of 1999. The decrease is due to
lower average investment balances in the 1999 period than in the 1998 period.
Investment resources were used throughout the 1998 year and the first quarter of
1999 for development efforts toward both the Company's cardiac output monitoring
system and the transcatheter closure device, which comprised the core technology
distributed with Cardia, Inc.

The net loss for the six months ended June 30, 1999 was $1,000,000, or $0.23 per
share, compared to a net loss of $1,192,000, or $0.28 per share in 1998,
including a $419,000 or $0.10 per share loss from discontinued operations.


LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $1,400,000 at June 30, 1999 as compared to
$2,400,000 of cash, cash equivalents and marketable securities at December 31,
1998, a reduction of $1,000,000. The reduction in cash and cash equivalents is
in line with the year to date loss from operations.

Continuing operating activities used cash of $995,000 in the first six months of
1999 as compared to $1,116,000 used during the first six months of fiscal 1998.
Discontinued operations used cash of $121,000 during the 1999 period as compared
to $456,000 in the prior six month period.

Investing activities provided $458,000 in the 1999 period as compared to
$1,031,000 in the 1998 period, primarily due to the maturity of short-term
investments. Investing activities in 1999 included the use of $31,000 for the
purchase of equipment. Discontinued operations used $11,000 and $5,000 in the
1999 and 1998 periods,



                                       9
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
--------------------------------------------------------------------------------

respectively. The Company intends to spend approximately $500,000 on capital
expenditures in the second half of the year. These expenditures are primarily to
upgrade and equip its manufacturing area that will support the commercialization
of the Company's cardiac output monitoring system and to expand its information
system capabilities. The Company is seeking financing for these expenditures
that will likely be secured by the equipment and may include a warrant to
purchase the Company's common stock.

Financing activities in the six-month period provided $75,000 of cash from the
exercise of stock options.

The Company believes, based on its expected rate of spending, that its existing
cash and cash equivalents will enable the Company to meet its cash requirements
for approximately the next six months. The Company will need additional
financing in order to successfully meet its current product development, market
commercialization plans for its cardiac output monitoring system and capital
expenditure needs. The Company is pursuing alternatives for obtaining additional
working capital.


NEW ACCOUNTING STANDARDS

Effective January 1, 1999, the Company adopted SFAS No. 130 ("SFAS 130"),
Reporting Comprehensive Income, which establishes standards for reporting and
displaying comprehensive income and its components (revenues, expenses, gains
and losses) in the financial statements. The Company currently has no items that
would be included as a component of other comprehensive income.

Other than the above statement, no other new accounting pronouncements have been
issued that will have a impact on the Company's financial statements.



YEAR 2000 READINESS - UPDATE

The following Year 2000 disclosure update is required by the rules and
regulations of the Securities and Exchange Commission and constitutes a "Year
2000 Readiness Disclosure" as defined in the Year 2000 Information and Readiness
Disclosure Act.

The "Year 2000" or "Y2K" problem references the problem caused by computer
systems that have historically been written using two digits rather than four
digits to define the applicable year. Additionally, Y2K includes a problem
calculating leap year if a computer system does not correctly identify the year
2000 as being a leap year. Company computer systems and other equipment and
technology having date sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000 and may not recognize the year 2000 as a
leap year. The Company has instituted a Year 2000 readiness program (the "Y2K
Plan") in order to identify, evaluate and address its exposure to these
problems.

For purposes of its Y2K Plan, the Company defines "Year 2000 compliant" to mean
that a product or service accurately process dates and times into and between
the twentieth and twenty-first centuries, into and between the years 1900 and
2000, performs correct leap year calculations and properly exchanges date and
time information with other products or services when used in combination. The
goal of the Y2K Plan is to ensure that the Company's products, equipment,
systems and processes and those of its significant business partners are
sufficiently Year 2000 compliant such that no date/time issue will have any
adverse impact on the services or products that the Company provides its
customers or the timely and accurate processing of transactions.

STATE OF READINESS. The Company has tested and validated that its cardiac output
monitoring system is Y2K



                                       10
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
--------------------------------------------------------------------------------


compliant. The Company is in the process of documenting this validation process
and the underlying component in the system. In addition, as part of the
Company's Y2K Plan, management is in the process of evaluating of its
information technology ("IT") and non-information technology ("non-IT") systems,
including manufacturing equipment, telephone and mechanical systems and other
equipment and systems having embedded, date sensitive technology for Year 2000
compliance. The Company's Y2K Plan is focused on assessing and assuring
compliance in the following areas: IT and non-IT hardware, operating systems,
and software. Additionally, the Company is in the process of reviewing the Year
2000 compliance status of its customers, vendors and other service providers.

HARDWARE. The Company is in the process of completing its assessment of its IT
and non-IT hardware for Y2K compliance. The Company estimates that most of its
IT hardware has either been upgraded for Y2K compliance or has been certified
internally or through the appropriate vendor to be compliant. The Company
expects that all IT and non-IT hardware systems will be upgraded or certified as
Y2K compliant by October 31, 1999.

OPERATING SYSTEMS. The Company's operating systems are Microsoft NT, Novell
Netware, Microsoft Windows 95 and Microsoft Windows NT. Novell has certified
Netware to be Y2K compliant. Microsoft has certified Windows 95 and Windows NT
to be Y2K compliant. Microsoft has also certified its NT 4.x network operating
system is Y2K compliant upon installation of service release four. The Company
has completed all such operating system upgrades.

SOFTWARE APPLICATIONS. The Company's software systems consist of "off-the-shelf"
software. The Company is in the process of obtaining from its vendors
certification that each software package is compliant. None of these software
programs are critical to the Company's ability to accurately and timely process
transactions. The Company expects that all software applications will either be
assessed to be not dependent on date/time accuracy, certified by the vendor to
be Y2K compliant or replaced by October 31, 1999.

THIRD PARTY RELATIONSHIPS. Because Y2K issues may also impact the Company by
affecting the business and operations of the Company's vendors, customers and
other business partners, the Company is in the process of communicating with
these parties in order to determine their Y2K compliant status. The Company is
in the process of communicating with these parties in order to determine their
compliance status. This communication is in the early stage and accordingly, the
Company has not been able to determine if the failure of a third-party to be Y2K
compliant will have a material adverse affect on the Company. The Company
anticipates that this part of its Y2K plan will be substantially complete by
October 31, 1999.

COSTS TO ADDRESS YEAR 2000 ISSUES. Although the ultimate cost of attaining Year
2000 compliance is not fully known at this time, management anticipates that
external costs will not be material. These costs will be funded from operations.
The Company does not track internal personnel time spent on IT projects,
including the Y2K project. To date, no IT projects have been delayed as a result
of the Company's Y2K project. In the event the Company's Y2K Plan is not
successful or timely implemented, the Company may need to devote more resources
to the process and additional costs may be incurred. Such a situation could have
a material adverse effect on the Company's financial condition and results of
operations.

The costs of Year 2000 compliance and the expected completion dates are the best
estimates of Company management. Estimated costs of the Company's Y2K project
and projected completion dates are forward-looking statements that may be
affected by the Company's current belief as to the extent of its internal
exposure to the Y2K problem, the timeliness and accuracy of information provided
by the Company's vendors, customers and other business partners in response to
Y2K compliance inquiries by the Company, the cost and availability of upgrades,
corrections or replacements for IT and non-IT systems identified as
non-compliant, and the cost of and the Company's ability to procure the services
of consultants or qualified personnel to assist with its Y2K Plan.

WORST CASE SCENARIO. The Company believes that its most reasonably likely, worst
case scenario as a result of the Year 2000 problem will be the failure of one or
more significant vendors, customers or business partners to become



                                       11
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- CONTINUED
--------------------------------------------------------------------------------


Year 2000 complaint and the inability of the Company to determine or react on a
timely basis in order to mitigate the effects on the Company. If the operations
of any significant vendor, customer or other business partner are disrupted due
to the Year 2000 problem and the Company is unable to develop and implement an
effective contingency plan, the Company's ability to carry on essential
activities could be materially affected. Even though the Company is undertaking
its Y2K Plan in an effort to mitigate its risks, there can be no assurance that
this scenario or any other impact of the Y2K problem will not have a material
adverse effect on the Company's business, financial condition and results of
operations.

CONTINGENCY PLANS. To date, the Company has not yet developed any detailed
contingency plans to address Year 2000 compliance deficiencies, as it is still
in the process of gathering data from its customers, vendors and other business
partners regarding their Year 2000 compliance and otherwise implementing its Y2K
Plan. To the extent that the Company identifies Year 2000 compliance issues that
cannot be addressed on a timely basis, it will seek to develop appropriate
contingency plans in order to mitigate its risks.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.


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<PAGE>



PART II.  OTHER INFORMATION
--------------------------------------------------------------------------------


ITEM 1.  LEGAL PROCEEDINGS

None.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.  DEFAULT UPON SENIOR SECURITIES

None.

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

The following is a report of the voting results of the Company's annual
shareholders meeting held on June 14, 1999.

1.       The proposal to elect three directors was approved. Andrew M. Weiss,
         Demetre Nicoloff and Jeffrey W. Green were elected until the next
         annual meeting of shareholders or until their successors are duly
         elected and qualified. The tabulation is as follows:

                     Director              Votes For        Votes Against
                     --------              ---------        -------------
                  Andrew M. Weiss          4,277,373            81,152
                 Demetre Nicoloff          4,275,373            81,152
                 Jeffrey W. Green          4,275,973            82,552

2.       The proposal to amend the Company's Articles of Incorporation to
         increase the authorized shares of common stock from 10,000,000 to
         20,000,000 and to authorize 5,000,000 undesignated shares was approved.
         There were 2,048,262 votes cast in favor and 384,552 votes cast against
         the proposal, with 20,790 shares abstaining.

3.       The proposal to approve the appointment of PricewaterhouseCoopers LLP
         as independent auditors of the Company was approved. There were
         4,330,673 votes cast in favor and 27,152 votes cash against the
         proposal, with 700 shares abstaining.

ITEM 5.  OTHER INFORMATION

None.

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 15.

(b)      Form 8-K. None.



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<PAGE>




SIGNATURES
--------------------------------------------------------------------------------



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


                            APPLIED BIOMETRICS, INC.



Dated:  August 16, 1999     /s/ Camille M. Meyer
                            ---------------------------------------------------
                            Camille M. Meyer
                            Vice President, Finance and Chief Financial Officer
                            (Principal Financial Officer)


                                       14
<PAGE>


APPLIED BIOMETRICS, INC.
INDEX TO EXHIBITS
--------------------------------------------------------------------------------


10.1     Applied Biometrics 1996 Stock Option Plan, amended July 2, 1999. (filed
         herewith electronically).

10.2     Applied Biometrics Amended 1994 Stock Option Plan, amended July 2,
         1999. (filed herewith electronically).

10.3     Applied Biometrics 1998 Stock Plan, amended June 12, 1998. (filed
         herewith electronically).

27.1     Financial Data Schedule for the six-month period ended June 30, 1999
         (filed herewith electronically).



                                       15