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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-KSB

(Mark One)

/x/

ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended September 30, 2000/ /

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


For the Transition Period From  to

Commission File Number 0-18785

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OXBORO MEDICAL, INC.(Name of small business issuer in its charter)

Minnesota(State or Other Jurisdiction of
Incorporation or Organization)

41-1391803(I.R.S. Employer
Identification No.)


13828 Lincoln Street N.E., Ham Lake, Minnesota 55304(Address of Principal Executive Offices, including Zip Code)

(763) 755-9516(Issuer's Telephone Number)

Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:

Common
Stock, Par Value $.01 Per Share (Title of Class)One-Year Common Stock Purchase Warrant(Title of Class)Three-Year Common Stock Purchase Warrant(Title of Class)

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Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.   Yes /x/   No/ /

Check
if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB.   / /

The
issuer's revenues for its most recent fiscal year were $4,587,126.

Based
upon the closing price of the issuer's Common Stock as reported by The Nasdaq Small-Cap Stock Market, the aggregate market value of such Common Stock held by
nonaffiliates of the issuer as of December 8, 2000, was approximately $4,585,346.

The
number of shares of the issuer's Common Stock outstanding at December 8, 2000 was 1,779,007 shares.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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TABLE OF CONTENTS

|           |  |          |  |                                                                                                                 |  | Page No.
|---------- |  | -------- |  | --------------------------------------------------------------------------------------------------------------- |  | --------
|PART I     |  | 3       
|           |  | Item 1.  |  | DESCRIPTION OF BUSINESS                                                                                         |  | 3       
|           |  | Item 2.  |  | DESCRIPTION OF PROPERTY                                                                                         |  | 8       
|           |  | Item 3.  |  | LEGAL PROCEEDINGS                                                                                               |  | 8       
|           |  | Item 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                             |  | 8       
|PART II    |  | 9       
|           |  | Item 5.  |  | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                                        |  | 9       
|           |  | Item 6.  |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                       |  | 10      
|           |  | Item 7.  |  | FINANCIAL STATEMENTS                                                                                            |  | 12      
|           |  | Item 8.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                            |  | 12      
|PART III   |  | 13      
|           |  | Item 9.  |  | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT |  | 13      
|           |  | Item 10. |  | EXECUTIVE COMPENSATION                                                                                          |  | 14      
|           |  | Item 11. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                                                  |  | 16      
|           |  | Item 12. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                                  |  | 17      
|           |  | Item 13. |  | EXHIBITS AND REPORTS ON FORM 8-K                                                                                |  | 20      
|SIGNATURES |  | 25      

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Forward Looking Statements

Forward looking statements herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. There are certain
important factors that could cause results to differ materially from those anticipated by some of the statements made herein. Investors are cautioned that all forward-looking statements involve risks
and uncertainty. Among the factors that could cause actual results to differ materially are the following: acceptance of new products, pricing strategies of competitors, general conditions in the
industries served by the Company's products, ability to maintain adequate inventories to respond to customer demand, changes in regulatory requirements for health care related products, and overall
economic conditions, including inflation and consumer buying patterns.

The
information presented in this Annual Report on Form 10-KSB under "Business", "Properties" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. When used in this report, the words "believe", "expect",
"will", "can", "estimate", "anticipate" and similar expressions are intended to identify such forward-looking statements.

Forward-looking
statements involve risks and uncertainties, including those discussed under "Risk Factors", that could cause actual results to differ materially from those
anticipated. Because actual results may differ, readers are cautioned not to place undue reliance on these forward-looking statements. We do not intend to update any forward-looking statements.

Introduction

Oxboro Medical, Inc. (the "Company" or "Oxboro") was incorporated in Minnesota in 1978. The Company develops, assembles, and markets
single-use medical and surgical products.

Principal Products

Principal medical products produced and sold by Oxboro include vessel loops, clamp covers, instrument guards, suture aid booties and identification tape. The
products are primarily used in the operating room and instrument reprocessing areas of the hospital.

Raw
materials and parts for the products are produced to Oxboro's specifications by various outside vendors. Oxboro uses a clean room facility to assemble, package, and inspect its
sterilized products. The assembled products that are sold sterile are sent to an independent contract sterilizer, and samples are tested at an independent laboratory.

Product Distribution

Medical products are marketed through Oxboro's telemarketing department directly to hospitals throughout the United States and Canada and through dealers and
kit packaging companies domestically. International sales of medical products are made through distributors and accounted for approximately 8% of medical product sales during both fiscal 2000 and
1999.

Sources Of Supply

The raw materials used for the extruding, molding, and weaving of the Company's various products are readily available from multiple sources.

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Patents, Trademarks, Licenses

The Company has in the past pursued and will, from time to time, pursue registrations in patents, trademarks and licenses in connection with the marketing of
its products. Other than certain trademarks and licenses obtained on behalf of Oxboro Outdoors, Inc., which were transferred with the sale of Outdoors on June 30, 1999, the Company filed
one patent application in fiscal year 1999.Many of the products currently being marketed by the Company are not unique. Accordingly, the Company
believes that the effect of patents on other than a few select products would be negligible. In the event the Company substantially develops and tests any new unique products, patent protection could
be important; however, such protection may not be available. In the event the Company attempts to secure patents, it is likely to incur substantial costs in such attempts.

Competition

The medical products market is extremely competitive. The Company believes that among its direct competitors are firms with substantially greater assets,
marketing capability, and experience than the Company. In addition, such competitors are often able to offer lower prices than the Company and thus can limit the Company's penetration and market
share. We believe that Oxboro has achieved a substantial portion of the markets in which it competes by offering a balance of competitive factors including selection, price, customer service,
convenience, product quality, reliability and speed of order fulfillment. Our continued success will depend upon the ability of our sales and marketing program to implement and close sales. In
addition, our principal executive officers and key personnel have extensive experience in sales of medical products.

Government Regulation

Because Oxboro manufactures and sells medical products, both the products and the manufacturing procedures are subject to regulation in the United States by
the Food and Drug Administration and in the European Community by the Medical Device Directives. As a result, Oxboro is subject to extensive rules and regulations, compliance with which may require
expenditure of material amounts. In addition, should Oxboro fail to comply with such regulations it would be subject to administrative and criminal actions, which could have a material adverse effect
on the Company's business. The Company's operations may also be affected if Congress or the European Community passes new legislation or if courts issue new rulings with respect to existing
legislation. Continued compliance with all regulatory requirements may require significant expenditures.

Employees

As of September 30, 2000, Oxboro employed 46 full-time and 4 part-time employees.

Risks Related to Our Business

The following are important factors that could cause actual results to differ materially from those anticipated in any forward-looking statements made by or on
behalf of the Company.

We have sustained losses in the past due to subsidiary operations

We have incurred substantial losses in recent years that have depleted our working capital and reduced our stockholders' equity. While we generated net income
from continuing operations of $904,670 for the fiscal year ended September 30, 2000, we have incurred significant losses in prior years. These losses have resulted principally from expenses
incurred in the development of our former subsidiary, Oxboro Outdoors, Inc. ("Oxboro Outdoors"), expenses due to payment of severance packages to our former officers in connection with related
proxy litigation and a one-time medical inventory write down of approximately $240,000 in fiscal year 1999. On June 30, 1999, we completed

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the sale of Oxboro Outdoors. However, prior to the sale and as a result of losses in Oxboro Outdoors, we incurred significant operating losses. We have taken measures to increase our sales revenues
and profit margins and expect to show further improvement as a result of the sale of Oxboro Outdoors, however, there can be no assurance that our core business will operate profitably in the future,
or that any profits from operations will be significant.

If we cannot maintain adequate operating capital and bank financing, our business will suffer

Our business plan and financial needs are subject to change depending on, among other things, market conditions, business opportunities and cash flow from
operations, if any. We currently have a $550,000 line of credit that will expire on March 31, 2001. There can be no assurance that this line of credit will be extended beyond March 31,
2001. As of September 30, 2000, we had no outstanding balance on the line of credit. We expect to continue to borrow against this line of credit in the future. However, there
can be no assurance that we will have sufficient resources in the future to fulfill our obligations in a timely manner under the current loan agreement. Failure to meet our loan obligations would have
a material adverse effect on our business.

If we do not remain competitive in the markets we serve, our business will be adversely affected

There is growing pressure on healthcare providers in general, and the surgical area in particular, to reduce costs. The trend is towards hospitals purchasing
through buying groups and other large distributors, which generally occurs at lower prices than selling direct to the customer. This trend will make it difficult to maintain and grow sales at our
historic profit margins. If we are not able to introduce new products into such an economic environment and compete at prices lower than that charged by other larger distributors, our business will be
adversely affected.

We are dependent on our management and key personnel to succeed

We depend on the extensive experience in sales of medical products of our principal executive officers and key personnel. Our business requires significant
research and development efforts to bring our products to market. Our continued success also depends on the ability of our marketing and sales program to implement and close the sales. The loss of the
services of any of our executive officers or other key personnel, or our failure to attract and retain other skilled and experienced personnel on acceptable terms, could impede the achievement of our
business objectives and have a material adverse effect on our business.

The pricing strategies of our competitors and our response to those strategies may result in a decline in our revenues

The medical products market is extremely competitive. We believe that the principal competitive factors in our market are selection, price, customer service,
convenience, product quality, reliability and speed of order fulfillment. Among our direct competitors are firms with longer operating histories, larger customer bases, greater financial and marketing
capability, and greater resources and experience than us. We compete with companies such as Scanlon Instruments, Key Surgical and Healthmark. In addition, our competitors are often able to offer lower
prices to customers. Competition from these competitors could limit our market penetration and market share. These factors may have an adverse impact upon our business.

If we do not prevail in a license dispute with a former officer, our revenues and profits could decline

On March 30, 1999, Larry A. Rasmusson, our former Chief Executive Officer and a former director of Oxboro, notified us that he believed we were in
default on exclusive license agreements that we executed with him relating to some of our medical products, including bulldogs, fabric ties,

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

The success of competitive products could have an adverse effect on our business

The medical products industry is intensely competitive and hospitals have a wide variety of product choices and technologies from which to choose. The success
of any competing alternative product to those provided by Oxboro could have a material adverse effect on our business, financial condition and results of operations. Our competitors are companies with
substantially greater financial capabilities for product development and marketing and can therefore market their products or procedures to hospitals and the medical community more effectively than we
could. In addition, companies having proprietary rights to the products we sell could choose to market their products directly to our customers and competitors selling the same or similar products may
duplicate our marketing methods and reduce our ability to effectively sell our product lines. The success of alternative products or of competitors selling those products will have a material adverse
impact on our business.

If we fail to acquire products or develop new products, our business will be adversely affected

We believe that some new products may offer us increased revenue and market penetration, as well as allow us to compete more effectively in our markets. Some
of our revenue is used to acquire product
lines and develop new products and we are currently evaluating several product lines. We cannot assure you that we will use our revenue effectively in evaluating or acquiring new products. Further,
the Company often evaluates new products to offer its customers, but there can be no assurance that we will be able to acquire or successfully develop these new products. Failure to take advantage of
opportunities to offer new products, failure to acquire new products that are accepted by the market or inefficient use of resources to evaluate or acquire new products will have a material adverse
impact on our business.

Fluctuations in our quarterly operating results may negatively affect our stock price

We may experience variability in our net sales and operating profit on a quarterly basis as a result of many factors, including, among other things, the buying
habits of our customers, size and timing of orders by certain customers, shifts in demand for types of products, technological changes and industry announcements of new products. If revenues do not
meet expectations in any given quarter, operating results may be materially adversely affected.

We depend upon third party suppliers

We currently purchase our component materials from several sources. Alternative suppliers for these materials exist should the current suppliers discontinue
production or distribution. However, we would need to investigate the materials obtained from any new suppliers for quality and performance. Additionally, limited notice of the need to switch
suppliers for any reason could affect on our ability to fulfill customer orders, which would have a material adverse effect on our profitability. We have not

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experienced any difficulty with suppliers to date. However, there can be no assurance that delays in the distribution or sale of our products will not occur in the future.

If a product we sell injures a user, we could be subject to a product liability exposure

We sell medical products which may involve product liability risk. We carry general casualty insurance, including coverage for product liability claims up to
$1 million per incident and $2 million aggregate per year. We also carry liability umbrella coverage of $3 million. However, there can be no assurance that this coverage will be
adequate for any claims that may be raised. We are not aware of any pending
product liability claims against us. However, a successful product liability suit could have a material adverse effect our business operations.

Shareholders who hold less than 100 shares may pay disproportionate commissions on sale of their shares

Partially as a result of our 1-for-5 reverse stock split effected August 13, 1999, we have a number of shareholders who hold
fewer than 100 shares. It is our understanding that the minimum unit for our Common Stock traded by broker dealers in the Nasdaq SmallCap Market is a round lot of 100 shares. Because of this, and the
fact that a number of brokerage firms have minimum commission amounts, shareholders holding fewer than 100 shares of our Common Stock might pay a disproportionately high level of commissions upon sale
of their shares.

There is no assurance that future capital will be available to us, and additional capital will dilute the holdings of our stockholders

Our shareholders have no preemptive rights. If we:



our
shareholders, who may not participate in any future stock issuance, will experience dilution of their equity investment. At this time, we cannot determine the potential dilution to our
shareholders.

We
cannot assure that additional financing will be available, or if available, that it will be available on terms favorable to our shareholders. If funds are not available to satisfy
our short-term and long-term operating requirements, we may limit or suspend our operations in the entirety or, under certain circumstances, seek protection from creditors. We
believe that future financing undertaken may contain terms that could result in more substantial dilution than we now have, which would adversely affect our business.

Our stock price may be materially affected by market volatility

The stock market has, from time to time, experienced significant price and volume fluctuations that have affected the market prices of companies similar to
ours and these fluctuations often have been unrelated to the operating performance of such companies. Factors not directly related to our performance, such as negative industry reports or
disappointing earnings announcements by publicly traded competitors, may have an adverse impact on the market price of our Common Stock. In the past, following periods of volatility in the market
price of a company's securities, securities class action claims have often been brought against that company. This litigation could result in substantial costs and a diversion of management's
attention and resources.

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We may be adversely affected by statutory anti-takeover provisions

As a Minnesota corporation, we are subject to certain anti-takeover provisions of the Minnesota Business Corporation Act. The authority of the
Board with regard to the anti-takeover provisions of the Act could have the effect of delaying, deferring or preventing a change in control of the Company, may discourage bids for our
Common Stock at a premium over the then prevailing market price, and may adversely affect the market price of, and the voting and other rights of the holders of our Common Stock. If we issue
additional shares, whether for purposes of raising additional capital or otherwise, it could have the effect of making a takeover more difficult.

Changes in government regulation of the products we sell may negatively affect our business

Our products are regulated by government agencies in the United States and foreign countries. In the United States, our products are regulated by the Food and
Drug Administration. The FDA regulates, among other things, (1) the content of our products, (2) the product labels, (3) the claims in our product literature and advertising, and
(4) the manufacture of the products. The FDA and other government agencies may in the future issue new regulations, or issue new interpretations of existing regulations, which affect the
manufacture, marketing and sale of our products. Our operations may also be affected if Congress passes new legislation or if courts issue new rulings with respect to existing legislation. We can
offer no assurance that we will not be adversely affected by new, or newly interpreted, regulatory requirements.

ITEM 2.  DESCRIPTION OF PROPERTY

The Company's office, manufacturing, and warehouse facilities are located in a 30,000 square foot building on 2.41 acres in Ham Lake, a suburb of Minneapolis,
Minnesota. The building is approximately 10 years old. See Notes 9 and 17 of Notes to Consolidated Financial Statements (included in Item 7 hereof) regarding the terms of a mortgage on the
property and the proposed refinancing.

ITEM 3.  LEGAL PROCEEDINGS

None.

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

None.

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PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock is traded on The Nasdaq SmallCap Market. The following table sets forth the quarterly high and low closing bid prices for the
Company's Common Stock for each quarter of the past two fiscal years as reported by Nasdaq. Such closing bid quotations reflect inter-dealer prices, without mark-up, markdown or commission
and may not represent actual transactions. All prices have been adjusted to reflect the Company's 1-for-5 reverse stock split effected August 13, 1999.

High

LowFiscal 2000First Quarter

$
4.0625

$
2.0000Second Quarter


5.7500


3.5000Third Quarter


5.0313


4.0625Fourth Quarter


4.3750


3.5000Fiscal 1999First Quarter


9.0625


5.0000Second Quarter


7.5000


5.6250Third Quarter


6.2500


4.6875Fourth Quarter


5.3125


2.8750


As
of December 8, 2000, there were approximately 238 holders of record of Common Stock. As of December 8, 2000, there were approximately 12 registered holders of three
year warrants, or "incentive warrants," for the purchase of Common Stock of the Company. The Company has paid no cash dividends on its Common Stock and does not intend to pay any dividends in the
future.

Recent Sales of Unregistered Securities

The Company issued a warrant dated November 17, 2000, for the purchase of the Company's Common Stock to each of two rights warrant holders who had
exercised their rights warrants prior to the commencement of the incentive warrant offering. One warrant was for the purchase of 2,177 shares of the Company's Common Stock; the other was for the
purchase of 4,800 shares of the Company's
Common Stock. Except that the warrants are unregistered and not freely transferable, the terms of the warrants are governed in all respects by the warrant agreement dated August 23, 2000
between the Company and its transfer agent, Wells Fargo Shareowner Services, relating to the warrants offered by the Company in the incentive warrant offering. The Board of Directors determined that,
based upon considerations of equity and fairness, it would offer the warrants to the two rights holders for no consideration, just as the incentive warrants were offered to rights holders generally.
The Company believes this issuance of securities is exempt from registration under Section 4(2) of the Securities Act of 1933.

Securities Issued in Rights Offering

On September 1, 1999, the SEC declared effective the Company's Registration Statement on Form S-3 (File
No. 333-83469) relating to its rights offering to shareholders of record at August 20, 1999. The Company registered 890,824 shares of Common Stock and 445,412 warrants for
purchase of Common Stock in the offering. For each share held at August 20, 1999, shareholders of the Company were entitled to purchase two shares of Common Stock and one warrant immediately
exercisable for purchase of one share of Common Stock at a purchase price of $2.50. The exercise price of the warrants is $2.75. The rights offering terminated on November 30, 1999.

On
December 3, 1999, the Company consummated the sale of 888,590 shares of its Common Stock and 444,295 warrants immediately exercisable for Common Stock pursuant to the
offering, resulting in

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gross proceeds of $1,110,738, plus $11,275 paid on exercise of 4,100 warrants for purchase of an additional 4,100 shares of Common Stock. Net proceeds to the Company after payment of expenses
associated with the offering were $1,071,944. Of that amount, approximately $200,000 has been used for working capital and the remainder has been used to purchase available-for-sale securities.

Securities Issued in Incentive Warrant Offering

On August 23, 2000, the Securities and Exchange Commission declared effective the Company's Registration Statement on Form S-3 (File
No. 333-43616) relating to the offering of 417,794 three year common stock purchase warrants, the "incentive warrants" and 417,794 shares of the Company's Common Stock issuable upon
exercise of the Common Stock purchase warrants issued in connection with the Company's September 1, 1999 rights offering, or the "rights warrants." The aggregate offering price of the
securities registered was $1,671,176.

The
Company offered one incentive warrant to each holder of the rights warrants. For each rights warrant which was properly exercised after August 23, 2000 and on or before
September 30, 2000, the Company issued one incentive warrant to the rights warrant holder at no cost. The rights warrants were exercisable at a price of $2.75 per share of Common Stock. The
incentive warrants have a term of three years and will expire on September 29, 2003. The incentive warrants may be exercised at an exercise price of $4.00 per share of Common Stock. Each
incentive warrant entitles the holder to receive the one share of Common Stock of the Company upon exercise.

On
October 16, 2000 the incentive warrant offering was extended from September 30, 2000 until October 20, 2000 to accommodate warrant holders who were unable to
exercise their rights warrants during the initial offering period as a result of administrative difficulties discovered by the Company following the termination of the initial offering period. The
incentive warrant offering terminated on October 20, 2000.

Gross
proceeds from the exercise of the rights warrants were approximately $1,159,000. As a result of the incentive warrant offering and the exercise of rights warrants, the Company
issued an additional 392,435 shares of its Common Stock. After payment of legal fees, printing costs and expenses associated with the offering, net proceeds to the Company were $1,081,995.

The
Company has applied all of the proceeds to short term investment grade securities pending their application in the business. The Company currently has no specific plans as to the
use of these proceeds.

Compliance with Nasdaq Requirements

During fiscal year 1999, the Company was notified that it had failed to meet the Nasdaq minimum net tangible asset and market capitalization requirements for
continued listing on the Nasdaq SmallCap Market. The Company responded with a plan of compliance that included the sale of its subsidiary, Oxboro Outdoors, Inc., a
1-for-5 reverse stock split and a rights offering extended to shareholders of record of the Company at August 20, 1999. By letter dated October 19, 1999, Nasdaq
notified the Company that it had demonstrated compliance with the Nasdaq net tangible asset and market capitalization requirements for continued listing on the SmallCap Market.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Results of Operations

On June 30, 1999, the Company sold its wholly-owned subsidiary, Oxboro Outdoors, Inc., for $385,000 in cash, a 9% promissory note of $265,000,
subject to certain adjustments, and the assumption of liabilities of approximately $87,000. Because the final sale price was subject to certain adjustments, the Company established a reserve and as a
result, reported a third quarter loss on the sale of $102,045. At the end of the fiscal year ended September 30, 1999, the final sale price of Oxboro

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Outdoors was agreed upon, thereby eliminating the need for the reserve. This resulted in a gain from discontinued operations of $105,000 in the fourth quarter of 1999. The Company received a $175,000
payment on the promissory note in October 1999, with the remaining balance of $70,000 plus interest due December 31, 1999. By September 30, 2000, the promissory note had been
paid.

Net
sales of medical and surgical products for the Company were $4,587,126 in fiscal 2000 compared to $4,513,424 in fiscal 1999, an increase of approximately 1.6% due to a slight
increase in units sold. Competition and the greater emphasis on controlling costs in the health care industry represent ongoing challenges to the Company.

Gross
margin on net sales of medical and surgical products was 65.9% in fiscal 2000 compared to 61.4% in fiscal year 1999. The increase in gross margin percentage is primarily due to
inventory write off adjustments and higher labor costs in fiscal year 1999.

During
fiscal 2000, selling, general and administrative ("SG&A") expenses decreased by 12.8%, or $328,017 as compared to fiscal 1999. For fiscal year 2000, SG&A expenses represented
approximately 48.7% as a percentage of sales. The decrease in SG&A expenses is primarily due to a reduction in consulting expenses and legal fees. The Company's interest expense decreased by
approximately $71,459 as a result of lower average borrowings on its line of credit.

In
fiscal 2000, the Company's net income from continuing operations was $904,670 as compared to net income from continuing operations of $74,074 in fiscal 1999.

Liquidity and Capital Resources

As of September 30, 2000, the Company had working capital of $2,602,601 as compared to $1,515,848 at September 30, 1999. Also, at
September 30, 2000, the Company had $379,551 in long-term debt and $461,108 in cash and cash equivalents.

During
the year ended September 30, 2000, the Company provided $628,308 net cash from operating activities primarily as a result of income from continuing operations and
changes in working capital components.

The
Company used $1,357,725 in net cash in investing activities during the fiscal year ended September 30, 2000, primarily due to purchases of
available-for-sale securities, including purchases of common stock of Minntech Corporation.

During
the fiscal year ended September 30, 2000, net cash provided by financing activities was $887,365, resulting from decreased borrowings on the Company's line of credit and
$1,071,944 proceeds from the exercise of stock rights. The Company has a line of credit facility, pursuant to which it can borrow up to $550,000 subject to certain terms and conditions related to the
Company's financial performance. Outstanding balances are subject to an annual interest rate of 0.5% over the bank's prime rate (9.25% at September 30, 1999) and are secured by all of the
Company's assets. As of September 30, 2000, there was no outstanding balance, however outstanding balances would be subject to an interest rate of 0.5% over the bank's prime rate (10% at
September 30, 2000). This credit facility expires in March 2001 and the Company intends to replace the credit facility with a similar agreement prior to that time, although no such
agreement is presently in place.

As
described above, on August 23, 2000, the Company effected an offering of incentive warrants to rights warrants holders who exercised their rights warrants on or before
September 30, 2000. The incentive warrant offering was extended until October 20, 2000. The incentive warrant offering resulted in net proceeds to the Company of $1,081,995 after payment
of legal fees, printing costs and other expenses. The Company has applied all of the proceeds to short term investment grade securities pending their application in the business. The Company currently
has no specific plans as to the use of these proceeds.

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During fiscal year 2001, the Company currently expects to spend approximately $150,000 on capital improvements. We believe we have the financial resources to meet our future business
requirements for at least the next twelve months.

Year 2000 Issues

The Company has assessed and continues to assess the impact of the Year 2000 issue on its reporting systems and operations. The Year 2000 issue exists because
many computer systems and applications currently use two-digit fields to designate a year. As the century date occurs, date sensitive systems may recognize the Year 2000 as 1900 or not at
all. This inability to recognize or properly treat the Year 2000 may cause systems to process critical financial and operational information incorrectly.

During
1999 the Company replaced most of its computer systems with new hardware and software. To date the Company's expenditures for Year 2000 compliance have been minimal. It is the
Company's belief that all critical computer systems and equipment with embedded systems are Y2K compliant. To date the Company has experienced no problems with its computer systems relating to the
Year 2000 issue. The Company does business with other entities which may or may not be Year 2000 compliant, however the Company has experienced no problems with any of these other companies relating
to the Year 2000 issue. If any Year 2000 issues arise, the Company plans to devote the necessary resources to resolve all significant Year 2000 issues in a timely manner.

ITEM 7.  FINANCIAL STATEMENTS

|Report of Independent Certified Public Accountants |                                                          | F-2
|-------------------------------------------------- | -------------------------------------------------------- | ---
|For the years ended September 30, 2000 and 1999:   |                                                          |    
|                                                   | Balance sheets                                           |    
|                                                   | Statements of Operations and Comprehensive Income (Loss) |    
|                                                   | Statements of Stockholders' Equity                       |    
|                                                   | Statements of Cash Flows                                 |    
|                                                   | Notes to Financial Statements                            |    

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On March 16, 2000, the Company dismissed Grant Thornton LLP as its independent accountants. The decision to change accountants was recommended by our
Board of Directors.

In
connection with the audits of the fiscal years ended September 30, 1999 and 1998, and in the subsequent interim period through the date of dismissal, there were no
disagreements with Grant Thornton LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the
satisfaction of Grant Thornton LLP, would have caused them to make reference thereto in their report on the financial statements for such years.

Grant
Thornton LLP's report on the consolidated financial statements as of and for the years ended September 30, 1999 and 1998, did not contain any adverse opinion or
disclaimer of opinion, nor was it qualified as to uncertainty, audit scope, or accounting principles.

The
Company has requested and Grant Thornton LLP has furnished the Company with a letter addressed to the SEC stating that it agrees with the above statements. A copy of such letter,
dated March 22, 2000, was filed as Exhibit 1 to our Current Report on Form 8-K filed on March 23, 2000.

On
March 16, 2000, Oxboro engaged Lund Koehler Cox & Arkema LLP as its new independent accountants.

12

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PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The following table provides information about the Company's directors and executive officers:

|Name                       |  | Age |  | Position  |  | Director Since
|-------------------------- |  | --- |  | --------- |  | --------------
|J. David Berkley           |  | 52  |  | President |  |              
|Gary W. Copperud(2)        |  | 42  |  | Director  |  | 1998          
|Kenneth W. Brimmer(2), (4) |  | 45  |  | Director  |  | 1998          
|Gervaise Wilhelm(1)        |  | 57  |  | Director  |  | 2000          
|Allan D. Anderson(3)(4)    |  | 47  |  | Director  |  | 2000          

---

J. David Berkley.(President). Mr Berkley has served as the President of the Company since October 16, 2000.
Prior to joining the Company, Mr. Berkley was employed in various capacities by Minnesota Mining and Manufacturing Company (3M) from 1977 to 1999. Mr. Berkley was the Executive General
Manager of 3M's Security Market Center in 1999. From 1997 to 1999 he served as the Vice President, Strategic Development, Health Care of 3M. From 1995 to 1997, he was 3M's Vice President, Medical
Surgical Markets Division. Mr. Berkley was the General Manager of 3M's Consumer Professional Health Care Division from 1993 to 1995.

Gary W. Copperud.(Class II Director). Mr Copperud has been a director of the Company since
February 1998. He has been president/general manager of CMM Properties, LLC, an investment company located in Fort Collins, Colorado, with holdings in real estate and stocks, since 1993. Prior
to that, Mr. Copperud was self-employed in the fields of securities and real estate investment and real estate development.

Kenneth W. Brimmer.(Class II Director). Mr. Brimmer has been a director of the Company since
February 1998 and served as its interim Chief Executive Officer from October 2000 to November 18, 2000. Mr. Brimmer presently serves as Chairman, CEO and Director of Active
IQ Technologies, Inc. Previously, Mr. Brimmer was President of Rainforest Cafe, Inc. from April 1997 until April 2000 and was Treasurer from its inception in 1995.
Prior to that, Mr. Brimmer was employed by Grand Casinos, Inc. and its predecessor from October 1990 until April 1997, serving as Special Assistant to the Chairman and CEO,
Lyle Berman. Mr. Brimmer currently serves on the board of directors of Rainforest Cafe, Inc., New Horizons Kid Quest, Inc., and Hypertension Diagnostics, Inc., where he is
also Chairman.

Gervaise Wilhelm.(Class I Director). Ms. Wilhelm has been a partner with Surgical Safety Associates, a
manufacturer of surgical safety disposable devices, since October 1999. Since 1997, Ms. Wilhelm has also
served as a consultant to start-up medical device companies, including companies operating in the medical specialty areas of urology, surgery, cardiology, gastroenterology and critical
care medicine. From 1994 to 1997, Ms. Wilhelm served as president and chief executive officer of Internventional Innovations, Inc., now KRT Corp., a medical device company.
Ms. Wilhelm currently serves on the board of directors of Paradigm Diagnostics LLC.

13

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Allan D. Anderson.(Class III Director). Mr. Anderson has been a director of the Company since
October 2000. Mr. Anderson is currently President of RiverBend Solutions ("RiverBend"), having served in that capacity since August 2000. He is also the Chief Financial Officer of
RiverBend, appointed in January 2000. He has also been a director of RiverBend since 1995. RiverBend provides processing and customer services to not-for-profit credit
counseling agencies and their clients. Mr. Anderson was the President of Metropolitan Financial Management, Inc. from 1997 to 1999 and served as its Treasurer from 1995 to 1999. He was a
director of Metropolitan Financial Management, Inc. from 1991 through 1999. Prior to joining Metropolitan, he was the Chief Financial Officer of Pan Am Systems, Inc. from 1994 through
1995.

The
Company's Articles of Incorporation and Bylaws provide: (a) the Board of Directors is classified into three classes, each of which member would serve (after a transitional
period) for a staggered three-year term; (5) directors may be removed for cause with the vote of the holders of a majority of the then outstanding shares entitled to vote or other
than for cause with the vote of the holders of at least 75% of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors, voting
together as a single class; (c) any new director elected to fill a vacancy on the Board shall serve for the remainder of the full term of the class in which the vacancy occurred rather than
until the next meeting of shareholders; and (d) require a 75% shareholder vote requirement to alter, amend or repeal the foregoing provisions of the Articles or Bylaws. Such classification will
make it more difficult to change the members of the Board of Directors or to effect a takeover of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

Pursuant to Section 16(a) under the Securities Exchange Act of 1934, executive officers, directors and 10% shareholders (insiders) of the Company are
required to file reports on Forms 3, 4, and 5 of their beneficial holdings and transactions in the Company's Common Stock. To the Company's knowledge, all insiders of the Company made timely filings
of Forms 3, 4 or 5 with respect to transactions or holdings during fiscal year 2000, except that Messrs. Brimmer and Copperud failed to timely file one Form 4 relating to their
acquisition of warrants during our incentive warrant offering.

ITEM 10.  EXECUTIVE COMPENSATION

The following table sets forth the aggregate compensation for the years indicated for the Company's executive officers who received salary and bonus in excess
of $100,000.

Summary Compensation Table

|                                                                                    |  |                |  |   |                  |  |   | Long-Term
Compensation Awards
Securities Underlying
Options |  |      
|----------------------------------------------------------------------------------- |  | -------------- |  | - | ---------------- |  | - | ----------------------------------------------------------- |  | -----
|
|
|
|
|Matthew E. Bellin(1)
President, Chief Operating Officer and Chief Financial Officer |  | 2000
1999
1998 |  | $ | 129,574
61,539
 |  | $ | 10,000

                                                  |  | 


|Kenneth Brimmer(2)
Chief Executive Officer                                          |  | 2000
1999
1998 |  |   | 

            |  |   | 

                                                       |  | 



---

14

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The following table provides information about each stock option grant made during the fiscal year ended September 30, 2000 to the named executive
officers. All share amounts and share prices reflect a 1-for-5 reverse stock split effected by the Company on August 13, 1999.

Option Grants In Fiscal Year 2000

|Name               |  | Number of Securities
Underlying Options
Granted |     | Percent of Total Options
Granted to Employees in
Fiscal Year |   | Exercise or
Base Price Per
($/Share) |      | Market Price
on
Date of Grant |   | Expiration
Date
|------------------ |  | ----------------------------------------------- | --- | ------------------------------------------------------------ | - | ------------------------------------ | ---- | ----------------------------- | - | ---------------
|Matthew E. Bellin  |  | 65,000                                          | (1) | 68                                                           | % | $                                    | 3.50 |                               | $ | 5.00           
|                   |  | 20,000                                          | (2) | 20                                                           | % | $                                    | 3.50 |                               | $ | 5.00           
|Kenneth W.
Brimmer |  | 0                                               |     |                                                             |   |                                      |     |                               |   |               

---

The
following table summarizes stock option exercises during the fiscal year ended September 30, 2000 and the total number of options held at the end of fiscal year 2000 by the
named executive officers.

Aggregated Option Exercises in Fiscal Year 2000 and
Fiscal Year End Option Values

|                   |  |   |  |   |   | Number of Securities
Underlying Unexercised
Options at September 30, 2000 |        |     |        |    
|------------------ |  | - |  | - | - | ------------------------------------------------------------------------- | ------ | --- | ------ | ---
|
|
|
|
|Matthew E. Bellin  |  |  |  | $ |  |                                                                           | 17,000 | (1) | 68,000 | (1)
|Kenneth W. Brimmer |  |  |  | $ |  |                                                                           |       |     |       |    

---

Employment Agreements

On February 10, 1999, Matthew Bellin entered into a letter agreement with the Company to serve as its President, Chief Operating Officer and interim
Chief Financial Officer. Pursuant to the letter agreement, Mr. Bellin would be paid an annual salary of $100,000 per year plus 20% of such salary

15

---

upon the achievement of mutually agreed upon objectives. After 30 days of employment, Mr. Bellin was entitled to Company benefits customary to the office of President. In addition,
Mr. Bellin received an option to purchase 20,000 shares of Common Stock of the Company (as adjusted to reflect the Company's 1-for-5 reverse stock split, effective
August 13, 1999), at an exercise price of $7.50 per share, vesting with respect to 4,000 shares (adjusted for the reverse split) annually. As a condition of his employment, Mr. Bellin
also executed an Employee Noncompetition and Confidentiality Agreement with the Company under which he agreed not to engage in activities (described in the Agreement) hostile or adverse to the Company
or Oxboro Outdoors, Inc. or that would interfere with his exercise of independent judgment in the Company's best interests. The Agreement prohibits Mr. Bellin from disclosing or using
proprietary information, as described in the Agreement, relating to the Company or Oxboro Outdoors. Under the terms of the Agreement, for a period of one year after termination of the Agreement,
Mr. Bellin is prohibited from engaging in activities that are competitive to the Company or Oxboro Outdoors (as described in the Agreement) or from attempting to employ any Company or Outdoors
employee or persuading such person to terminate employment with the Company or Oxboro Outdoors. Mr. Bellin's annual salary was increased to $120,000 effective October 1, 1999.

Mr. Bellin
ceased serving as an officer of the Company effective October 6, 2000. In connection with his resignation, he executed a letter agreement dated
October 12, 2000 with the Company. The letter agreement provided that, in exchange for consulting services to the Company, Mr. Bellin would be paid his usual salary through
December 1, 2000. The letter agreement also summarized the exerciseability of nonqualified options granted to Mr. Bellin on February 15, 1999; options which were not vested as of
October 6, 2000 expired. Of the nonqualified options granted to Mr. Bellin on February 15, 1999, options for the purchase of 13,000 shares of our Common Stock were vested as of
October 6, 2000 and may be exercised, if at all, on or before April 6, 2001 and additional options to purchase 4,000 were vested as of October 6, 2000 and may be exercised, if at
all, on or before January 6, 2001. In the letter agreement, Mr. Bellin also agreed to release the Company and its affiliates from certain claims.

The
Company and J. David Berkley entered into an agreement dated October 31, 2000, effective October 16, 2000 under which Mr. Berkley agreed to serve as
the President of Oxboro Medical, Inc. on an "at will" basis. The Agreement provided for an annual salary of $150,000, with a salary review at the end of the first year. Mr. Berkley would also
be eligible for a bonus of up to 100% of his salary, based upon the performance of the Company.

As
part of Mr. Berkley's compensation, he received options to purchase 100,000 shares of the Common Stock of the Company. The options are exercisable at $3.75 per share.
The options vest on the seventh anniversary of employment; however, vesting is accelerated if the Company reaches certain performance goals.

Outside Director Compensation

Each director of the Company who is not an employee receives $1,000 per quarter and the Chairman of the Board receives $1,250 per quarter. The aggregate fees
paid to non-management directors for services rendered for the years ended September 30, 2000 were approximately $17,000.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table presents, as of December 8, 2000, certain information regarding beneficial ownership of the Company's Common Stock by
(i) each person known by the Company to beneficially own more than 5% of the outstanding shares of Common Stock; (ii) each director and executive officer of the Company; and
(iii) all directors and executive officers of the Company as a group. Unless

16

---

otherwise indicated, the persons listed below have sole voting and investment power with respect to the shares and may be reached at 13828 Lincoln Street N.E., Ham Lake, MN 55304.

|Name of Beneficial Owner                                                                                       |  | Shares of Common
Stock(1) |     | Shares
Acquirable
within 60 days |     | Total   |  | Percentage
Beneficially
Owned |  
|-------------------------------------------------------------------------------------------------------------- |  | ------------------------- | --- | -------------------------------- | --- | ------- |  | ----------------------------- | -
|Matthew E. Bellin                                                                                              |  | 21,544                    | (2) | 17,000                           |     | 38,544  |  | 2.1                           | %
|J. David Berkley                                                                                               |  | 0                         |     | 0                                |     | 0       |  | *                             |  
|CMM Properties LLC                                                                                             |  | 473,402                   | (3) | 134,879                          | (4) | 608,281 |  | 31.8                          | %
|Kenneth W. Brimmer
c/o Active IQ Technologies, Inc.
Suite 1500
601 Carlson Parkway
Minnetonka, Minnesota 55305 |  | 252,526                   | (5) | 77,842                           | (6) | 330,368 |  | 17.8                          | %
|Gervaise Wilhelm                                                                                               |  | 5,000                     |     | 10,000                           |     | 15,000  |  | *                             |  
|Allan D. Anderson                                                                                              |  | 0                         |     | 5,000                            |     | 5,000   |  | *                             |  
|All Officers and Directors as a Group (5 persons)                                                              |  | 752,472                   |     | 244,721                          |     | 997,193 |  | 49.3                          | %

---

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Agreements with Larry A. Rasmusson

Employment Agreements.During fiscal 1994, the Company entered into an employment agreement with Larry A. Rasmusson,
former Chief Executive Officer and Chief Financial Officer, whereby he was paid an annual salary determined each fiscal year, a bonus, the amount of which was based upon achievement by the Company of
certain financial goals, and other benefits. Effective September 1, 1998, the Company and Mr. Rasmusson entered into a Mutual Release & Noncompetition Agreement (the "Mutual
Release & Noncompetition Agreement") that provided for the termination of Mr. Rasmusson's employment agreement in consideration of payment of $150,000 over 24 months, the
amendment of his consulting agreement with the Company, the surrender of 510,000 shares of Common Stock to the Company, an amendment to an exclusive license and royalty agreement between

17

---

Mr. Rasmusson and Oxboro Outdoors, Inc., the rescission of the exercise of options for 220,364 shares of Common Stock of the Company, and a mutual release of claims.

License Agreements.Pursuant to an exclusive license agreement, Mr. Rasmusson, as licensor, granted the Company,
as licensee, the exclusive right to make, use, and sell certain medical products and to receive information and assistance from Mr. Rasmusson to make, use and sell the products.
Mr. Rasmusson is to receive royalties in the amount of 4% of the "net sales price" (as defined) of all licensed products sold. Royalties continue for the life of the product. If at any time a
product covered by the agreement is no longer sold by the Company (defined as a reduction by 50% in sales from the previous calendar year), the license will no longer be exclusive as to that product.
The agreement contains a provision for increasing the royalty amount if royalty rates paid by the Company to others for similar products are higher than 4%. The agreement also provides that upon the
termination of the employment of a former officer, the royalty will be increased from 4% to 6% on certain products, and Mr. Rasmusson and the former officer will each receive royalties of 3% on
sales of such products. During fiscal 2000 and 1999, Mr. Rasmusson earned $44,076 and $40,881, respectively, in royalties under this agreement.

The
Company has been notified by Mr. Rasmusson that it is currently in default of royalty agreements related to certain medical products. Mr. Rasmusson has taken the
position that the rights to these medical products have reverted back to him. The Company believes that it is not in default. If
Mr. Rasmusson were to initiate a legal action to terminate such agreements, the Company would aggressively defend itself in such action and would challenge the validity of such agreements. In
that event and if necessary and appropriate, the Company will seek to terminate the agreements or have them declared invalid or both. If, however, the royalty agreements are found valid and any
resulting litigation is determined adversely to it, the Company may lose the right to manufacture and distribute products related to the royalty agreements. There could be a substantial negative
impact on the Company's revenues and profits in such event until it located and acquired or developed alternative products.

Oxboro
Outdoors, Inc. ("Oxboro Outdoors") entered into an exclusive license and royalty agreement with Mr. Rasmusson pursuant to which Mr. Rasmusson, as licensor,
granted Oxboro Outdoors, as licensee, the exclusive right to make, use, and sell certain outdoor recreational products and to receive information and assistance from Mr. Rasmusson to make, use
and sell the products. Pursuant to the terms of the Royalty Agreement, advance royalties of $229,241 were paid, by the Company to Mr. Rasmusson and as of June 30, 1999, royalties of
$182,201 had been credited against advances paid to Mr. Rasmusson for products sold. The Company's payment obligations terminated with the sale of Oxboro Outdoors on June 30, 1999.

Consulting Agreements.During fiscal 1996, the Company entered into a consulting agreement with Mr. Rasmusson
whereby he would be paid an annual consulting fee of $150,000 for a period of five years commencing upon his retirement. Effective September 1, 1998, the Company and Mr. Rasmusson
amended the consulting agreement, as part of the Mutual Release & Noncompetition Agreement, to reduce the term of the consulting agreement to 24 months, beginning September 1,
1998 and terminating August 31, 2000, and reduced the compensation payable under the consulting agreement to $485,000 payable in 24 equal monthly installments of $20,208.

Split Dollar Insurance.The Company adopted split dollar life insurance plans for the benefit of Mr. Rasmusson.
Prior to September 1, 1998 and under the terms of Mr. Rasmusson's plan, the Company paid the annual premiums on two $500,000 insurance policies (the "Policies") on his life. The Policies
are whole life policies on which all premiums were paid by the Company and income is imputed to the insured in an amount equal to the term rate for his insurance as established by the insurer. The
Policies are owned by Mr. Rasmusson. The plan was designed so that the Company will recover all premium payments, interest, and advances made by it on account of the Policies. The Company's
interest in the premium payments, interest, and advances made with respect to the Policies are secured by a collateral assignment of the Policies. Upon the death of Mr. Rasmusson, the Company

18

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will be reimbursed from the insurance proceeds paid to the beneficiaries in an amount equal to the total premiums, interest, and advances made by the Company with respect to the Policies. In the event
the Policies are surrendered for their cash surrender value at some date in the future, the Company will be reimbursed for the premiums it has paid on the Policies, plus interest. Premiums paid in
fiscal
2000 and 1999 on behalf of Mr. Rasmusson totaled $47,775 and $47,095, respectively. Effective September 1, 1998, pursuant to the terms of the Mutual Release & Noncompetition
Agreement, the two Policies will be maintained by the Company so long as Mr. Rasmusson pays and maintains his portion of the monthly premiums on said Policies in a timely manner. If the Company
fails to maintain payments or terminates either or both of said Policies or if the Policies cancel or terminate for any reason other than Mr. Rasmusson's death, Mr. Rasmusson shall
receive all of the cash value and/or termination value. Upon Mr. Rasmusson's death, the benefits under the Policies are to be paid out according to their terms.

Exercise of Stock Options

The Company was notified by the Nasdaq Stock Market in May 1999 that it failed to meet the minimum net tangible asset requirement for continued listing
on the Nasdaq SmallCap Stock Market. The Company proposed a compliance plan to Nasdaq, which included a rights offering to its shareholders of record at August 20, 1999. For each share held,
shareholders were entitled to receive the right to purchase two shares of Common Stock and one immediately exercisable warrant for purchase of Common Stock of the Company for a purchase price of $2.50
per right. In connection with the compliance plan and the rights offering, Kenneth W. Brimmer and Gary W. Copperud, directors of the Company, agreed to purchase shares sufficient to ensure that the
Company would meet the Nasdaq net tangible asset requirement following the offering. Pursuant to this agreement, Messrs. Copperud and Brimmer each exercised options to purchase 4,000 shares of
Common Stock at an exercise price of $5.00 per share for a purchase price of $20,000 each on exercise of their respective options.

Effective
January 15, 1998, John R. Walter, a director of the Company, exercised options to purchase 40,000 (8,000 post-split) shares of the Company's Common Stock
for an aggregate purchase price of $43,200. Mr. Walter paid the exercise price by delivery of a nonrecourse promissory note that provided for payment of the principal in five equal annual
installments, commencing in January 1999, together with all interest accrued and unpaid as of the date of payment, and interest at an annual rate of 6%. The shares purchased were pledged as
security for the notes. In January 1999, Mr. Walter entered into an agreement with the Company whereby he returned 29,000 (5,800 post-split) shares to the Company in
consideration of the cancellation of the promissory note and all accrued interest.

Transactions with Directors

On April 20, 1999, the Company granted immediately exercisable options to Kenneth W. Brimmer, John E. Sayer and Gary W. Copperud in connection with
their service as non-management directors, each for purchase of 4,000 shares at a purchase price of $5.00 per share. The Company also granted an immediately exercisable option to Robert S.
Garin to purchase 1,000 shares of Common Stock at a purchase price of $5.00 per share for his service as a non-management director.

A
former director of the Company, Dennis Mikkelson, was paid approximately $18,000 and $64,000 during the fiscal years ended September 30, 1999 and 1998, respectively, for
general business consulting and for development and enhancement of the Company's computer capabilities. A former director, John Walter, received approximately $10,000 in commissions from the sale of
insurance policies to the Company during each of the years ended September 30, 1999 and 1998. A former director, R. J. Fritz, was paid $10,333 for his services as a director during fiscal year
1999.

On
September 22, 2000, a Schedule 13D was filed with the Securities and Exchange Commission on behalf of the Company, Kenneth W. Brimmer and Gary Copperud relating to
their respective interests in Minntech Corporation. Messrs. Brimmer and Copperud are two of our directors. The Company reported that, as of September 12, 2000, it had aquired a 3%
interest in Minntech Corporation through open market purchases of 200,000 shares that company's common stock. As disclosed in the Schedule 13D, the Company would beneficially own 5.7% if the
Company's shares were aggregated with those owned by Kenneth W. Brimmer and Gary Copperud. The Company disclaims ownership of the shares held by Messrs Brimmer and Copperud.

19

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ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits.

The following Exhibits are included with this annual report on Form 10-KSB pursuant to Item 601 of Regulation S-B:

|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1            |  | Agreement for Purchase and Sale of Stock, effective June 30, 1999, by and between the Company and John McGuire, Stephen Kaminski and Charles Kruse (incorporated by reference to Exhibit 2.1 to the Company's Quarterly
Report on Form 10-QSB for the period ended June 30, 1999 as filed with the Securities and Exchange Commission (the "Commission") on August 13, 1999 (the "June 1999 Form 10-QSB")).
|2.2            |  | Promissory Note dated June 30, 1999, issued to the Company by John McGuire, Stephen Kaminski and Charles Kruse, in the principal amount of $265,000 (incorporated by reference to Exhibit 2.2 to the Company's June 1999 Form
10-KSB).                                                                                                                                                                     
|3.1            |  | Composite Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 2000).                                                                                                                                                                                                              
|3.2            |  | Amended and Restated Bylaws effective February 23, 1995 (incorporated by reference to Exhibit 3.1(b) to the Company's Annual Report on Form 10-KSB for the year ended September 30, 1998 (the "1998 Form 10-KSB")
).                                                                                                                                                                                       
|4.1            |  | Form of Rights Subscription Certificate (incorporated by reference to Exhibit 4(a) to the Company's Registration Statement on Form S-3 (File No. 333-83469) filed on July 22, 1999, as amended (the "1999 Form S-3")
).                                                                                                                                                                                    
|4.2            |  | Form of Common Stock Certificate (incorporated by reference to Exhibit 4(b) to the 1999 Form S-3).                                                                                                                                                                                                                                                                                                         
|4.3            |  | Warrant Agreement between the Company and Norwest Bank Minnesota, N.A. dated September 30, 1999 with respect to the rights offering (incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form
10-KSB for the year ended September 30, 1999 (the "1999 10-KSB")).                                                                                                                    
|4.4            |  | Specimen Warrant Certificate of the Company (incorporated by reference to Exhibit 4(e) to the 1999 Form S-3).                                                                                                                                                                                                                                                                                              
|4.5            |  | Warrant Agreement between the Company and Wells Fargo Bank Minnesota, N.A. dated August 23, 2000 (incorporated by reference to Exhibit 4(d) to the Company's Registration Statement on Form S-3 (File No. 333-43616) filed on
August 11, 2000 (the "2000 Form S-3")).                                                                                                                                      
|4.6            |  | Form of Warrant Certificate (incorporated by reference to Exhibit 4(e) to the 2000 Form S-3).                                                                                                                                                                                                                                                                                                              
|10.1*          |  | Transfer of Technology Agreement by and between Project Heart Limited Partnership and LexTen, Inc., effective September 30, 1997 (incorporated by reference to Exhibit 10.1 to the Company's 1998 Form 10-KSB).                                                                                                                                                                                            
|10.2*          |  | Termination of Stock Award Agreement effective September 30, 1997, between the Company and Larry A. Rasmusson (incorporated by reference to Exhibit 10.2 to the 1998 Form 10-KSB).                                                                                                                                                                                                                         
|10.3(a)*       |  | Exclusive License Agreement between the Company and Larry Rasmusson dated April 1, 1990 (the "Exclusive License Agreement")(incorporated by reference to Exhibit 10.3(a) to the 1998 Form 10-KSB).                                                                                                                                                                                                         

20

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|10.3(b)* |  | First Amendment to Exclusive License Agreement effective November 8, 1995 (incorporated by reference to Exhibit 10.3(b) to the 1998 Form 10-KSB).                                                                                               
|-------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.3(c)* |  | Second Amendment to Exclusive License Agreement effective September 1, 1998 (incorporated by reference to Exhibit 10.3(c) to the 1998 Form 10-KSB).                                                                                             
|10.4(a)* |  | Employment Agreement between the Company and Larry A. Rasmusson dated April 1, 1993 (incorporated by reference to Exhibit 10.4(a) to the 1998 Form 10-KSB).                                                                                     
|10.4(b)* |  | First Amendment to Employment Agreement effective December 21, 1993 (incorporated by reference to Exhibit 10.4(b) to the 1998 Form 10-KSB).                                                                                                     
|10.4(c)* |  | Second Amendment to Employment Agreement effective October 1, 1997 (incorporated by reference to Exhibit 10.4(c) to the 1998 Form 10-KSB).                                                                                                      
|10.4(d)* |  | Third Amendment to Employment Agreement effective February 25, 1998 (incorporated by reference to Exhibit 10.4(d) to the 1998 Form 10-KSB).                                                                                                     
|10.5(a)* |  | Exclusive License and Royalty Agreement between Oxboro Outdoors, Inc. and Larry Rasmusson dated April 17, 1993 the ("Exclusive License and Royalty Agreement")(incorporated by reference to Exhibit 10.5(a) to the 1998 Form
10-KSB).           
|10.5(b)* |  | First Amendment to Exclusive License and Royalty Agreement effective December 21, 1993 (incorporated by reference to Exhibit 10.5(b) to the 1998 Form 10-KSB).                                                                                  
|10.5(c)* |  | Second Amendment to Exclusive License and Royalty Agreement effective November 8, 1995 (incorporated by reference to Exhibit 10.5(c) to the 1998 Form 10-KSB).                                                                                  
|10.5(d)* |  | Third Amendment to Exclusive License and Royalty Agreement effective February 25, 1998 (incorporated by reference to Exhibit 10.5(d) to the 1998 Form 10-KSB).                                                                                  
|10.5(e)* |  | Fourth Amendment to Exclusive License and Royalty Agreement, effective as of the 1st day of September, 1998 (incorporated by reference to Exhibit 10.5(e) to the 1998 Form 10-KSB).                                                             
|10.6(a)* |  | Consulting Agreement effective November 1, 1995, by and between the Company and Larry A. Rasmusson (the "Consulting Agreement") (incorporated by reference to Exhibit 10.6(a) to the 1998 Form 10-KSB).                                         
|10.6(b)* |  | First Amendment to the Consulting Agreement effective October 1, 1997 (incorporated by reference to Exhibit 10.6(b) to the 1998 Form 10-KSB).                                                                                                   
|10.6(c)* |  | Second Amendment to the Consulting Agreement effective September 1, 1998 (incorporated by reference to Exhibit 10.6(c) to the 1998 Form 10-KSB).                                                                                                
|10.7(a)* |  | Stock Option Agreement effective August 17, 1995, by and between the Company and Larry A. Rasmusson (incorporated by reference to Exhibit 10.7(a) to the 1998 Form 10-KSB).                                                                     
|10.7(b)* |  | Stock Option Exercise and Loan Agreement for the Purchase of 20,536 shares of Common Stock of the Company, between Company and Larry A. Rasmusson dated January 15, 1998 (incorporated by reference to Exhibit 10.7(b) to the
1998 Form 10-KSB).
|10.7(c)* |  | Secured Promissory Note in the amount of $30,546 to Company from Larry A. Rasmusson dated January 15, 1998 (incorporated by reference to Exhibit 10.7(c) to the 1998 Form 10-KSB).                                                              
|10.7(d)* |  | Instruments Security Agreement between Company and Larry A. Rasmusson dated January 15, 1998 (incorporated by reference to Exhibit 10.7(d) to the 1998 Form 10-KSB).                                                                            

21

---

|10.7(e)*  |  | First Amendment to August 17, 1995 Stock Option Agreement by and between the Company and Larry A. Rasmusson effective September 1, 1998 (incorporated by reference to Exhibit 10.7(e) to the 1998 Form 10-KSB).                                      
|--------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.8(a)*  |  | Current Stock Option Agreement effective October 1, 1997, by and between the Company and Larry A. Rasmusson (incorporated by reference to Exhibit 10.8(a) to the 1998 Form 10-KSB).                                                                  
|10.8(b)*  |  | Deferred Stock Option Agreement effective October 1, 1997, by and between the Company and Larry A. Rasmusson (incorporated by reference to Exhibit 10.8(b) to the 1998 Form 10-KSB).                                                                 
|10.8(c)*  |  | Stock Option Exercise and Loan Agreement for the purchase of 200,000 shares of Common Stock of the Company, between the Company and Larry A. Rasmusson dated January 15, 1998 (incorporated by reference to Exhibit 10.8(c)
to the 1998 Form 10-KSB).
|10.8(d)*  |  | Secured Promissory Note in the Amount of $200,000 to Company from Larry A. Rasmusson dated January 15, 1998 (incorporated by reference to Exhibit 10.8(d) to the 1998 Form 10-KSB).                                                                  
|10.8(e)*  |  | Instruments Security Agreement between the Company and Larry A. Rasmusson dated January 15, 1998 (incorporated by reference to Exhibit 10.8(e) to the 1998 Form 10-KSB).                                                                             
|10.8(f)*  |  | First Amendment to October 1, 1997 Current Stock Option Agreement by and between the Company and Larry A. Rasmusson effective September 1, 1998 (incorporated by reference to Exhibit 10.8(f) to the 1998 Form
10-KSB).                              
|10.9*     |  | Mutual Release and Noncompetition Agreement by and between Larry A. Rasmusson and the Company effective September 1, 1998 (incorporated by reference to Exhibit 10.9 to the 1998 Form 10-KSB).                                                       
|10.10*    |  | Product Development and Incentive Agreement effective November 8, 1995, be and between the Company and Harley Haase (incorporated by reference to Exhibit 10.10 to the 1998 Form 10-KSB).                                                            
|10.11*    |  | Royalty Sharing Agreement effective November 21, 1995, by and between the Company, Oxboro Outdoors, Inc., Larry A. Rasmusson and Harley Haase (incorporated by reference to Exhibit 10.11 to the 1998 Form
10-KSB).                                  
|10.12*    |  | Settlement Agreement and Mutual Release of Claims by and between Harley Haase and the Company dated June 13, 1997 (incorporated by reference to Exhibit 10.12 to the 1998 Form 10-KSB).                                                              
|10.13(a)* |  | Stock Option Exercise and Loan Agreement for the purchase of 40,000 shares of Common Stock of the Company between the Company and Dennis L. Mikkelson dated January 15, 1998 (incorporated by reference to Exhibit 10.13(a)
to the 1998 Form 10-KSB).
|10.13(b)* |  | Secured Promissory Note in the amount of $45,000 to the Company from Dennis L. Mikkelson dated January 15, 1998 (incorporated by reference to Exhibit 10.13(b) to the 1998 Form 10-KSB).                                                             
|10.13(c)* |  | Instruments and Security Agreement between the Company and Dennis L. Mikkelson dated January 15, 1998 (incorporated by reference to Exhibit 10.13(c) to the 1998 Form 10-KSB).                                                                       
|10.14(a)* |  | Stock Option Agreement effective June 19, 1997 by and between the Company and John Walter (incorporated by reference to Exhibit 10.14(a) to the 1998 Form 10-KSB).                                                                                   
|10.14(b)* |  | Stock Option Exercise and Loan Agreement for the purchase of 40,000 shares of Common Stock of the Company between the Company and John Walter dated January 15, 1998 (incorporated by reference to Exhibit 10.14(b) to the
1998 Form 10-KSB).        

22

---

|10.14(c)* |  | Secured Promissory Note in the amount of $43,200 to the Company from John Walter dated January 15, 1998 (incorporated by reference to Exhibit 10.14(c) to the 1998 Form 10-KSB).                                          
|--------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.14(d)* |  | Instruments and Security Agreement between the Company and John Walter dated January 15, 1998 (incorporated by reference to Exhibit 10.14(d) to the 1998 Form 10-KSB).                                                    
|10.15*    |  | Nonqualified Stock Option Agreement dated January 28, 1998, between the Company and Robert S. Garin (incorporated by reference to Exhibit 10.15 to the 1998 Form 10-KSB).                                                 
|10.16*    |  | Nonqualified Stock Option Agreement dated February 20, 1998, between the Company and John Sayer (incorporated by reference to Exhibit 10.16 to the 1998 Form 10-KSB).                                                     
|10.17*    |  | Temporary Services Agreement effective September 8, 1998 by and between the Company and Critical Care Anesthetists, P.A. and Christopher J. Turnbull (incorporated by reference to Exhibit 10.17 to the 1998 Form
10-KSB).
|10.18*    |  | Temporary Services Agreement effective September 17, 1998 by and between the Company and Richard Ulvenes (incorporated by reference to Exhibit 10.18 to the 1998 Form 10-KSB).                                            
|10.19*    |  | Letter Employment Agreement dated February 10, 1999 between the Company and Matthew E. Bellin (incorporated by reference to Exhibit 10.19 to the 1999 Form 10-KSB).                                                       
|10.20*    |  | Employee Noncompetition/Confidentiality Agreement dated February 10, 1999 between the Company and Matthew E. Bellin (incorporated by reference to Exhibit 10.20 to the 1999 Form 10-KSB).                                 
|10.21*    |  | Stock Option Agreement, effective as of February 15, 1999, between Matthew E. Bellin and the Company (incorporated by reference to Exhibit 10.21 to the 1999 Form 10-KSB).                                                
|10.22*    |  | Non-qualified Stock Option Agreement between Gary W. Copperud and the Company effective as of April 20, 1999 (incorporated by reference to Exhibit 10.22 to the 1999 Form 10-KSB).                                        
|10.23*    |  | Non-qualified Stock Option Agreement between Kenneth W. Brimmer and the Company effective as of April 20, 1999 (incorporated by reference to Exhibit 10.23 to the 1999 Form 10-KSB).                                      
|10.24*    |  | Non-qualified Stock Option Agreement between Robert S. Garin and the Company effective as of April 20, 1999 (incorporated by reference to Exhibit 10.24 to the 1999 Form 10-KSB).                                         
|10.25*    |  | Non-qualified Stock Option Agreement between John E. Sayer and the Company effective as of April 20, 1999 (incorporated by reference to Exhibit 10.25 to the 1999 Form 10-KSB).                                           
|10.26     |  | Amendment of August 25, 1999 to Restated Term Loan and Credit Agreement dated November 3, 1998 between the Company and Norwest Bank Minnesota, N.A (incorporated by reference to Exhibit 10.26 to the 1999 Form
10-KSB).  
|10.27*    |  | Agreement dated October 12, 2000 between the Company and Matthew E. Bellin.                                                                                                                                               
|10.28*    |  | Agreement dated October 31, 2000 between the Company and J. David Berkley.                                                                                                                                                
|21        |  | List of Subsidiaries.                                                                                                                                                                                                     
|23.1      |  | Consent of Lund Koehler Cox & Arkema, LLP.                                                                                                                                                                                
|23.2      |  | Consent of Grant Thorton LLP.                                                                                                                                                                                             
|27.1      |  | Financial Data Schedule.                                                                                                                                                                                                  

---

23

---

(b) Reports on Form 8-K

On September 15, 2000, the Company filed a Current Report on Form 8-K relating to its acquisition of 200,000 shares of common stock
of Minntech Corporation.

On
September 21, 2000, the Company filed a Current Report on Form 8-K regarding the resignation of Matt Bellin from the office of President effective
September 18, 2000. The report also stated that Mr. Brimmer would serve as the interim Chief Executive Officer of the Company until a successor to
Mr. Bellin could be appointed. The report further disclosed that John Sayer resigned as a member of the Company's Board of Directors, effective September 30, 2000.

On
October 24, 2000, the Company filed a Current Report on Form 8-K regarding the appointment of Allan D. Anderson to the Board of Directors of the Company
as of October 6, 2000. The report also stated that effective October 16, 2000, J. David Berkley would serve as the President of the Company. Further, the report announced the resignation
of Linda Erickson from the position of Chief Financial Officer as of October 31, 2000.

24

---

OXBORO MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999

---

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                           |                                                          | Page      
|------------------------------------------ | -------------------------------------------------------- | ----------
|Report of Independent Public Accountants   |                                                          | F-2       
|Consolidated Financial Statements:         |                                                          |           
|                                           | Balance Sheets                                           |           
|                                           | Statements of Operations and Comprehensive Income (Loss) |           
|                                           | Statements of Stockholders' Equity                       |           
|                                           | Statements of Cash Flows                                 |           
|Notes to Consolidated Financial Statements |                                                          | F-8 - F-17

F-1

---



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Oxboro Medical, Inc.:

We
have audited the accompanying consolidated balance sheet of Oxboro Medical, Inc. and subsidiaries as of September 30, 2000, and the related consolidated statements of
operations and comprehensive income, stockholders' equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of Oxboro Medical, Inc. and subsidiaries as of
September 30, 2000 and for the year then ended, were audited by other auditors whose report dated November 22, 1999, expressed an unqualified opinion on those statements.

We
conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Oxboro Medical, Inc. and
subsidiaries as of September 30, 2000, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles.

LUND KOEHLER COX & ARKEMA, LLP

Minneapolis, Minnesota
November 3, 2000

F-2

---

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Shareholders
and Board of Directors
Oxboro Medical, Inc.

We
have audited the accompanying balance sheet of Oxboro Medical, Inc. (formerly Oxboro Medical International, Inc.) as of September 30, 1999, and the related statements of
operations and comprehensive income (loss), shareholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Oxboro Medical, Inc. as of September 30, 1999,
and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

GRANT THORNTON LLP

Minneapolis, Minnesota
November 22, 1999 (except for Note E,
  as to which the date is December 3, 1999)

F-3

---



OXBORO MEDICAL, INC. AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS        SEPTEMBER 30, 2000 AND 1999

|                                       |                                                                                                                                                                          | 2000                       |           | 1999     
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | --------- | ---------
|ASSETS                                
|Current assets:                        |                                                                                                                                                                          |                            |           |          
|                                       | Cash and cash equivalents                                                                                                                                                |                            | $         | 461,108  
|                                       | Warrant proceeds due from trustee                                                                                                                                        |                            |           | 1,079,196
|                                       | Rights offering proceeds due from trustee                                                                                                                                |                            |           | 0        
|                                       | Accounts receivable, net                                                                                                                                                 |                            |           | 708,933  
|                                       | Note receivable                                                                                                                                                          |                            |           | 0        
|                                       | Inventories, net                                                                                                                                                         |                            |           | 761,295  
|                                       | Income taxes receivable                                                                                                                                                  |                            |           | 0        
|                                       | Deferred income taxes                                                                                                                                                    |                            |           | 20,000   
|                                       | Other current assets                                                                                                                                                     |                            |           | 12,269   
|                                       |                                                                                                                                                                          |                            |           |          
|                                       |                                                                                                                                                                          | Total current assets       |           |          
|Property and equipment, net            |                                                                                                                                                                          |                            | 1,132,546 |          
|Other assets                           |                                                                                                                                                                          |                            | 1,510,618 |          
|                                       |                                                                                                                                                                          |                            |           |          
|                                       |                                                                                                                                                                          | $                          | 5,685,965 |          
|                                       |                                                                                                                                                                          |                            |           |          
|LIABILITIES AND STOCKHOLDERS' EQUITY  
|Current liabilities:                   |                                                                                                                                                                          |                            |           |          
|                                       | Lines of creditbank                                                                                                                                                     |                            | $         | 0        
|                                       | Current portion of long-term debt                                                                                                                                        |                            |           | 50,883   
|                                       | Accounts payable                                                                                                                                                         |                            |           | 148,481  
|                                       | Accrued payroll and related taxes                                                                                                                                        |                            |           | 168,360  
|                                       | Other accrued expenses                                                                                                                                                   |                            |           | 72,476   
|                                       |                                                                                                                                                                          |                            |           |          
|                                       |                                                                                                                                                                          | Total current liabilities  |           |          
|Long-term debt, net of current portion |                                                                                                                                                                          |                            | 379,551   |          
|Deferred income taxes                  |                                                                                                                                                                          |                            | 20,000    |          
|                                       |                                                                                                                                                                          |                            |           |          
|                                       |                                                                                                                                                                          | Total liabilities          |           |          
|                                       |                                                                                                                                                                          |                            |           |          
|Stockholders' equity:                  |                                                                                                                                                                          |                            |           |          
|                                       | Capital stock, $.01 par value, 20,000,000 common shares authorized, 5,000,000 undesignated shares authorized, 1,755,495 and 742,468 common shares issued and outstanding |                            |           | 17,555   
|                                       | Additional paid-in capital                                                                                                                                               |                            |           | 3,309,069
|                                       | Retained earnings                                                                                                                                                        |                            |           | 1,495,725
|                                       | Accumulated other comprehensive income                                                                                                                                   |                            |           | 23,865   
|                                       |                                                                                                                                                                          |                            |           |          
|                                       |                                                                                                                                                                          | Total stockholders' equity |           |          
|                                       |                                                                                                                                                                          |                            |           |          
|                                       |                                                                                                                                                                          | $                          | 5,685,965 |          
|                                       |                                                                                                                                                                          |                            |           |          

See
accompanying notes to consolidated financial statements.

F-4

---

OXBORO MEDICAL, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)        FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999

|                                                                  |                        | 2000 |                                         | 1999      |      
|----------------------------------------------------------------- | ---------------------- | ---- | --------------------------------------- | --------- | -----
|
|Sales, net                                                        |                        | $    | 4,587,126                               |           | 100.0
|Cost of goods sold                                                |                        |      | 1,566,156                               |           | 34.1 
|                                                                  |                        |      |                                         |           |      
|Gross profit                                                      |                        |      | 3,020,970                               |           | 65.9 
|Selling, general and administrative expenses                      |                        |      | 2,232,984                               |           | 48.7 
|                                                                  |                        |      |                                         |           |      
|Income from operations                                            |                        |      | 787,986                                 |           | 17.2 
|                                                                  |                        |      |                                         |           |      
|Other income (expense):                                           |                        |      |                                         |           |      
|                                                                  | Investment income      |      |                                         | 88,811    |      
|                                                                  | Interest expense       |      |                                         | (42,043   | )    
|                                                                  | Other income (expense) |      |                                         | 69,916    |      
|                                                                  |                        |      |                                         |           |      
|                                                                  |                        |      | Total other income (expense)            |           |      
|                                                                  |                        |      |                                         |           |      
|Income from continuing operations before income taxes             |                        |      | 904,670                                 |           | 19.7 
|Provision for income taxes                                        |                        |      | 0                                       |           | 0.0  
|                                                                  |                        |      |                                         |           |      
|Income from continuing operations                                 |                        |      | 904,670                                 |           | 19.7 
|                                                                  |                        |      |                                         |           |      
|Loss from discontinued operations:                                |                        |      |                                         |           |      
|                                                                  | Loss from operations   |      |                                         | 0         |      
|                                                                  | Gain on disposal       |      |                                         | 0         |      
|                                                                  |                        |      |                                         |           |      
|                                                                  |                        |      | Total loss from discontinued operations |           |      
|                                                                  |                        |      |                                         |           |      
|Net income (loss)                                                 |                        |      | 904,670                                 |           | 19.7 
|Other comprehensive income                                        |                        |      | 23,865                                  |           | 0.5  
|                                                                  |                        |      |                                         |           |      
|Comprehensive income (loss)                                       |                        | $    | 928,535                                 |           | 20.2 
|                                                                  |                        |      |                                         |           |      
|Net earnings per share from continuing operations:                |                        |      |                                         |           |      
|                                                                  | Basic                  |      | $                                       | 0.72      |      
|                                                                  |                        |      |                                         |           |      
|                                                                  | Diluted                |      | $                                       | 0.65      |      
|                                                                  |                        |      |                                         |           |      
|Net loss per share from discontinued operations:                  |                        |      |                                         |           |      
|                                                                  | Basic                  |      | $                                       |          |      
|                                                                  |                        |      |                                         |           |      
|                                                                  | Diluted                |      | $                                       |          |      
|                                                                  |                        |      |                                         |           |      
|Net earnings (loss) per share:                                    |                        |      |                                         |           |      
|                                                                  | Basic                  |      | $                                       | 0.72      |      
|                                                                  |                        |      |                                         |           |      
|                                                                  | Diluted                |      | $                                       | 0.65      |      
|                                                                  |                        |      |                                         |           |      
|Weighted average common and common equivalent shares outstanding: |                        |      |                                         |           |      
|                                                                  | Basic                  |      |                                         | 1,259,743 |      
|                                                                  |                        |      |                                         |           |      
|                                                                  | Diluted                |      |                                         | 1,392,289 |      
|                                                                  |                        |      |                                         |           |      

See
accompanying notes to consolidated financial statements.

F-5

---



OXBORO MEDICAL, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999

|                           |                                                                        |           |         |   |        |       |   |           |           |   |           |          |  
|-------------------------- | ---------------------------------------------------------------------- | --------- | ------- | - | ------ | ----- | - | --------- | --------- | - | --------- | -------- | -
|
|
|
|BalanceSeptember 30, 1998 |                                                                        | 487,697   |         | $ | 4,877  |       | $ | 1,556,126 |           | $ | 1,538,747 |          | $
|                           | Cancellation of shares relating to stock subscription receivable       |           | (13,800 | ) |        | (138  | ) |           | (88,062   | ) |           |         |  
|                           | Exercise of stock options                                              |           | 8,000   |   |        | 80    |   |           | 39,920    |   |           |         |  
|                           | Shares issued related to rights offering (net of expenses of $150,197) |           | 297,056 |   |        | 2,971 |   |           | 218,152   |   |           |         |  
|                           | Return of shares from terminated ESOP                                  |           | (36,485 | ) |        | (365  | ) |           | (189,556  | ) |           |         |  
|                           | Net loss                                                               |           |        |   |        |      |   |           |          |   |           | (947,692 | )
|                           |                                                                        |           |         |   |        |       |   |           |           |   |           |          |  
|BalanceSeptember 30, 1999 |                                                                        | 742,468   |         |   | 7,425  |       |   | 1,536,580 |           |   | 591,055   |          |  
|                           | Shares issued related to rights offering (net of expenses of $38,794)  |           | 591,534 |   |        | 5,915 |   |           | 694,709   |   |           |         |  
|                           | Exercise of warrants (net of expenses of $77,111)                      |           | 421,493 |   |        | 4,215 |   |           | 1,077,780 |   |           |         |  
|                           | Net income                                                             |           |        |   |        |      |   |           |          |   |           | 904,670  |  
|                           | Unrealized gain on available-for-sale securities                       |           |        |   |        |      |   |           |          |   |           |         |  
|                           |                                                                        |           |         |   |        |       |   |           |           |   |           |          |  
|BalanceSeptember 30, 2000 |                                                                        | 1,755,495 |         | $ | 17,555 |       | $ | 3,309,069 |           | $ | 1,495,725 |          | $
|                           |                                                                        |           |         |   |        |       |   |           |           |   |           |          |  

See accompanying notes to consolidated financial statements.

F-6

---

OXBORO MEDICAL, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND 1999

|                                             |                                                                                     | 2000                                         |                                   | 1999                                 |        
|-------------------------------------------- | ----------------------------------------------------------------------------------- | -------------------------------------------- | --------------------------------- | ------------------------------------ | -------
|Cash flows from operating activities:        |                                                                                     |                                              |                                   |                                      |        
|                                             | Net income (loss)                                                                   |                                              | $                                 | 904,670                              |        
|                                             | Adjustments to reconcile net income (loss) to cash flows from operating activities: |                                              |                                   |                                      |        
|                                             |                                                                                     | Depreciation and amortization                |                                   |                                      | 124,582
|                                             |                                                                                     | Loss on disposal of property and equipment   |                                   |                                      | 0      
|                                             |                                                                                     | Discontinued operations                      |                                   |                                      | 0      
|                                             |                                                                                     | Changes in operating assets and liabilities: |                                   |                                      |        
|                                             |                                                                                     |                                              | Accounts receivable, net          |                                      |        
|                                             |                                                                                     |                                              | Inventories, net                  |                                      |        
|                                             |                                                                                     |                                              | Income taxes receivable           |                                      |        
|                                             |                                                                                     |                                              | Other current assets              |                                      |        
|                                             |                                                                                     |                                              | Accounts payable                  |                                      |        
|                                             |                                                                                     |                                              | Accrued payroll and related taxes |                                      |        
|                                             |                                                                                     |                                              | Other accrued expenses            |                                      |        
|                                             |                                                                                     |                                              |                                   |                                      |        
|                                             |                                                                                     |                                              |                                   | Cash flows from operating activities |        
|                                             |                                                                                     |                                              |                                   |                                      |        
|Cash flows from investing activities:        |                                                                                     |                                              |                                   |                                      |        
|                                             | Purchases of property and equipment                                                 |                                              |                                   | (216,044                             | )      
|                                             | Proceeds from sale of subsidiary                                                    |                                              |                                   | 0                                    |        
|                                             | Purchases of available-for-sale securities                                          |                                              |                                   | (1,351,135                           | )      
|                                             | Payments received on note receivable                                                |                                              |                                   | 245,000                              |        
|                                             | Purchase of other assets                                                            |                                              |                                   | (35,546                              | )      
|                                             |                                                                                     |                                              |                                   |                                      |        
|                                             |                                                                                     |                                              |                                   | Cash flows from investing activities |        
|                                             |                                                                                     |                                              |                                   |                                      |        
|Cash flows from financing activities:        |                                                                                     |                                              |                                   |                                      |        
|                                             | Payments on line of creditbank, net                                                |                                              |                                   | (145,313                             | )      
|                                             | Payments on long-term debt                                                          |                                              |                                   | (42,065                              | )      
|                                             | Proceeds from long-term debt                                                        |                                              |                                   | 0                                    |        
|                                             | Proceeds from exercise of stock options                                             |                                              |                                   | 0                                    |        
|                                             | Proceeds from rights offering, net                                                  |                                              |                                   | 1,071,944                            |        
|                                             | Proceeds from exercise of stock warrants, net                                       |                                              |                                   | 2,799                                |        
|                                             | Expenses related to rights offering                                                 |                                              |                                   | 0                                    |        
|                                             |                                                                                     |                                              |                                   |                                      |        
|                                             |                                                                                     |                                              |                                   | Cash flows from financing activities |        
|                                             |                                                                                     |                                              |                                   |                                      |        
|Increase in cash and cash equivalents        |                                                                                     |                                              | 157,948                           |                                      |        
|Cash and cash equivalents, beginning of year |                                                                                     |                                              | 303,160                           |                                      |        
|                                             |                                                                                     |                                              |                                   |                                      |        
|Cash and cash equivalents, end of year       |                                                                                     | $                                            | 461,108                           |                                      | $      
|                                             |                                                                                     |                                              |                                   |                                      |        

See
accompanying notes to consolidated financial statements.

F-7

---



OXBORO MEDICAL, INC. AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        SEPTEMBER 30, 2000 AND 1999

(1)  NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of businessOxboro Medical, Inc. (the Company) was incorporated in Minnesota in 1978.
The Company changed its name from Oxboro Medical International, Inc. to Oxboro Medical, Inc. on March 17, 2000. The Company develops, assembles and markets disposable medical
products for use in general and cardiovascular surgery. The Company sells its product to customers located throughout the world.

Principles of consolidationThe consolidated financial statements include the accounts of Oxboro Medical, Inc. and
its wholly-owned subsidiaries, Oxboro, Inc. (formerly known as Oxboro Medical, Inc.) and Oxboro Outdoors, Inc. On June 30, 1999, Oxboro Outdoors, Inc. was sold (see
Note 2). Oxboro, Inc. had no activity for the years ended September 30, 2000 and 1999. All significant intercompany transactions and balances have been eliminated in
consolidation.

Cash and cash equivalentsThe Company includes as cash equivalents money market and all other investments with maturities
of three months or less when purchased. The Company maintains its cash in high quality financial institutions. The balances, at times, may exceed the federally insured limits.

Accounts receivableAccounts receivable have been reduced by an allowance for uncollectible accounts of $34,700 and $35,200
at September 30, 2000 and 1999. The Company believes all accounts receivable in excess of the allowance are fully collectible. If accounts receivable in excess of the provided allowance are
determined uncollectible, they are charged to expense in the year that determination is made. The Company extends unsecured credit to customers in the normal course of business.

InventoriesInventories consist principally of medical supplies and are recorded at the lower of cost
(first-in, first-out) or market.

DepreciationProperty and equipment are recorded at cost. Depreciation is provided for using the straight-line
method over estimated useful lives ranging from five to thirty years. Maintenance, repairs and minor renewals are expensed when incurred.

Advertising costsAdvertising costs are charged to expense as incurred. Advertising expense was $11,242 and $26,017 for the
years ended September 30, 2000 and 1999.

Stock-based compensationIn accordance with APB Opinion No. 25, the Company uses the intrinsic value-based method
for measuring stock-based compensation cost which measures compensation cost as the excess, if any, of the quoted market price of the Company's common stock at the grant date over the amount the
employee must pay for the stock. The Company's policy is to grant stock options at fair value at the date of grant. Required pro forma disclosures of compensation expense determined under the fair
value method of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," are presented in Note 11.

Net earnings (loss) per shareBasic earnings (loss) per share is computed by dividing the net income (loss) by the weighted
average number of common shares outstanding for the reporting period. The Company's diluted net earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of
common shares outstanding and common share equivalents, when dilutive, for the reporting period.

F-8

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Comprehensive incomeThe Company has adopted Statement of Financial Accounting No. 130 "Reporting Comprehensive
Income" (Statement 130), which establishes standards for reporting and presentation of comprehensive income (loss) and its components in a full set of financial statements. Comprehensive income (loss)
consists of the Company's net income (loss) and net unrealized gain on available-for-sale securities and is presented in the consolidated statements of operations and
comprehensive income (loss). Statement 130 only requires additional disclosures in the consolidated financial statements. It does not affect the Company's financial position or results of operations.

Management's use of estimatesThe preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Financial instrumentsThe carrying amounts for all financial instruments approximates fair value. The carrying amounts for
cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments. The fair value of
long-term debt approximates the carrying amounts based upon the Company's expected borrowing rate for debt with similar remaining maturities and comparable risk.

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

(2)  DISCONTINUED OPERATIONS

On June 30, 1999, the Company sold the stock of its subsidiary, Oxboro Outdoors, Inc., a maker of outdoor recreational products, for $385,000 in
cash, a 9% promissory note of $265,000 and the
assumption of liabilities of approximately $87,000, less a contingency reserve of $20,000. The Company received a $175,000 payment on the promissory note in October 1999 with the remaining
balance plus interest received on December 31, 1999. The Company realized a gain on the sale of $2,956.

Oxboro
Outdoors, Inc. incurred a loss from operations of $1,024,722 for the year ended September 30, 1999, which included revenues of $545,974.

(3)  AVAILABLE-FOR-SALE SECURITIES

The Company classifies all securities, which are not cash equivalents, as available-for-sale securities.
Available-for-sale securities are reported at fair value with all unrealized gains or losses included in other comprehensive income. There were unrealized gains of $23,865 and
$0 for the years ended September 30, 2000 and 1999.

F-9

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(4)  INVENTORIES

Inventories consisted of the following at September 30:

2000

1999Raw materials

$
497,950

$
309,956Work in process


77,675


86,513Finished goods


287,873


320,305Total


863,498


716,774Less: valuation reserve


(102,203
)

(48,953
)Inventories, net

$
761,295

$
667,821


(5)  PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at September 30:

2000

1999Land

$
57,211

$
57,211Buildings


952,520


905,366Furniture and equipment


1,130,945


962,055Total


2,140,676


1,924,632Less: accumulated depreciation and amortization


(1,008,130
)

(883,548
)Property and equipment, net

$
1,132,546

$
1,041,084


(6)  OTHER ASSETS

Other assets consisted of the following at September 30:

2000

1999Available-for-sale securities

$
1,375,000

$
0Cash value of life insurance, net of loans


135,618


100,072Total

$
1,510,618

$
100,072


(7)  OTHER ACCRUED EXPENSES

Other accrued expenses consisted of the following at September 30:

2000

1999Accrued consulting fees

$
0

$
202,080Accrued professional fees


25,000


165,119Other accrued expenses


47,476


33,032Total

$
72,476

$
400,231


F-10

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(8)  LINES OF CREDITBANK

The Company has a $550,000 revolving line of credit and a $150,000 commercial note line of credit with Wells Fargo Bank. Both lines are subject to a defined
borrowing base. Amounts outstanding are
due upon demand or, if no demand is made, on March 31, 2001 and bear interest at prime plus one-half percent (10% at September 30, 2000). These lines are secured by
substantially all of the assets of the Company and contain restrictive covenants which include, but are not limited to, minimum tangible net worth, net earnings and a maximum debt to tangible net
worth ratio. At September 30, 2000, the Company was in compliance with all covenants. Outstanding borrowings were $0 and $145,313 at September 30, 2000 and 1999.

(9)  LONG-TERM DEBT

Long-term debt consisted of the following at September 30:

|                                                                                                                                                                                      |  | 2000 |         | 1999 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | -
|Mortgage payableWells Fargo Bankmonthly installments of $3,510 including interest at prime plus 1% (10.5% at September 30, 2000), due June 2001, secured by building (see Note 17). |  | $    | 370,816 |      | $
|Capital lease obligationmonthly installments of $3,424 including interest at 7.6%, due April 2002, secured by computer equipment.                                                    |  |      | 59,618  |      |  
|                                                                                                                                                                                      |  |      |         |      |  
|Total long-term debt                                                                                                                                                                  |  |      | 430,434 |      |  
|Less: current portion                                                                                                                                                                 |  |      | (50,883 | )    |  
|                                                                                                                                                                                      |  |      |         |      |  
|Long-term debt, net                                                                                                                                                                   |  | $    | 379,551 |      |  
|                                                                                                                                                                                      |  |      |         |      |  

Future
maturities of long-term debt are as follows for the years ending September 30:

2001

$
50,8832002


38,6112003


18,3542004


19,9772005


21,742Thereafter


280,867Total

$
430,434


(10)  CAPITAL LEASE OBLIGATION

The Company has a lease financing facility for computer equipment. The lease outstanding bears interest at approximately 7.6% and expires in April 2002.
The obligation is secured by the property under lease. Total cost and accumulated amortization of the leased equipment was $109,622 and $31,060 at September 30, 2000 and $109,622 and $10,980 at
September 30, 1999.

F-11

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Future minimum lease payments are as follows for the years ending September 30:

2001

$
41,0882002


22,268Total


63,356Less: amount representing interest


(3,738
)Present value of future minimum lease payments


59,618Less: current portion


(37,870
)Capital lease obligations, net of current portion

$
21,748


(11)  STOCKHOLDER'S EQUITY

During 1999, the Company declared a 1-for-5 reverse stock split. All share and per share amounts have been retroactively restated to
reflect the reverse stock split.

The
Company initiated a common stock rights offering in 1999. For each share of common stock owned, shareholders were given a right to purchase two shares of common stock and one
warrant to purchase one additional share of common stock for a total purchase price of $2.50. The term of the warrant was for one year with an exercise price of $2.75. As of September 30, 1999,
148,528 rights were sold which resulted in the issuance of 297,056 shares of common stock and warrants to purchase 148,528 additional shares of common stock. Gross proceeds of $371,320 were held by
the trustee at September 30, 1999 and were received by the Company on October 5, 1999. Net proceeds from the offering as of September 30, 1999 were $221,123. In
November 1999, the Company completed the rights offering. Rights sold in fiscal 2000 totaled 295,767 which resulted in the issuance of an additional 591,534 shares of common stock and warrants
to purchase 295,767 additional shares of common stock. Proceeds from the sale of rights in fiscal 2000 were $700,624, net of expenses of $38,794.

On
January 5, 1999, the Company terminated the Employee Stock Ownership Plan. In connection with the termination, 36,485 shares of common stock were returned to the Company in
payment of the outstanding loan amount of $174,306 and related interest receivable of $15,615.

In
August 2000, the Company offered as an incentive to the holder of the warrants (Incentive Offering) to exercise the warrants received in the 1999 rights offering, one new
common stock warrant if exercised on or before October 20, 2000. During the year ended September 30, 2000, 421,493 warrants were exercised at an exercise price of $2.75. Proceeds were
$1,081,995, net of costs of $77,111.

Stock warrantsIn connection with the Incentive Offering, the Company issued warrants to purchase 395,441 shares of the
Company's common stock at $4.00 per share. The warrants expire on September 29, 2003.

Stock option planThe Company has a Stock Option Plan (the Plan) which provides for granting of incentive and nonstatutory
stock options to employees and others. The aggregate of 150,000 shares of the Company's common stock may be granted at exercise prices not less than fair market value at the date of grant (not less
than 110% of fair market value for significant stockholders). The Board of

F-12

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Directors or a committee administers the Plan. In general, options vest over five years and expire up to ten years from the date of grant. In addition, the Company has issued options outside the Plan.

Information
regarding the grant of stock options is summarized below:

|                                                           |           | Number of Options |         | Weighted Average
Exercise Price |      | Range of
Option
Exercise Price
|---------------------------------------------------------- | --------- | ----------------- | ------- | ------------------------------- | ---- | ------------------------------
|Options outstandingSeptember 30, 1998                     |           | 58,073            |         | $                               | 6.73 |                               
|                                                           | Granted   |                   | 40,400  |                                 |      | 6.26                          
|                                                           | Cancelled |                   | (16,000 | )                               |      | 8.13                          
|                                                           | Expired   |                   | (24,073 | )                               |      | 5.42                          
|                                                           | Exercised |                   | (8,000  | )                               |      | 5.00                          
|                                                           |           |                   |         |                                 |      |                               
|Options outstandingSeptember 30, 1999                     |           | 50,400            |         |                                 | 6.81 |                               
|                                                           | Granted   |                   | 95,500  |                                 |      | 3.99                          
|                                                           | Cancelled |                   | (12,000 | )                               |      | 7.92                          
|                                                           | Exercised |                   |        |                                 |      |                              
|                                                           |           |                   |         |                                 |      |                               
|Options outstandingSeptember 30, 2000                     |           | 133,900           |         | $                               | 4.77 |                               
|                                                           |           |                   |         |                                 |      |                               
|Options exercisableSeptember 30, 2000                     |           | 47,700            |         | $                               | 5.37 |                               
|                                                           |           |                   |         |                                 |      |                               
|Weighted average fair value of options granted during 2000 |           |                   |         | $                               | 2.52 |                               
|                                                           |           |                   |         |                                 |      |                               

At
September 30, 2000, the weighted average remaining contractual life of outstanding options was 8.24 years.

In
determining the compensation cost of the options granted during 2000 and 1999, as specified by Statement 123, the fair value of each option grant has been estimated on the date of
grant using the Black-Scholes option pricing model and the weighted average assumptions used in these calculations are summarized below:

Fiscal 2000

Fiscal 1999Risk free interest rate

6.0
%
6.3
%Expected life of options granted

5-10 years

5 yearsExpected volatility range

20.4
%
64.2
%Expected dividend yield

0
%
0
%


Had
compensation cost for the Company's stock options been determined based on fair value at the grant dates consistent with the method of Statement of Financial Accounting Standards
No. 123

F-13

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"Accounting for Stock-Based Compensation", the Company's net income (loss) would have changed to the pro forma amounts indicated below:

Net income (loss):As reported

$
904,670

$
(947,692
)Pro forma

$
817,984

$
(981,080
)Net earnings (loss) per share (diluted):As reported

$
0.65

$
(2.07
)Pro forma

$
0.59

$
(2.15
)


The
resulting pro forma information may not be representative of that to be expected in future years.

(12)  INCOME TAXES

The Company has adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", under which deferred income tax assets and
liabilities are recognized for the temporary differences between the financial statement and income tax reporting bases of assets and liabilities based on currently enacted rates and laws. These
temporary differences include depreciation and related party accruals.

The
Company has generated net operating losses of approximately $1,200,000 which, if not used, will begin to expire in 2018. The Company also has a capital loss carryforward of
approximately $68,000 available to offset future capital gains which expires in 2002 and research and development credit carryforwards of approximately $13,000 which, if not used, will begin to expire
in 2013. Future changes in the ownership of the Company may place limitations on the use of these carryforwards.

The
Company has recorded a valuation allowance against its deferred tax asset due to the uncertainty of realizing the related benefits as follows at September 30:

2000

1999Deferred tax assets:Accrued liabilities

$
26,000

$
85,000Allowance for doubtful accounts


12,000


13,000Inventory valuation adjustments


65,000


55,000Net operating loss carryforward


425,000


854,000Capital loss carryforward


14,000


14,000542,000


1,021,000Valuation allowance


(522,000
)

(927,000
)$
20,000

$
94,000Deferred tax liabilities:Depreciation


(20,000
)

(94,000
)Total

$
0

$
0


F-14

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Reconciliation
between the statutory rate and the effective tax rate for the years ended September 30 is as follows:

2000

1999Federal statutory tax rate

34.0
%
(34.0
)%State taxes, net of federal benefit

2.0

0.1Research and development credits

0.0

(2.6
)Change in valuation allowance

(36.7
)
34.6Other

0.7

1.9Effective tax rate

0.0
%
0.0
%


(13)  RELATED PARTY TRANSACTIONS

Significant stockholder and former officerThe Company entered into several agreements with a
significant stockholder, former chief executive officer and director, Larry Rasmusson (former officer) of the Company as noted:

In
September 1998, the Company entered into a Mutual Release and Noncompetition Agreement ("Release") with the former officer. The Release included a consulting agreement
requiring the Company to pay the former officer $485,000 in twenty-four equal monthly installments of $20,208, beginning in September 1998 and a noncompetition agreement requiring
payment of $150,000 in twenty-four equal monthly installments of $6,250, beginning in September 1998. The noncompete expense was $62,500 and $75,000 for the years ended
September 30, 2000 and 1999. The obligations under the consulting agreement and noncompetition agreement were paid in full as of September 30, 2000. The payments under the consulting and
noncompetition agreements were secured by a second mortgage on the Company's land and building.

The
Release also amended the exclusive license agreement between the Company and the former officer for specified Oxboro Outdoors, Inc. products invented or developed. Such
agreements were transferred to the buyer in conjunction with the sale of Oxboro Outdoors, Inc. in 1999.

The
former officer received royalties on medical product sales under certain royalty agreements. Royalty expense for the years ended September 30, 2000 and 1999 under these
agreements was $44,076 and $40,881.

OtherIn 1998, former board members Dennis Mikkelson and John Walter issued promissory notes to the Company totalling
$88,200 in connection with the exercise of stock options. During 1999, 13,800 shares of common stock were returned to the Company in payment of these promissory notes.

Web site agreementIn June 2000, the Company entered into an agreement with ActiveIQ Technologies, Inc., a
party related through common ownership, to develop an informational and transactional web site for its medical products business. The agreement is for a five year period and may be terminated by
either party upon 45 days notice for any reason. The Company is required to pay $15,000 upon approval of a completed web site, a monthly fee of $1,000 and a 1% fee on all transactions processed
during the first year of the agreement through the e-commerce portion of the Company's web site developed by Active IQ Technologies, Inc. and a .5% fee on all e-commerce

F-15

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transactions processed during the second year. The agreement does not require the Company to pay any transaction payments to Active IQ Technologies, Inc. after the second year.

(14)  RETIREMENT SAVINGS PLAN

The Company has a pre-tax salary reduction/profit-sharing plan under the provisions of Section 401(k) of the Internal Revenue Code. The Plan
covers substantially all full-time employees who have reached the age of 18 and have been employed by the Company for one year or worked 1,000 or more hours during the year. Profit sharing
contributions by the Company are discretionary. The Company will match 25% of the first 6% of employee contributions. The Company's matching contributions for the years ended September 30, 2000
and 1999 were $10,354 and $2,374.

(15)  COMMITMENTS AND CONTINGENCIES

Operating leasesThe Company leases certain equipment under leases expiring through
October 2003. Monthly base rent is $647. Total rent expense was $9,162 and $8,116 for the years ended September 30, 2000 and 1999.

Future
minimum rental payments are as follows for the years ending September 30:

2001

$
7,7612002


7,7612003


7,4092004


471Total

$
23,402


Legal proceedingsThe Company is involved in legal actions in the ordinary course of its business. Although the outcome of
any such legal actions cannot be predicted, management believes that there is no pending legal proceedings against or involving the Company for which the outcome is likely to have a material adverse
effect upon the Company's financial position or results of operations.

Royalty agreementAt September 30, 2000, the Company has a royalty agreement with an unrelated party. The agreement
requires monthly payments based on 4% of the net sales price of specific products developed by the individual and sold by the Company.

F-16

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(16)  SUPPLEMENTAL CASH FLOWS INFORMATION

2000

1999Cash paid for interest

$
42,043

$
113,502Cash paid (received) for income taxes

$
(52,758
)
$
0Noncash investing and financing activities:Cancellation of shares relating to stock subscription receivable

$
0

$
88,200Shares issued related to rights offering due from trustee

$
0

$
371,320Shares issued related to exercise of warrants due from trustee

$
1,079,196

$
0


(17)  SUBSEQUENT EVENT

In November 2000, the Company received a commitment from a mortgage company to refinance the existing mortgage on the building. The new mortgage will be
for $975,000 with monthly installments of $8,175 including interest at 8.5% and due in 10 years. The current portion of long-term debt presented in Note 9 is based on the
refinancing commitment.

F-17

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized on December 29, 2000.

| |  | OXBORO MEDICAL INTERNATIONAL, INC.
| |  | ----------------------------------
| |  | By:                               

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints J. David Berkley and Kenneth W. Brimmer as his true and lawful
attorneys-in-fact and agents, each acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all
capacities, to sign any of all amendments to this Annual Report on Form 10-KSB and to file the same, with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all said
attorneys-in-fact and agents, each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

In
accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on December 29,
2000.

|                                        |  |          |  | 
|--------------------------------------- |  | -------- |  | 
|                                        |  |          |  | 
|/s/KENNETH W. BRIMMERKenneth W. Brimmer |  | Director |  | 
|/s/GARY COPPERUDGary Copperud           |  | Director |  | 
|/s/GERVAISE WILHELMGervaise Wilhelm     |  | Director |  | 
|/s/ALLAN D. ANDERSONAllan D. Anderson   |  | Director |  | 

25

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Exhibit Index

|Exhibit No. |  | Description                                                                
|----------- |  | ---------------------------------------------------------------------------
|10.27       |  | Agreement dated October 12, 2000 between the Company and Matthew E. Bellin.
|10.28       |  | Agreement dated October 31, 2000 between the Company and J. David Berkley. 
|21          |  | Subsidiaries of the Registrant.                                            
|23.1        |  | Consent of Lund Koehler Cox & Arkema, LLP.                                 
|23.2        |  | Consent of Grant Thorton LLP.                                              
|24          |  | Power of Attorney (included on signature page).                            
|27.1        |  | Financial Data Schedule.                                                   

26

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