<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

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

     For the Quarterly Period Ended March 31, 2004; or

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

     For the transition period from ______________ to ______________


Commission File Number: 0-28010


                                  MEDWAVE, INC.
             (Exact name of registrant as specified in its charter)

           Delaware                                            41-1493458
(State or other jurisdiction of                              (IRS employer
incorporation or organization)                           identification number)

                               435 Newbury Street
                                Danvers, MA 01923
                    (Address of principal executive offices,
                                    zip code)

                                 (978) 762-8999
                    (Registrant's telephone number, including
                                   area code)


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period as 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 [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of May 7, 2004 the issuer had 9,921,416 shares of Common Stock outstanding.


<PAGE>

                                  Medwave, Inc.

                                    Form 10-Q

                                      INDEX

<Table>
<Caption>
                                                                               Page
                                                                               ----
<S>                                                                            <C>

PART I. FINANCIAL INFORMATION

  Item 1. Financial Statements                                                     2

          Balance Sheets - September 30, 2003 and March 31, 2004                   2

          Statements of Operations - Three Months Ended March 31, 2004             3
             and 2003 & Six Months Ended March 31, 2004 and 2003

          Statements of Cash Flows - Six Months Ended March 31, 2004               4
             and 2003

          Notes to Unaudited Financial Statements                                  5

  Item 2. Management's Discussion and Analysis of Financial Condition              6
             and Results of Operations

  Item 3. Quantitative and Qualitative Disclosures About Market Risk              12

  Item 4. Controls and Procedures                                                 12

PART II. OTHER INFORMATION

  Item 1. Legal Proceedings                                                       13

  Item 2. Changes in Securities And Use Of Proceeds                               13

  Item 3. Defaults Upon Senior Securities                                         13

  Item 4. Submission of Matters To A Vote of Security Holders                     13

  Item 5. Other Information                                                       14

  Item 6. Exhibits and Reports on Form 8-K                                        14

Signatures                                                                        14

Exhibits                                                                       15-16
</Table>



                                       1
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                  Medwave, Inc.

                                 Balance Sheets
                                   (Unaudited)

<Table>
<Caption>
                                                                         MARCH 31        SEPTEMBER 30
                                                                           2004              2003
                                                                       ------------      ------------
<S>                                                                    <C>               <C>

ASSETS
Current assets:
      Cash and cash equivalents                                        $  5,456,075      $  1,694,648
      Accounts receivable, net                                              222,108           232,676
      Inventories, net                                                      372,920           404,306
      Prepaid expenses                                                      125,263            54,016
                                                                       ------------      ------------
Total current assets                                                      6,176,366         2,385,646
                                                                       ------------      ------------

Property and equipment:
      Research and development equipment                                     31,535            31,535
      Office equipment                                                      105,744            76,836
      Manufacturing and engineering equipment                               281,206           247,824
      Sales and marketing equipment                                          62,365            62,365
      Leasehold improvements                                                 31,613            31,613
      Demonstration equipment                                                    --            25,302
                                                                       ------------      ------------
                                                                            512,463           475,475
      Accumulated depreciation and amortization                            (415,660)         (398,715)
                                                                       ------------      ------------
                                                                             96,803            76,760
                                                                       ------------      ------------

Patents, net                                                                  1,917                --
                                                                       ------------      ------------

Total assets                                                           $  6,275,086      $  2,462,406
                                                                       ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                                 $    255,801      $    380,380
      Accrued expenses                                                       79,344            66,794
      Deferred revenue                                                       39,772            38,085
                                                                       ------------      ------------
Total current liabilities                                                   374,917           485,259
                                                                       ------------      ------------
Stockholders' equity:
      Common Stock, .01 par value:
                 Authorized shares--50,000,000
                 Issued and outstanding shares-
                 September 30, 2003 - 8,744,666
                 March 31, 2004 - 9,851,416                                  98,514            87,446
      Additional Paid In Capital                                         28,594,425        23,440,705
      Accumulated deficit                                               (22,792,770)      (21,551,004)
                                                                       ------------      ------------
Total stockholders' equity                                                5,900,169         1,977,147
                                                                       ------------      ------------

Total liabilities and stockholders' equity                             $  6,275,086      $  2,462,406
                                                                       ============      ============
</Table>

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



                                       2
<PAGE>

                                  Medwave, Inc.

                            Statements of Operations
                                   (Unaudited)

<Table>
<Caption>
                                                                  Three months ended March 31        Six months ended March 31
                                                                  ----------------------------     -----------------------------
                                                                     2004             2003             2004             2003
                                                                  -----------     ------------     ------------     ------------
<S>                                                               <C>             <C>              <C>              <C>
Revenue:
      Net Sales                                                   $   211,856     $    324,422     $    436,783     $    634,296

Operating expenses:
      Cost of sales and product development                           185,104          159,272          282,914          297,336
      Research and development                                        142,775          100,371          241,329          253,617
      Sales and marketing                                             363,965          299,592          722,690          652,803
      General and administrative                                      200,661          202,770          415,562          363,472
                                                                  -----------     ------------     ------------     ------------
Operating loss                                                       (680,649)        (437,583)      (1,225,712)        (932,932)

Other income (expense):
      Interest income                                                   7,248            5,362            9,248           10,521
      Loss on disposal of equipment                                        --               --          (25,302)              --
                                                                  -----------     ------------     ------------     ------------
Net loss                                                          $  (673,401)    $   (432,221)    $ (1,241,766)    $   (922,411)
                                                                  ===========     ============     ============     ============

Net loss per share - Basic and diluted                            $     (0.07)    $      (0.05)    $      (0.13)    $      (0.12)
                                                                  ===========     ============     ============     ============
Weighted average number of common and
      common equivalent shares outstanding - basic and diluted      9,703,724        8,293,138        9,230,546        7,766,301
                                                                  ===========     ============     ============     ============
</Table>

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


                                       3
<PAGE>

                                  Medwave, Inc.

                            Statements of Cash Flows
                                   (Unaudited)

<Table>
<Caption>
                                                                                   Six months ended March 31
                                                                                 -----------------------------
                                                                                     2004             2003
                                                                                 ------------     ------------
<S>                                                                              <C>              <C>

OPERATING ACTIVITIES
Net loss                                                                         $ (1,241,766)    $   (922,411)
Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization                                                    16,945           17,222
      Loss on disposal of equipment                                                    25,302               --
      Changes in operating assets and liabilities:
         Accounts receivable                                                           10,568          (27,658)
         Inventories                                                                   31,386         (122,326)
         Prepaid expenses                                                             (71,247)         (74,541)
         Accounts payable                                                            (124,579)         101,279
         Accrued expenses                                                              12,550            9,564
         Deferred revenue                                                               1,687         (103,065)
                                                                                 ------------     ------------
Net cash used in operating activities                                              (1,339,154)      (1,121,936)
                                                                                 ------------     ------------

INVESTING ACTIVITIES
Purchase of patent                                                                     (1,917)              --
Purchase of property and equipment                                                    (62,290)         (34,458)
                                                                                 ------------     ------------
Net cash used in investing activities                                                 (64,207)         (34,458)
                                                                                 ------------     ------------

FINANCING ACTIVITIES
Proceeds from issuance of common stock                                              5,164,788        1,711,010
                                                                                 ------------     ------------
Cash provided by financing activities                                               5,164,788        1,711,010
                                                                                 ------------     ------------

Increase in cash and cash equivalents                                               3,761,427          554,616
Cash and cash equivalents at beginning of period                                    1,694,648        2,219,851
                                                                                 ------------     ------------
Cash and cash equivalents at end of period                                       $  5,456,075     $  2,774,467
                                                                                 ============     ============
</Table>

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


                                       4
<PAGE>

                                  Medwave, Inc.
                     Notes To Unaudited Financial Statements
                                 March 31, 2004

1.   BASIS OF PRESENTATION

     The accompanying unaudited condensed financial statements of Medwave, Inc.
     have been prepared in accordance with accounting principles generally
     accepted in the United States of America ("United States ") for interim
     financial information and with the instructions to Form 10-Q and Article 10
     of Regulation S-X promulgated under the Securities Exchange Act of 1934.
     Accordingly, they do not include all of the information and disclosures
     required by accounting principles generally accepted in the United States
     for complete financial statements. In the opinion of management, all
     adjustments, consisting only of normal recurring adjustments, necessary for
     a fair presentation of the financial information have been included for the
     interim periods presented. The preparation of financial statements in
     conformity with accounting principles generally accepted in the United
     States 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 reported period.
     Actual results could differ from those estimates. Operating results for
     interim periods are not necessarily indicative of results that may be
     expected for the entire fiscal year. Accordingly, these interim period
     condensed financial statements should be read in conjunction with the
     financial statements contained in the Company's Annual Report on Form 10-K,
     for the year ended April 30, 2003.

     In May of 2003, the board of directors changed the Company's fiscal year
     from May 1- April 30 to October 1- September 30. In addition, on August 1,
     2003, the Company completed a reorganization in which the Company's state
     of incorporation was changed from Minnesota to Delaware.

2.   STOCKHOLDERS' EQUITY

     A summary of changes in stockholders' equity for the six months ended March
     31, 2004 is as follows:

<Table>
<Caption>
                                                COMMON STOCK
                                               .01 PAR VALUE
                                        ----------------------------    ADDITIONAL      ACCUMULATED
                                           SHARES          AMOUNT     PAID IN CAPITAL     DEFICIT            TOTAL
                                        ------------    ------------  ---------------   ------------     ------------
<S>                                     <C>            <C>            <C>               <C>              <C>
Balance at September 30, 2003              8,744,666    $     87,446    $ 23,440,705    $(21,551,004)    $  1,977,147
Exercise of Stock Options                     96,750             968         163,477              --          164,445
Private Placement -
January, 2004 Net of Issuance Cost         1,010,000          10,100       4,990,243              --        5,000,343
Net Loss                                          --              --              --      (1,241,766)      (1,241,766)
Balance at March 31, 2004                  9,851,416    $     98,514    $ 28,594,425    $(22,792,770)    $  5,900,169
</Table>

      Shareholder Rights Agreement

      On September 29, 2003, the Company adopted a shareholder rights agreement
      in order to obtain maximum value for shareholders in the event that a
      person or group of affiliated persons obtain 15% or more of the
      outstanding shares of common stock. To implement the agreement, Medwave
      issued a dividend of one right for each share of its common stock held by
      shareholders of record as of the close of business on September 30, 2003.
      Each right initially entitles shareholders to purchase one share of
      Medwave's common stock for $50. However, the rights are not immediately
      exercisable and will become exercisable only if certain events occur as
      discussed above. The rights expire September 30, 2013. The Company, at its
      option, also holds certain redemption privileges related to the rights as
      described in the agreement.



                                       5
<PAGE>

3.   RECENT ACCOUNTING PRONOUNCEMENTS

     In May 2003, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards No. 150, "Accounting for
     Certain Financial Instruments with Characteristics of Both Liabilities and
     Equity" ("SFAS 150"). SFAS No. 150 provides guidance on how an entity
     classifies and measures certain financial instruments with characteristics
     of both liabilities and equity. It requires that an issuer classify a
     financial instrument that is within its scope as a liability (or an asset
     in some circumstances), because that instrument represents an obligation.
     Many of these instruments were previously classified as equity. SFAS 150 is
     effective for financial instruments entered into or modified after May 31,
     2003, and otherwise is effective at the beginning of the first interim
     period beginning after June 15, 2003. The Company does not believe the
     adoption of SFAS 150 will have a material effect on the Company's
     operations, financial position or cash flows.

4.   NET LOSS PER SHARE

     Net loss per share is based on the weighted average number of common shares
     outstanding in each year. Diluted earnings per share (EPS) is similar to
     basic EPS, except that the weighted average of common shares outstanding is
     increased to include the additional common shares that would have been
     outstanding if the potential dilutive common shares, consisting of shares
     of those stock options and warrants for which market price exceeds exercise
     price, had been issued. Such common equivalent shares are excluded from the
     calculation of diluted EPS in loss years, as the impact is antidilutive.
     Therefore, there was no difference between basic and diluted EPS for each
     period presented. The number of common equivalent shares excluded from the
     calculation was 3,244,950 as of March 31, 2004.

5.   REINCORPORATION

     In August of 2003, the Company completed its reincorporation into the State
     of Delaware. All assets and liabilities of the Company as originally
     organized in the state of Minnesota have been assumed by the newly formed
     Delaware Corporation. Each share of common stock issued and outstanding
     immediately prior to the re-incorporation was converted into one share of
     common stock of the newly formed corporation. The Company's name remains
     Medwave, Inc.

6.   STOCK PURCHASE AGREEMENT

     On January 8, 2004, the Company entered into a Stock Purchase Agreement
     with certain investors. Under the terms of the agreement, the Company
     issued 1,010,000 shares of common stock yielding $5,000,343 net of issuance
     costs.

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

The Private Securities Litigation Reform Act of 1995 contains certain safe
harbors regarding forward-looking statements. From time to time, information
provided by the Company or statements made by our directors, officers or
employees may contain" "forward-looking" information subject to numerous risks
and uncertainties. Statements made in this report that are stated as
expectations, plans, anticipations, prospects or future estimates or which
otherwise look forward in time are considered "forward-looking statements" and
involve a variety of risks and uncertainties, known and unknown, which are
likely to affect the actual results. The following factors, among others, as
well as factors discussed in the Company's other filings with the SEC, have
affected and, in the future, could affect the Company's actual results:
resistance to the acceptance of new medical products, the market acceptance of
the Vasotrac system, the Vasotrax hand-held unit, or other products of the
Company, hospital budgeting cycles, the possibility of adverse or negative
commentary from clinical researchers or other users of the Company's products,
the Company's success in creating effective distribution channels for its
products, the Company's ability to scale up its manufacturing process, and
delays in product development or enhancement or regulatory approval.
Consequently, no forward-looking statement can be guaranteed and actual results
may vary materially.



                                       6
<PAGE>

This discussion summarizes the significant accounting policies, accounting
estimates and other significant factors affecting the liquidity, capital
resources and results of operations of the Company for the three-month and
six-month periods ended March 31, 2004 and 2003. This discussion should be read
in conjunction with the financial statements and other financial information
included in our April 30, 2003 Annual Report on Form 10-K filed with the
Securities and Exchange Commission.

OVERVIEW

Operating revenue for the six months ended March 31, 2004 decreased 31% from the
six months ended March 31, 2003. Revenue from the North American market was
approximately $302,331 and $330,092 for the six month periods ended March 31,
2004 and 2003, respectively. Revenue from international markets including OEM
revenue from Nihon Kohden was approximately $146,759 and $325,037 for the six
month periods ended March 31, 2004 and 2003, respectively. Total revenue from
Nihon Kohden for the six month period ended March 31, 2004 was $65,332. Total
revenue from Nihon Kohden for the six month period ended March 31, 2003 was
$270,498; this included a one time demo equipment order, as well as OEM modules.
We are continuing to work with representatives of Nihon Kohden to try to ensure
that we could anticipate consistent business performance from the Japanese
market in the future. The distribution component of our agreements with Nihon
Kohden may be impacted in the future by their continued emphasis on the OEM
module, which they sell in conjunction with their larger, more comprehensive
patient monitoring platforms. We may therefore consider other business options
for our stand-alone monitoring business in the Japanese market.

We continue to add new sales professionals to our United States sales force. We
have also expanded into additional markets in the northeast, central, and
western areas. We have established three distinct sales regions, East, West, and
Central. We have a sales manager in the western and central areas, and we
anticipate that we will add a sales manager in the eastern area to directly
manage this team of sales professionals. We presently have several open sales
territories, which we will work to fill in the months ahead. We believe that
with the numerous product validation studies, both formal and anecdotal, the
recent signing of the major group purchasing contracts with AmeriNet, Novation,
and Mayo Foundation, and the technology recognition which we have received in
the form of the Child Health Corporation Seal of Acceptance and the Frost and
Sullivan Technology Innovation Award, that we will now benefit by investing in
additional sales professionals to increase our market penetration and revenue
generating capabilities.

GENERAL

Medwave currently employs twenty-nine (29) full-time employees and three (3)
part-time employees. Of the 29 full-time employees, 13 are in sales/marketing, 2
are field clinical support, 3 are administrative support, 10 are research &
development/manufacturing/technical support, and 1 is President & CEO. Of the 3
part-time employees, 2 are in accounting and 1 is administrative support. Since
our inception, we have been engaged exclusively in the development of devices
for monitoring and measuring blood pressure.

Blood pressure or, more precisely, arterial pressure, is the pressure that the
blood exerts against the interior of the arterial walls. The level of the
pressure depends upon the strength of the heart's contraction, the volume of
blood in the circulatory system, the elasticity of the arteries, and the degree
of capillary constriction impeding circulation. During the heart's relaxation
phase, (the diastole), blood pressure falls. When the heart muscle contracts,
(the systole), blood pressure rises. Clinically, blood pressure is commonly
reported as three different values. Systolic and diastolic pressures are the
maximum and minimum pressures during a single cardiac cycle, respectively.
Systolic pressure is also often referred to as contracting pressure, when the
heart muscle is contracting and pumping blood through the blood vessels of the
body. Diastolic pressure is also often referred to as the resting or relaxation
pressure of the heart muscle. Mean pressure is the average pressure during the
cardiac cycle.



                                       7
<PAGE>

Blood pressure and changes in blood pressure are critical indicators of the
health and performance of the body's cardiovascular system. Blood pressure
varies with age and by gender, such that young adults tend to have lower blood
pressures than older adults, and men tend to have higher blood pressures than
women of the same age. Even in healthy bodies, blood pressure normally
fluctuates during the day. For example, exercise, emotion, and exposure to the
cold tend to cause blood pressure to rise, while it falls in instances of
warmth, fainting, hemorrhage, and certain diseases. All hospital patients
require measurement of their blood pressure and many surgical or critically ill
patients require frequent or continual monitoring of their blood pressure.
Continual monitoring of blood pressure is important for patients in operating
rooms, surgical recovery rooms, intensive care units, emergency departments and
other critical care sites because of the acuteness of these patients' conditions
and rapidity with which their conditions can deteriorate. Trend information
obtained from successive blood pressure measurements plays an important role in
the diagnosis, prognosis, and treatment of diseases. Blood pressure is one vital
sign that is measured in every clinical location of the healthcare spectrum,
including a patient's own home environment. It is estimated that approximately
25 million people in the United States are measuring their personal blood
pressure each day.

Medwave Inc. develops, manufactures, and distributes non-invasive blood pressure
products. Its Vasotrax(R) Hand Held Monitor, the Vasotrac(R) APM205A NIBP
Monitor, and the MJ23 OEM Module are new approaches to non-invasive blood
pressure monitoring. Medwave has received the necessary regulatory clearances to
market its technology in Europe, Asia, and the United States. Medwave is
ISO13485/ISO9001/MDD93/42/EEC certified, and all of its products are CE marked.

RECENT DEVELOPMENTS

In September, 2003, Medwave signed an agreement with Novation, the leading
supply chain management company in healthcare, to offer our sensor-based blood
pressure measurement solutions to the more than 2,300 health care organizations
that purchase supplies through Novation. This one-year contract covers our
Vasotrac and Vasotrax technology. Subsequent to this, in April, 2004, Medwave
was chosen by Novation as one of only 10 suppliers to showcase its products in
Novation's Technology Pavillion at the Novation Leadership Conference. More than
700 suppliers were invited to be considered for this showcase. The conference
was attended by leaders of Novation member hospitals. During December, 2003, we
signed a corporate purchasing agreement with the Mayo Foundation Hospital and
its 35 affiliate hospitals. As a result of this agreement, Medwave's technology
is now listed as an alternative for the 35 Mayo Foundation hospitals. Several
Mayo hospitals currently use Medwave's technology. Prior to signing the
agreement, the Mayo Foundation Hospital in Rochester, MN performed an 18-month
clinical study comparing the Vasotrac system to an invasive catheter.

Over the past few quarters, we have been finalizing the clinical validation of a
single-patient use disposable sensor used with the Vasotrac DS APM205A monitor.
The validation was completed in December, 2003, and as a result, we initiated
production of these sensors. We will broadly introduce the disposable sensor at
the National Teaching Institute & Critical Care Exposition, a meeting of
critical care nursing professionals, to be held in mid-May, 2004 in Orlando,
Florida.

We have continued to focus on building our direct sales organization, adding
hospital based sales professionals in New Jersey and Minnesota. In addition, we
began hiring Sales Representatives who will focus on "pre" and "post" hospital
sales. Currently, we employ eleven hospital-based Sales Specialists, two
Clinical Support Specialists, one Marketing / International Sales Manager, and
one "pre" and "post" hospital (alternative care) Sales Representative. Over the
next few months, we plan to hire several more hospital and alternative care
sales professionals to expand the reach into the U.S. market.



                                       8
<PAGE>

Last quarter, we were unable to ship additional OEM modules to our Japanese
partner, Nihon Kohden. Nihon Kohden had some internal delays in executing its
product launch plans for the MJ23 Module. In early February, 2004,
representatives of Medwave's sales and marketing team began to work with Nihon
Kohden in Japan in an effort to execute a complete product launch in the
Japanese market. As a result, Nihon Kohden ordered additional OEM modules during
this past quarter. We will continue to work with Nihon Kohden to insure that an
ongoing focus remains on our technology.

RESULTS OF OPERATIONS

The results of operations compares the three months and six months ended March
31, 2004 and 2003. The analysis of liquidity and capital resources compares
March 31, 2004 to September 30, 2003.

Operating revenue was $211,900 and $324,400 for the quarters ended March 31,
2004 and 2003, respectively, a decrease of 35%. Operating revenue was $436,800
and $634,300 for the six month period ended March 31, 2004 and 2003,
respectively, a decrease of 31%. This decrease is mainly due to the inability to
ship additional OEM modules and Vasotrac monitors to our Japanese partner, Nihon
Kohden. This was a result of internal delays in Nihon Kohden's product launch
plans. In addition, several sales people have been added or replaced, therefore
sales "ramp-up" activity continues and is primarily focused on the U.S. market.
This "ramp-up" period consists of sales people becoming well known in their
respective territories, which require them to build up sales pipelines on a
go-forward basis.

Cost of sales and product development was $185,100 and $159,300 for the quarters
ended March 31, 2004 and 2003, respectively, an increase of 16%. The increase is
primarily due to adjustments in our inventory levels. Cost of sales and product
development was $282,900 and $297,300 for the six month period ended March 31,
2004 and 2003, respectively, a decrease of 5%.

We incurred $142,800 and $100,400 for research and development expenses for the
quarters ended March 31, 2004 and 2003 respectively, an increase of 42%. Salary
and benefit expenses increased approximately $15,000 due to the addition of a
full time engineer. Also, patent activity charges are approximately $20,000
higher compared to last year, because we are reviewing our patent positions, as
well as performing legal examinations for additional patents. We incurred
$241,300 and $253,600 for research and development expenses for the six month
period ended March 31, 2004 and 2003 respectively, a decrease of 5%. The
decrease reflects a decreased need for outside consulting services, which had
cost us approximately $50,000 for the six month period ended March 31, 2003.
This decrease is offset by approximately $30,000 in expenses for the addition of
a full-time engineer.

We incurred $364,000 and $299,600 for sales and marketing expenses for the
quarters ended March 31, 2004 and 2003, respectively, an increase of 22%. We
incurred $722,700 and $652,800 for sales and marketing expenses for the six
month period ended March 31, 2004 and 2003, respectively, an increase of 11%.
Sales & marketing expenses such as salaries, benefits, travel, and sales
supplies have all increased compared to last year. This is a result of building
up our direct sales force from 8 to 15 people since September 30, 2002. In
addition, this past quarter we invested in additional demonstration equipment
for our sales force to use during their sales presentations. Our plan is to
recycle this equipment by selling it on a periodic basis at a customer discount.
In the past, we expensed this equipment, but in the future this equipment will
be treated as a fixed asset and thereby depreciated.

We incurred $200,700 and $202,800 for general and administrative expenses for
the quarters ended March 31, 2004 and 2003, respectively, a decrease of 1%. We
incurred $415,600 and $363,500 for general and administrative expenses for the
six month period ended March 31, 2004 and 2003, respectively, an increase of
14%. The increase in general and administrative expenses was attributable to an
increase in legal costs of approximately $20,000 associated with the adoption of
the shareholder rights plan. The increase was also attributable to an increase
in salaries of approximately $25,000 due the addition of two accounting
employees. This was offset by the decreased need for outside consulting
services, which saved approximately $15,000. In addition, general insurance, as
well as employee health insurance, has increased approximately $10,000 in the
past 6 months, and is expected to continue to increase.



                                       9
<PAGE>

Interest income was $7,200 and $5,400 for the quarters ended March 31, 2004 and
2003, respectively. Interest income was $9,200 and $10,500 for the six month
period ended March 31, 2004 and 2003, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents were $5,456,075 and $1,694,648 at March 31, 2004
and September 30, 2003, respectively reflecting the additional capital received
from the January 8, 2004 private placement. This increase is offset by a
continued investment in sales and marketing as well as the increase in General
and Administrative expenses.

With the cash and cash equivalents, along with the approximately $5,000,000 of
capital raised on January 8, 2004, we believe that sufficient liquidity is
available to satisfy our working capital needs through March 31, 2005. Beginning
in January of this year, we began the process of upgrading our accounting
software, Great Plains. Four additional modules, which include inventory, bill
of materials, sales order processing, and purchase order processing, that were
not being utilized have been activated and computer hardware has been upgraded
as well. Prior to this upgrade, those four modules were being handled off-line.
As business growth continues, this project is a necessary building block to
support that growth and ensure that all business functions work concurrently.
Total cost to date is approximately $30,000 for software up-grade,
implementation, and training, and approximately $5,000 for hardware. We expect
to spend approximately $20,000 to complete the project.

We will need to raise additional capital to fund our long-term operations if we
do not begin to realize an operating profit. There can be no assurance that we
will be able to receive such funds on acceptable terms.

Cash flows used in operations increased to $1,339,200 for the six months ended
March 31, 2004 from $1,121,900 for the six months ended March 31, 2003, an
increase of $217,300. In both periods, we used cash flows to fund operating
losses, which were partially offset by non-cash expense for depreciation. The
use of cash in operations for the six-month period ended March 31, 2004 included
a decrease in inventory as well an increase in prepaid expenses and a decrease
in accounts payable. The use of cash in operations for the six-month period
ending March 31, 2003 included an increase in accounts payable as well an
increase in inventory and a decrease in deferred revenue.

Cash flows used in investing activities increased to $64,200 for the six months
ended March 31, 2004 from $34,500 for the six months ended March 31, 2003.

Financing activities provided $5,164,788 from the exercise of stock options as
well as the January, 2004 Private Placement during the six months ended March
31, 2004, and $1,711,010 from the January, 2003 Private Placement during the six
months ended March 31, 2003.

OFF-BALANCE SHEET ARRANGEMENTS

Our only off-balance sheet arrangements are non-cancelable operating leases
entered into in the ordinary course of business. The table below under the
caption "Contractual Obligations" shows the amount of our operating lease
payments by year.



                                       10
<PAGE>

CONTRACTUAL OBLIGATIONS

The following summarizes our contractual obligations at March 31, 2004 and the
effect these contractual obligations are expected to have on our liquidity and
cash flows in future periods. We recently renewed our operating lease
commitments for our Danvers, MA and Arden Hills, MN locations. Both leases were
extended for a three year period.


<Table>
<Caption>
                                                  PAYMENTS DUE BY PERIOD
                                      ----------------------------------------------
                                         TOTAL        1 YEAR OR LESS     1-3 YEARS
                                      ------------    --------------    ------------
<S>                                   <C>             <C>              <C>

Operating lease commitments .....     $    338,175     $    108,903     $    229,272
</Table>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Medwave's financial statements and accompanying notes are prepared in accordance
with accounting principles generally accepted in the United States of America
(U.S. GAAP). Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies. Critical accounting policies
for Medwave include revenue recognition, stock-based compensation, impairment of
long-lived assets, and allowance for doubtful accounts.

Revenue Recognition

The Company recognizes revenue upon product shipment, provided there exists
persuasive evidence of an arrangement, the fee is fixed or determinable, and
collectibility of the related receivable is reasonably assured.

Stock-Based Compensation

The Company follows Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25), and related interpretations in accounting
for its stock options. Under APB 25, when the exercise price of stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

As discussed above, the Company has elected to follow APB No. 25, and related
Interpretations in accounting for employee stock options and has adopted the
disclosure provisions of FASB Statement No. 123, Accounting for Stock-Based
Compensation (Statement 123), relating to the fair value method of accounting
for stock options.

Pro forma information regarding net loss and loss per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of Statement 123. The fair
value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following assumptions for 2004 and
2003: risk-free interest rates of 3.96% and 5.60% for the periods ending March
31, 2004 and 2003, respectively; dividend yield of 0%; volatility factor of the
expected market price of the Company's common stock of 1.60 and .64,
respectively, and a weighted average expected life of the option of five years.

The Company granted options to purchase 48,000 shares and 42,000 shares during
the six months ended March 31, 2004 and 2003 respectively.



                                       11
<PAGE>

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information is as follows:

<Table>
<Caption>
                                                             Three months ended March 31          Six months ended March 31
                                                            ------------------------------      ------------------------------
                                                                2004              2003              2004              2003
                                                            ------------      ------------      ------------      ------------
<S>                                                         <C>               <C>               <C>               <C>

Net loss as reported                                        $   (673,401)     $   (432,221)     $ (1,241,766)     $   (922,411)
Add: Stock-based employee compensation expense
  included in reported net loss                                       --                --                --                --
Deduct: Total stock-based employee compensation
  determined under fair value method for all awards              (14,060)         (133,317)         (217,028)         (263,073)
                                                            ------------      ------------      ------------      ------------
Pro forma net loss                                          $   (687,461)     $   (565,538)     $ (1,458,794)     $ (1,185,484)
                                                            ============      ============      ============      ============
Basis and diluted loss per share
  As reported                                                      (0.07)            (0.05)            (0.13)            (0.12)
  Pro forma                                                        (0.07)            (0.07)            (0.16)            (0.15)
</Table>

Impairment of Long-Lived Assets

The Company will record impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.

Accounts Receivable

Accounts receivable are customer obligations due under normal trade terms. The
Company reviews accounts receivable on a monthly basis to determine if any
receivables will potentially be uncollectible. The Company includes any reserves
for specific accounts receivable balances that are determined to be
uncollectible, along with a general reserve, in the overall allowance for
doubtful accounts. After all attempts to collect a receivable have failed, the
receivable is written off against the allowance. Based on the information
available, the Company believes the allowance for doubtful accounts as of March
31, 2004 is adequate. However, actual write-offs may exceed the recorded
allowance.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934,
the Company has evaluated, with the participation of management, including the
Chief Executive Officer (who is also the Company's acting Chief Financial
Officer), the effectiveness of its disclosure controls and procedures as of the
end of the period covered by this report. Based on such evaluation, the Chief
Executive Officer has concluded that such disclosure controls and procedures are
effective in ensuring that material information relating to the Company is made
known to the certifying officer by others within the Company during the period
covered by this report.

From time to time, the Company reviews the disclosure controls and procedures,
and may from time to time make changes aimed at enhancing their effectiveness
and to ensure that the Company's systems evolve with its business. There was no
change in the Company's internal control over financial reporting that occurred
during the three-month period ended March 31, 2004 that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.




                                       12
<PAGE>

PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

   Not applicable.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On January 28, 2004, the Company entered into a stock purchase agreement
pursuant to which it has sold 1,110,000 shares of common stock at $5.00 per
share, yielding proceeds of $5,500,000. These securities were sold only to
accredited investors pursuant to an exemption from registration under Regulation
D.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

   Not applicable.

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

Results from April 8, 2004 Annual Meeting of Shareholders

The Company's Annual Meeting of Stockholders, held April 8, 2004, imparted
results of a vote FOR Solomon Aronson, M.D. (electing one Class I Director to
complete a three-year term), votes FOR William D. Corneliuson and Timothy J.
O'Malley (electing two Class II Directors for three-year terms), a vote FOR the
approval of the sale of common stock to William D. Corneliuson, Chairman of the
Board of Directors and a vote FOR the approval of an amendment to the Company's
Stock Option and Grant Plan (the "Option Plan") that will increase the number of
shares that can be issued under the Option plan by 250,000 shares.

There were 9,801,416 shares of Common Stock entitled to vote at the meeting and
a total of 7,433,385 shares (75.83%) were represented at the meeting.

1.   Election of Directors:

<Table>
<Caption>
                                                      FOR                           WITHHOLD
                                                      ---                           --------
<S>                                                 <C>                            <C>
              Solomon Aronson M.D.                  7,424,735                          8,650
              William D. Corneliuson                7,353,935                         79,450
              Timothy O'Malley                      7,424,735                          8,650
</Table>

2.   Approving the sale of common stock to William D. Corneliuson, Chairman of
     the Board:

<Table>
<Caption>
                             FOR                   AGAINST               ABSTAIN                 BROKER NON-VOTE
                             ---                   -------               -------                 ---------------
<S>                                              <C>                    <C>                      <C>
                          4,774,954                44,021                 31,611                    2,582,799
</Table>

3.   Approving an amendment to the Company's Stock Option and Grant Plan (the
     "Option Plan") that will increase the number of shares that can be issued
     under the Option Plan by 250,000 shares:

<Table>
<Caption>
                             FOR                   AGAINST               ABSTAIN                 BROKER NON-VOTE
                             ---                   -------               -------                 ---------------
<S>                                              <C>                    <C>                      <C>
                          4,659,714                153,783                37,089                    2,582,799
</Table>


                                       13
<PAGE>

ITEM 5. OTHER INFORMATION

     (A)  Not applicable

     (B)  During the period covered by this report, there were no material
          changes to the Company's procedures by which security holders may
          recommend nominees to the Company's Board of Directors.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (A)  EXHIBITS:

<Table>
<Caption>
Exhibit
Number              Description
------              -----------

<S>                 <C>
31.1                Certification of the principal executive officer and
                    principal financial officer, pursuant to rule 13a - 14(a),
                    as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
                    of 2002.

32.1                Certification pursuant to 18 U.S.C. Section 1350, as adopted
                    pursuant to section 906 of the Sarbanes-Oxley Act of 2002
</Table>

     (B)  REPORTS ON FORM 8K:

          (1)  Form 8-K filed on January 13, 2004 relating to the sale of
               1,100,000 shares of common stock.



                                   SIGNATURES


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


Date: May 13, 2004                  Medwave, Inc.


                                       By: /s/ Timothy J. O'Malley
                                           -------------------------------------
                                           Timothy J. O'Malley
                                           President and Chief Executive Officer
                                           (Principal Executive Officer and
                                           Principal Financial Officer)



                                       14