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 July 31, 1998; or

[ ]  TRANSITION REPORT PERSUANT 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)

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

                            4382 Round Lake Road West
                          Arden Hills, Minnesota 55112
                    (Address of principal executive offices,
                                    zip code)

                                 (651) 639-1227
                    (Registrant's telephone number, including
                                   area code)


Indicate by mark  whether  the issuer (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 [ ]

As of August  31,  1998,  the  issuer  had  5,392,396  shares  of  Common  Stock
outstanding.



<PAGE>

                                  Medwave, Inc.

                                    Form 10-Q

                                      INDEX
   
                                                                           Page
 

PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

           Balance Sheets - April 30, 1998 and July 31, 1998                 2

           Statements of Operations - Three Months Ended July 31, 1998       3
             and 1997 and Period from June 27, 1984 (Inception) to
             July 31, 1998

           Statements of Cash Flows - Three Months Ended July 31, 1998       4
              and 1997 and Period from June 27, 1984 (Inception) to
              July 31, 1998


           Notes to Financial Statements                                     5


  Item 2.  Management's Discussion and Analysis of Financial Condition       5
             and Results of Operation

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk        7

PART II. OTHER INFORMATION

  Item 1.  Legal Proceedings                                                 7

  Item 2.  Changes in Securities                                             7

  Item 3.  Defaults Upon Senior Securities                                   8

  Item 4.  Submission of Matters To A Vote of Security Holders               9

  Item 5.  Other Information                                                 9

  Item 6.  Exhibits and Reports on Form 8-K                                  9


<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements
                                                
                                                   Medwave, Inc.
                                               (A Development Stage Company)
                                                      Balance Sheets

<TABLE>
<CAPTION>
                                                                                           April 30,             July 31,
                                                                                             1998                  1998
                                                                                      --------------------------------------
                                                                                         (see note 2)         (unaudited)
<S>                                                                                        <C>                 <C>    
Assets
Current Assets:
      Cash and cash equivalents                                                            $1,926,697          $  1,468,705
      Short term investments                                                                  759,758             1,564,052
      Accounts receivable                                                                      59,618               175,445
      Inventories                                                                             249,079               201,267
      Prepaid expenses                                                                         74,975                44,412
                                                                                      --------------------------------------
Total current assets                                                                        3,070,127             3,453,881

Investments                                                                                 3,484,515             2,661,564

Property and equipment:
      Research and development equipment                                                      242,606               239,043
      Office Equipment                                                                        115,243               115,243
      Manufacturing and engineering equipment                                                  65,259                65,259
      Sales and marketing equipment                                                            60,183                59,927
      Leasehold improvements                                                                   31,613                31,613
                                                                                      --------------------------------------
                                                                                              514,904               511,085
      Accumulated depreciation                                                               (383,802)             (399,513)
                                                                                      --------------------------------------
                                                                                              131,102               111,572

Patents, net                                                                                   53,418                47,069
                                                                                      --------------------------------------
Total Assets                                                                               $6,739,162          $  6,274,086
                                                                                      ======================================
Liabilities and shareholders' equity
Current liabilities:
      Accounts payable                                                                    $   109,585          $    130,658
      Accrued payroll                                                                          57,531                53,707
                                                                                      --------------------------------------
Total current liabilities                                                                     167,116               184,365

Shareholders' equity:
      Common Stock, no par value:
                 Authorized shares--50,000,000
                 Issues and outstanding shares -                                           16,240,970            16,245,470
                            July 31, 1998  -  5,384,396
                            April 30, 1998 - 5,378,376
      Unrealized gain/(loss) on investments                                                   (14,999)              (16,235)
      Deficit accumulated during the development stage                                     (9,653,925)          (10,139,514)
                                                                                      --------------------------------------
Total shareholders' equity                                                                  6,572,046             6,089,721
                                                                                      --------------------------------------

Total liabilities and shareholders' equity                                                 $6,739,162          $  6,274,086
                                                                                      ======================================

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


</TABLE>


<PAGE>


                                  Medwave, Inc.
                          (A Development Stage Company)

                            Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                                                              
                                                                                                               Period from
                                                                                                              June 27, 1984
                                                                     Three months ended July 31                (Inception)
                                                               ---------------------------------------              to
                                                                          1998                   1997         July 31, 1998
                                                               ---------------------------------------       -----------------
<S>                                                            <C>                   <C>                    <C>    
Revenue:
      Net Sales                                                 $      200,332        $       186,709        $        866,286

Operating expenses:
      Cost of sales and product development                            173,570                188,836                 839,391
      Research and development                                         270,670                276,657               5,891,547
      Sales and marketing                                              218,646                252,528               1,958,703
      General and administrative                                       100,714                 93,839               2,806,433
                                                               ---------------------------------------       -----------------
Operating loss                                                        (563,268)              (625,151)            (10,629,788)

Other income:
      Interest income                                                   77,678                 62,001               1,117,033
                                                               ---------------------------------------       -----------------
Net loss                                                        $     (485,590)        $     (563,150)        $    (9,512,755)
                                                               =======================================       =================

Net loss per share - Basic and diluted                          $        (0.09)     $           (0.12)     $            (3.88)
                                                               =======================================       =================
Weighted average number of common and
      common equivalent shares outstanding                           5,384,396              4,818,738               2,450,331
                                                               =======================================       =================

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


</TABLE>


<PAGE>


                                                   Medwave, Inc.
                                           (A Development Stage Company)
                                             Statements of Cash Flows
                                                   (Unaudited)

<TABLE>
<CAPTION>


 
                                                                                                                      
                                                                                                                        Period from
                                                                                                                       June 27, 1984
                                                                                   Three months ended July 31           (Inception)
                                                                               ------------------------------------         to
                                                                                      1998                 1997       July 31, 1998
                                                                               ------------------------------------  ---------------
<S>                                                                              <C>              <C>               <C>  
Operating activities
Net loss                                                                         $   (485,590)     $   (563,150)    $    (9,512,755)
Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation                                                                     19,373            17,730             575,991
      Amortization                                                                      6,349             6,350              88,948
      Loss on sale of equipment                                                       ---               ---                   7,375
      Issuance of Common Stock for consulting services                                ---               ---                   3,413
      Changes in operating assets and liabilities:
         Accounts receivable                                                         (115,827)         (110,989)           (175,445)
         Inventories                                                                   47,812           (71,683)           (201,267)
         Prepaid expenses                                                              30,563            34,458             (44,412)
         Accounts payable and accrued expenses                                         21,073           109,764             130,658
         Accrued payroll and related taxes                                             (3,824)           (1,205)             53,707
                                                                               ------------------------------------   --------------
Net cash used in operating activities                                                (480,071)         (578,725)         (9,073,787)

Investing activities
Patent expenditures                                                                  ---                ---                (136,017)
Purchase of investments                                                              (242,951)         (488,006)        (33,856,000)
Sales and maturity of investments                                                     260,373           ---              29,615,993
Purchase of property and equipment                                                     (3,306)          (16,414)           (715,799)
Proceeds from sale of equipment                                                         3,463           ---                  21,663
                                                                               ------------------------------------   --------------
Net cash used in investing activities                                                  17,579          (504,420)         (5,070,160)

Financing activities
Net proceeds from issuance of Convertible Preferred Stock                             ---                ---              4,848,258
Net proceeds from issuance of Common Stock                                              4,500            ---             10,764,394
                                                                               ------------------------------------   --------------
Net cash provided by financing activities                                               4,500            ---             15,612,652
                                                                               ------------------------------------   --------------

(Decrease) increase in cash and cash equivalents                                     (457,992)       (1,083,145)          1,468,705
Cash and cash equivalents at beginning of period                                    1,926,697         1,240,100
                                                                               ------------------------------------   --------------
Cash and cash equivalents at end of period                                       $  1,468,705      $    156,955       $   1,468,705
                                                                               ====================================   ==============


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

</TABLE>


<PAGE>





                                  Medwave, Inc.
                          (A Development Stage Company)

                          Notes To Financial Statements

                                  July 31, 1998


1.    Organization and Description of Business

      Medwave,  Inc. (the Company) is a development stage enterprise  engaged in
      the   development,   manufacturing,   and  marketing  of  a   proprietary,
      non-invasive  system that continually  monitors arterial blood pressure of
      adults and in the development of related technology and products.


2.    Basis of Presentation

      The financial  information presented as of July 31, 1998 has been prepared
      from the books and records  without  audit.  Financial  information  as of
      April 30, 1998 is based on audited financial statements of the Company but
      does not include all disclosures required by generally accepted accounting
      principles. In the opinion of management, all adjustments, consisting only
      of normal recurring adjustments,  necessary for a fair presentation of the
      financial  information for the periods  indicated have been included.  For
      further information regarding the Company's accounting policies,  refer to
      the  financial  statements  and related  notes  included in the  Company's
      Annual Report on Form 10-K for the fiscal year ended April 30, 1998.


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

The following  discussion  should be read in conjunction  with, and is qualified
by, the Company's financial statements set forth in Item 1 of this Form 10-Q.

General

The  Company,  which was formed in 1984,  is a  development  stage  company that
currently  employs sixteen  full-time  employees and three part-time  employees.
Since its  inception,  the  Company  has been  engaged in the  development  of a
non-invasive,  continual  blood  pressure  measurement  and  monitoring  system.
Utilizing the Company's proprietary technology,  the Vasotrac(R) system provides
new blood pressure readings approximately every fifteen heartbeats.  The Company
believes  that  the  continual  blood  pressure  readings  and the  non-invasive
features  of the  Vasotrac  system make it the most  advanced  approach to blood
pressure monitoring. In 1997, the Company began development of a hand-held blood
pressure  monitor.  This hand-held  unit is based on the technology  used in the
Vasotrac system.

The  Company  has  incurred  an  accumulated  deficit  of  $10,139,500  from its
inception through July 31, 1998.  Additional  losses from development,  testing,
regulatory compliance,  sales, and other expenses are expected to be incurred by
the Company at least until it emerges from the development stage.

The Company's success is dependent upon the successful development and marketing
of the Vasotrac  system  and/or  related  technology.  However,  there can be no
assurance that the Vasotrac  system or related  technology  will be successfully
marketed or sold in sufficient quantities and at margins necessary to achieve or
maintain profitability.

In December  1997,  the Company  began  developing  a dealer  sales  network for
selling the Vasotrac  system.  To date, the Company has entered into  agreements

<PAGE>

with eight  dealers  whose  territories  cover the southern  and western  United
States. The Company is seeking qualified dealers in the northeast portion of the
United States and portions of the Midwest. The success of the Company's Vasotrac
system sales will depend upon the ability of dealers to sell the Vasotrac system
to the hospitals in their area. At this time,  dealers have not had enough sales
experience  with the  Vasotrac  to  demonstrate  that they  will be  successful.
Furthermore,  the Company has limited distribution arrangements and there can be
no assurance that the Company will be able to implement or effectuate other such
arrangements.

The Company's hand-held blood pressure monitor,  that is under development,  may
have sales  potential both in the  professional  market  (doctors,  nurses,  and
medical  technicians)  and in the  consumer  market.  The Company  does not have
suitable  distribution  channels for these potential markets and there can be no
assurance  that the Company  will be able to implement  or  effectuate  suitable
arrangements for such markets.

For the  Company to emerge  from the  development  stage,  it will depend on its
ability to hire  additional  employees  for key operating  positions,  including
sales and marketing  positions.  Competition  for such  employees is intense and
there can be no  assurance  that the Company will be  successful  in hiring such
employees on acceptable  terms or when required,  or in maintaining the services
of its  present  employees.  The  Company  preliminarily  estimates  that  these
employees will increase  employee-related  expenses in excess of $850,000 during
the next twelve months. However, such requirements are subject to change and are
highly  dependent  on the  development  process  for the system,  including  the
manufacturing   scale-up   process,   market   acceptance,   and  the  Company's
distribution methods.

Cash,  cash  equivalents,  and short and  long-term  investments  are being used
primarily to continue clinical testing of the Vasotrac system, for manufacturing
and  marketing,  to conduct any  additional  research  and  product  development
efforts that may be necessary,  and to provide  working  capital.  Over the next
twelve months,  the Company  expects to spend in excess of $900,000 for research
and  development.  Specifically  the funds are expected to be used to develop an
improved sensor and to sustain engineering support for manufacturing and for the
continued development of a hand-held unit. No significant amount of equipment is
expected to be required.  Even assuming limited sales, the Company believes that
the Company's cash, cash equivalents,  and short and long-term  investments will
allow the Company to meet its cash requirements for approximately one and a half
years from July 31, 1998. If the development  process for the Company's products
does not proceed as expected  because  significant  product  design  changes are
required to achieve market acceptance,  unexpected  difficulties are encountered
in attaining cost-effective manufacturability,  or the sales and marketing costs
are higher than  expected,  the Company  may  require  additional  capital at an
earlier  date.  Such  capital may be sought  through bank  borrowing,  equipment
financing,  equity financing,  and other methods.  The Company's financing needs
are subject to change  depending on, among other things,  market  conditions and
opportunities,  equipment or other asset-based  financing that may be available,
and cash flow from operations.  Any material favorable or unfavorable  deviation
from its anticipated expense could significantly affect the timing and amount of
additional financing that may be required. However, additional financing may not
be  available  when  needed  or,  if  available,  may not be on  terms  that are
favorable  to the  Company  or its  security  holders.  In  addition,  any  such
financing  could  result  in  substantial  dilution  to then  existing  security
holders.

Results of Operations

The results of  operations  compares  the three  months  ended July 31, 1998 and
1997,  respectively.  The analysis of liquidity and capital  resources  compares
July 31, 1998 to April 30, 1998.

Operating  revenue was $200,300 and $186,700 for the quarter ended July 31, 1998
and 1997,  respectively.  The operating  revenue  increase was attributed to the
switch  from  direct  sales over to a dealer  network  and  included a marketing
incentive program to help provide customer feedback on the Vasotrac system.

<PAGE>

Cost of sales and product  development was $173,500 and $188,800 for the quarter
ended  July 31,  1998 and  1997,  respectively.  The cost of sales  and  product
development  decrease  was  attributed  to  increased  efficiencies  in  product
manufacturing as the Company improves its manufacturing processes.

The Company incurred $270,700 and $276,700 for research and development expenses
for the quarter  ended July 31, 1998 and 1997,  respectively.  The  research and
development expense decrease was attributed to a decrease in clinical costs as a
result of the completion of the multi-site clinical study.

The Company incurred $218,600 and $252,500 for sales and marketing  expenses for
the quarter ended July 31, 1998 and 1997, respectively.  The sales and marketing
expense  decrease  was  attributable  to a  decrease  in  the  number  of  sales
representatives  employed  by the  Company as the  Company  converted  over to a
dealer network.

The Company  incurred  $100,700  and  $93,800  for  general  and  administrative
expenses  for the  quarter  ended  July 31,  1998 and  1997,  respectively.  The
increase in general and  administrative  expenses  was  attributed  to a general
increase in expenses.

Interest  income was $77,700 and $62,000 for the quarter ended July 31, 1998 and
July  31,  1997,   respectively.   The  increase   reflects  higher  cash,  cash
equivalents,  and short and long-term  investments  as a result of the Company's
private placement in March 1998.

Liquidity and Capital Resources

The Company's cash, cash equivalents,  and short-and long-term  investments were
$5,694,300 and $6,171,000 at July 31, 1998 and April 30, 1998, respectively. The
Company  incurred cash  expenditures  of $480,100 for operations for the quarter
ended July 31, 1998.

With the Company's cash, cash equivalents,  and short and long-term investments,
the Company  believes  that  sufficient  liquidity  is  available to satisfy its
working capital needs for approximately one and a half years from July 31, 1998.
The Company has no significant capital expenditure commitments.

ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk
   Not applicable.

PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS
   Not applicable.

ITEM 2.  CHANGES IN SECURITIES

Use of proceeds for the period ending:  July 31, 1998 (Final Report)
(1)      Effective Date:                November 9, 1995
         SEC File Number:               0-28010-6

(2)      Offering Date:                 November 9, 1995

(4)(ii)  Managing Underwriter:          Miller, Johnson & Kuehn, Inc.
(4)(iii) Title of Security:             Common Stock
(4)(iv)  Amount Registered:              1,610,000
         Aggregate Offering Price:      $8,050,000
         Amount Sold:                    1,610,000
         Aggregate Offering Price Sold: $8,050,000


<PAGE>


(4)(v)   Underwriting Discount and Commissions:             $   805,000
         Expenses paid to or for underwriters:              $   194,169
         Other expenses:                                    $   217,263
         Total expenses:                                    $ 1,216,432
         All 4(v) are direct or indirect payments to others
(4)(vi)  Net offering proceeds:                             $ 6,833,568

<TABLE>
<CAPTION>

<S>      <C>                                        <C>                                                 <C>  
(4)(vii) Temporary Investments (specify)
         Construction of Plant, building and        (A) Direct or indirect payments to directors,
         Facilities                                 officers, general partners of issuer or their
                                                    associates, to persons owning ten percent
                                                    (10%) or more of any class of equity securities
                                                    of the issuer and to affiliates of the issuer:          None
                                                    (B)  Direct or indirect payment to others:            $  31,613

         Purchases and installation of              (A) Direct or indirect payments to directors,
         machinery and equipment                    officers, general partners of issuer or their
                                                    associates, to persons owning ten percent
                                                    (10%) or more of any class of equity securities
                                                    of the issuer and to affiliates of the issuer:          None
                                                    (B)  Direct or indirect payment to others:            $ 218,476

         Reserve Asset Management Account:          (A)  Direct or indirect payments to directors,
                                                    officers, general partners of issuer or their
                                                    associates, to persons owning ten percent
                                                    (10%) or more of any class of equity securities
                                                    of the issuer and to affiliates of the issuer:          None
                                                    (B)  Direct or indirect payment to others:              None

         Marketing & Manufacturing:                 (A)  Direct or indirect payments to directors,
                                                    officers, general partners of issuer or their
                                                    associates, to persons owning ten percent
                                                    (10%) or more of any class of equity securities
                                                    of the issuer and to affiliates of the issuer:          $  439,516
                                                    (B)  Direct or indirect payment to others:              $2,383,236

         Research & Development:                    (A)  Direct or indirect payments to directors,
                                                    officers, general partners of issuer or their
                                                    associates, to persons owning ten percent
                                                    (10%) or more of any class of equity securities
                                                    of the issuer and to affiliates of the issuer:          $  236,868
                                                    (B)  Direct or indirect payment to others:              $2,227,084

         General & Administrative:                  (A)  Direct or indirect payments to directors,
                                                    officers, general partners of issuer or their
                                                    associates, to persons owning ten percent
                                                    (10%) or more of any class of equity securities
                                                    of the issuer and to affiliates of the issuer:          $  245,881
                                                    (B)  Direct or indirect payment to others:              $1,050,894

</TABLE>


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
   Not applicable.



<PAGE>


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
   Not applicable.

ITEM 5.  OTHER INFORMATION

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 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.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (A)      EXHIBITS:
                  EXHIBITS DESCRIPTION
                     27  Financial data schedule

         (B)      REPORTS ON FORM 8K:
                     No reports on Form 8-K were filed by the Company  during
                     the quarter ended July 31, 1998




                                   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:    September 11, 1998                Medwave, Inc.


                                       By: /s/  G. Kent Archibald
                                           G. Kent Archibald
                                           President and Chief Executive Officer


                                           /s/  Mark T. Bakko
                                           Mark T. Bakko
                                           Chief Financial Officer


<PAGE>


                                  EXHIBIT INDEX


                                  MEDWAVE, INC.

                                    FORM 10-Q

                                FOR QUARTER ENDED
                                  JULY 31, 1998




Exhibit No.      Description


27               Financial Data Schedule (filed in electronic format only)