UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB


(Mark One)

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

     For the Quarterly Period Ended October 31, 1996

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

     For the transition period from ____________ to _____________


Commission File Number:    0-28010


                                  MEDWAVE, INC.
        (Exact name of small business issuer 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)

                                 (612) 639-1227
                           (Issuer's telephone number)



Check  whether  the issuer  (1) has 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 as the issuer 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  November  30,  1996,  the issuer  had  4,810,533  shares of Common  Stock
outstanding.

Transitional Small Business Disclosure Format (check one):  Yes [ ]   No [X]

<PAGE>



                                  Medwave, Inc.

                                   Form 10-QSB

                                      INDEX

                                                                           Page


PART I.  FINANCIAL INFORMATION

  Item 1. Financial Statements

          Balance Sheets - April 30, 1996 and October 31, 1996              2

          Statements of Operations - Three Months Ended October 31, 1995    3
            and 1996, Six Months Ended October 31, 1995 and 1996  and
            Period from June 27, 1984 (Inception) to October 31, 1996

          Statements of Cash Flows - Three Months Ended October 31, 1995    4
            and 1996, Six Months Ended October 31, 1995 and 1996 and
            Period from June 27, 1984 (Inception) to October 31, 1996


          Notes to Financial Statements                                     5


  Item 2. Management's Discussion and Analysis or Plan of Operation         6


PART II. OTHER INFORMATION

  Item 1 Legal Proceedings                                                  8
  Item 2 Changes in Securities                                              8
  Item 3 Defaults upon Senior Securities                                    8
  Item 4 Submission of Matters to a Vote of Security Holders                8
  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,                Ocotober 31,
                                                                                         1996                      1996
                                                                                      --------------------------------------
                                                                                                              (unaudited)
<S>                                                                                      <C>                 <C>    
Assets
Current Assets:
      Cash and cash equivalents                                                           $   769,121          $    173,517
      Short term investments                                                                4,234,080             3,942,949
      Accounts receivable                                                                       -----                 4,995
      Inventories                                                                               8,974               125,394
      Prepaid expenses                                                                        101,171               141,833
                                                                                      --------------------------------------
Total current assets                                                                        5,113,346             4,388,688

Property and equipment:
      Office equipment                                                                        114,088               120,113
      Research and development equipment                                                      261,076               215,727
      Sales and marketing                                                                       -----                15,075
      Manufacturing and engineering equipment                                                  46,312                63,925
      Leasehold improvements                                                                   31,613                31,613
                                                                                      --------------------------------------
                                                                                              453,089               446,453
      Less accumulated depreciation                                                           339,127               306,857
                                                                                      --------------------------------------
                                                                                              113,962               139,596

Patents, net                                                                                   78,776                91,878
Investments                                                                                 1,525,120             1,830,690
                                                                                      --------------------------------------
Total Assets                                                                               $6,831,204          $  6,450,852
                                                                                      ======================================

Liabilities and shareholders' equity
Current liabilities:
      Accounts payable and accrued expenses                                               $    83,607         $      38,683
      Accrued payroll and related taxes                                                        28,697                40,997
                                                                                      --------------------------------------
Total current liabilities                                                                     112,304                79,680

Shareholders' equity (deficiency):
      Common Stock, no par value:
                 Authorized shares--50,000,000 at April 30, 1996 and
                 at October 31, 1996
                 Issued and outstanding shares--4,690,560 at April 30,
                   1996 and 4,808,533 at October 31, 1996                                  12,458,866            12,749,876
Unrealized loss on investments                                                                (33,245)               (6,989)
Deficit accumulated during the development stage                                           (5,706,721)           (6,371,715)
                                                                                      --------------------------------------
Total shareholders' equity                                                                  6,718,900             6,371,172
                                                                                      --------------------------------------
Total liabilities and shareholders' equity                                                 $6,831,204          $  6,450,852
                                                                                      ======================================


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 October 31       Six months ended October 31           (Inception)
                                          ------------------------------    ------------------------------               to    
                                               1995             1996           1995                1996           October 31, 1996
                                          ------------------------------    ------------------------------   -----------------------
<S>                                      <C>            <C>                <C>               <C>                    <C>   

Revenue:
  Net sales                                      -       $      4,995            -            $      4,995           $        4,995

Operating expenses:
  Cost of sales, product  development,    $   21,862          247,792       $    61,774             423,812               4,195,444
     and research and development
  Sales and marketing                            938          126,159               938             199,559                 291,948
  General and administrative                  72,513          110,847           179,368             219,261               1,903,922
                                        -------------    -------------     -------------       -------------       -----------------
                                              95,313          484,798           242,080             842,632               6,391,314
                                        -------------    -------------     -------------       -------------       -----------------
Operating loss                               (95,313)        (479,803)         (242,080)           (837,637)             (6,386,319)

Other income:
  Interest income                              1,956           85,862             6,720             172,642                 641,362
                                        =============    =============     =============       =============       =================
Net loss                                  $  (93,357)    $   (393,941)      $  (235,360)          $(664,995)        $    (5,744,957)
                                        =============    =============     =============       =============       =================

Net loss per share                        $    (0.18)    $      (0.08)      $     (0.47)       $      (0.14)        $         (2.74)
                                        =============    =============     =============       =============       =================
Weighted average number of common and
  common equivalent shares outstanding       521,933        4,808,533           504,811           4,765,375               2,096,366
                                        =============    =============     =============       =============       =================

</TABLE>

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

<PAGE>




                                  Medwave, Inc.
                          (A Development Stage Company)

                            Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
 
                                                                                                                    Period from
                                                                                                                   June 27, 1984
                                           Three months ended October 31       Six months ended October 31          (Inception)
                                          --------------------------------    ----------------------------              to
                                             1995                  1996           1995              1996           October 31, 1996
                                          --------------------------------    ----------------------------    ----------------------
<S>                                       <C>                <C>              <C>               <C>             <C>         
Operating activities
Net loss                                  $  (93,357)         $   (393,941)    $(235,360)        $(664,995)      $    (5,744,957)
Adjustments to reconcile net loss to 
  net cash used in operating activities:
      Depreciation                            10,261                 5,628        21,794            16,516               431,255
      Amortization                             3,638                 7,254         7,276            16,951                47,035
      Loss on sale of equipment                ---                  ---            ---               ---                   7,375
      Issuance of Common Stock                                                                                                   
        for consulting services                ---                  ---            ---               ---                   3,413
      Changes in operating assets 
         and liabilities:
         Accounts receivable                   ---                  (4,995)        ---              (4,995)               (4,995)
         Other receivable                    (36,135)               ---          (51,530)             ---                   ---
         Inventories                           7,659              (101,267)         (156)         (116,420)             (125,394)
         Prepaid expenses                    (10,218)              (91,706)       (1,573)          (40,662)             (141,833)
         Accounts payable and 
           accrued expenses                   (3,615)              (20,294)       35,656           (44,924)               38,683
         Accrued payroll and 
           related taxes                       ---                   9,190        (7,314)           12,300                40,997
                                         -------------       ---------------  -------------      -----------    ------------------
Net cash used in operating activities       (121,767)             (590,131)     (231,207)         (826,229)           (5,448,421)

Investing activities
Patent expenditures                           (4,475)               ---           (8,284)          (27,157)             (136,017)
Purchase of investments                        ---              (2,657,825)        ---          (5,216,054)          (25,168,819)
Sales and maturity of investments              ---               2,741,704         ---           5,241,477            19,401,796
Purchase of property and equipment             ---                 (19,186)        ---             (58,650)             (610,279)
Proceeds from sale of equipment                ---                  ---            ---               ---                  18,200
                                         -------------       ---------------  -------------    -------------    ------------------
Net cash provided by (used in)
   investing activities                       (4,475)               64,693        (8,284)          (60,384)           (6,495,119)

Financing activities
Proceeds from notes payable
  to shareholders                              ---                  ---            ---               ---                 324,998
  
Payments of notes payable
  to shareholders                              ---                  ---            ---               ---                (324,998)
Net proceeds from issuance 
  of Common Stock                             92,276                ---           92,276           291,009            12,117,057
                                         -------------       ---------------  -------------     ------------    ------------------
Net cash provided by financing
  activities                                  92,276                ---           92,276           291,009            12,117,057
                                         -------------       ---------------  -------------     ------------    ------------------

(Decrease) increase in cash and
   cash equivalents                          (33,966)             (525,438)     (147,215)         (595,604)              173,517
Cash and cash equivalents at 
   beginning of period                       213,824               698,955       327,073           769,121                 ---
                                         -------------       ---------------  -------------     ------------    ------------------
Cash and cash equivalents at end
   of period                              $  179,858         $     173,517    $  179,858        $  173,517      $        173,517
                                         =============       ===============  =============     =============    ==================

</TABLE>

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

<PAGE>





                                  Medwave, Inc.
                          (A Development Stage Company)

                          Notes To Financial Statements

                                October 31, 1996


1.   Organization and Description of Business

     Medwave,  Inc.  (the  Company) is a development  stage  enterprise  engaged
     exclusively in the development  of, and intends to market,  manufacture and
     sell, a proprietary, non-invasive system that continually monitors arterial
     blood pressure of adults.


2.   Basis of Presentation

     The  financial  information  presented  as of  October  31,  1996  has been
     prepared  from the Company's  books and records  without  audit.  Financial
     information as of April 30, 1996 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-KSB for the fiscal year
     ended April 30, 1996.

     The results of operations for the six months ended October 31, 1996 are not
     necessarily indicative of the results to be expected for the full year.


3.   Public Offering

     In November 1995, the Company  received the proceeds from an initial public
     offering  of  1,610,000  shares of Common  Stock at $5.00 per share  before
     underwriting discount and offering expenses.

     The Company's shareholders,  as a condition of the initial public offering,
     approved a plan of recapitalization whereby all convertible preferred stock
     automatically  converted  into an aggregate  of 2,750,164  shares of Common
     Stock. As part of the plan of  recapitalization,  the Company's articles of
     incorporation were amended to, among other things,  increase the authorized
     capital stock of the Company to 50,000,000 shares without par value.


ITEM 2.  Management's Discussion and Analysis or Plan 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-QSB.

Plan of Operation

The  Company,  which was formed in 1984,  is a  development  stage  company that
currently  employs  thirteen  full-time  employees and two part-time  employees.
Since its inception, the Company has been engaged exclusively in the development
of a non-invasive,  continual blood pressure  measurement and monitoring system.
The  Company's  initial  concept for  measuring  blood  pressure  was based upon
parameters  obtained  from a doppler  signal.  By 1991, it was evident that this
approach would not yield the desired  results,  so those efforts were abandoned.
However,  the Company  used  information  gained from these  initial  efforts to
direct its technical efforts to different approaches,  which eventually resulted
in the approach the Company now uses in its Vasotrac(R)  system. This innovative
system, the Vasotrac(R)  system,  includes as one of its key components a unique
pressure  sensor that is placed on the wrist over a main artery.  Utilizing  the
Company's proprietary technology, the Vasotrac(R) system monitors blood pressure
continually,   providing  new  readings  about  every  fifteen  heartbeats.  The
continual, efficacious and non-invasive qualities of the Vasotrac(R) system make
it a new approach to blood pressure monitoring.

<PAGE>

The Company is not presently  generating any significant revenue from operations
and has incurred an accumulated deficit of $6,371,715 from its inception through
October 31,  1996.  Significant  additional  losses  from,  among other  things,
development,  testing, regulatory compliance, and sales expenses are expected to
be incurred by the Company at least until it emerges from the development stage.

Until  November 1995,  the Company  financed its activities  through a series of
private  placements of equity  securities,  including  shares of Preferred Stock
that were converted into Common Stock just prior to the Company's initial public
offering (IPO) in November, 1995.

The Company's success is dependent upon the successful development and marketing
of  the  Vasotrac(R)  system.  However,  there  can  be no  assurance  that  the
Vasotrac(R)  system  can ever by  successfully  marketed  or sold in  sufficient
quantities and at margins  necessary to achieve or maintain  profitability.  The
Company is currently  marketing the Vasotrac(R)  with a controlled  rollout.  As
part of the controlled market rollout,  the Company is now focusing on hospitals
in the Midwest.  The Company  received  its first order in August 1996,  and the
Company  shipped the first  Vasotrac(R)  to a customer in  September  1996.  The
Company has  received  additional  purchase  orders  which will be  delivered in
December 1996.  Consistent with the controlled  market rollout,  the Company has
been  conducting a hospital-wide  clinical study.  The response to the study has
allowed the Company to refine its marketing plan to include emergency and trauma
centers  as well as the  operating/surgery  rooms  that  the  Company  has  been
targeting.  The  Vasotrac(R)  continues to receive  positive  interest  from the
medical community.  The sale of the Vasotrac(R) to a hospital must coincide with
the hospital's budget cycle.  Therefore,  the Company has found that even though
the  hospital's  medical  staff is  interested  in the  Vasotrac(R),  the actual
purchase of the  Vasotrac(R) is delayed until the hospital's  capital  equipment
budget allows for the purchase of the system.

If the Company emerges from the development  stage, its success will also 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  estimates  that within the
next  twelve  months,  it  may  require  approximately  11  additional  persons,
including  one in the area of  general  and  administrative,  five in sales  and
marketing,  two in research and  development,  and three in  manufacturing.  The
Company   preliminarily   estimates   that   these   employees   will   increase
employee-related  expenses in excess of $780,000  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.

Proceeds from the IPO are being used primarily to continue  clinical  testing of
the Vasotrac(R)  system, to begin  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 $960,000  for  research and  development,  including  amounts
expected to be spent on clinical  trials.  The funds are  expected to be used to
develop sensors and holders, to repackage the monitor for cost reduction, and to
sustain  engineering  support  for  manufacturing.   No  significant  amount  of
equipment is expected to be required. Even assuming no sales by the Company, the
Company  believes  that the net  proceeds  of the IPO  offering  will  allow the
Company to meet its cash  requirements for  approximately two years from the end
of the second  quarter.  If the  development  process  for the  system  does not
proceed as expected because  significant  product design changes are required to
achieve  market  acceptance  or  unexpected   difficulties  are  encountered  in
attaining cost-effective  manufacturability,  the Company may require additional
capital at an earlier date.  Such capital may be sought through bank  borrowing,
equipment  financing,  additional  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.

<PAGE>

Results of Operations

The results of operations compares the three months and six months ended October
31, 1996 and 1995, respectively. The analysis of liquidity and capital resources
compares October 31, 1996 to April 30, 1996.

The  Company  incurred   $247,792  and  $21,862  for  cost  of  sales,   product
development, and research and development expenses for the quarter ended October
31, 1996 and 1995, respectively. Cost of sales, product development and research
and  development  costs for the six months ended  October 31, 1996 and 1995 were
$423,812 and $61,774,  respectively.  The cost of sales, product development and
research and development expense increase was primarily attributed to the hiring
of  additional   employees  as  the  Company  prepares  for  production  of  the
Vasotrac(R)  system.  Also,  in August  through  October  1995,  the Company had
consulting  revenues of $111,000 from an unrelated  outside project  relating to
services  performed  on a single  doppler  flowmeter  project.  This  consulting
revenue was netted against cost of sales, product development,  and research and
development  costs.  The consulting  project was performed  pursuant to a single
purchase order and was substantially completed by December 1995.

The Company incurred $126,159 and $938 for sales and marketing  expenses for the
quarter  ended  October 31,  1996 and 1995,  respectively.  Sales and  marketing
expenses  for the six months ended  October 31, 1996 and 1995 were  $199,559 and
$938,  respectively.  The sales and marketing expenses increase was attributable
to the hiring of a Vice President of Sales and additional Sales Associates along
with the development of sales material.

The Company  incurred  $110,847  and  $72,513  for  general  and  administrative
expenses for the quarter ended October 31, 1996 and 1995, respectively.  General
and administrative  expenses for the six-month period ended October 31, 1996 and
1995 were  $219,261  and  $179,368,  respectively.  The  increase in general and
administrative expenses was primarily attributed to increased insurance expenses
associated with increased activities of its operations and the hiring of a Chief
Financial Officer.

Interest  income was $85,862 and $1,956 for the quarter  ended  October 31, 1996
and October 31,  1995,  respectively.  Interest  income for the six months ended
October 31, 1996 and 1995 was  $172,642 and $6,720,  respectively.  The interest
income increase reflects higher cash, cash equivalents,  and short and long-term
investments resulting from the Company's IPO.

Liquidity and Capital Resources

The Company's  cash,  cash  equivalents,  short and long-term  investments  were
$5,947,156 and $6,528,321 at October 31, 1996 and April 30, 1996,  respectively.
The Company  incurred  cash  expenditures  of $590,131  for  operations  for the
quarter ended October 31, 1996.

In November 1995, the Company completed its initial public offering of 1,610,000
shares of Common Stock raising  approximately  $6,900,000 in net proceeds to the
Company.  Prior  to the  initial  public  offering,  the  Company  financed  its
activities  through a series of private  placements  of equity  securities.  The
Company's  Common Stock is quoted on the Nasdaq SmallCap Market under the symbol
"MDWV".

With the proceeds of the initial  public  offering,  the Company  believes  that
sufficient  liquidity  is  available  to satisfy its working  capital  needs for
approximately  two years from October 31, 1996.  The Company has no  significant
capital expenditure commitments.

<PAGE>

                           PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.
   Not applicable.


ITEM 2.  CHANGES IN SECURITIES.
   Not applicable.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.
   Not applicable.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
         a)  On  October  7,  1996  the  Company  held  its  annual  meeting  of
         shareholders.  The Company's  shareholders  elected the following three
         persons as  directors,  each to serve until the next annual  meeting of
         shareholders or until their successor is elected and qualified:

                                    Votes         Votes
    Election of Directors            For         Withheld
------------------------------- -------------- -------------
G. Kent Archibald                 3,821,193       16,130
Norman Dann                       3,819,193       18,130
Jerry E. Robertson                3,819,193       18,130

          b) A proposal to set the number of directors at three was adopted by a
          vote of 3,827,266  shares in favor,  with 2,323 shares against,  7,734
          shares abstaining and no broker non-votes.

          c) The shareholders  approved the Company's Amended and Restated Stock
          Option  Plan by a vote of  2,687,097  shares  in favor,  with  356,860
          shares  against,   29,650  shares   abstaining,   and  764,316  shares
          represented by broker non-votes.



ITEM 5.  OTHER INFORMATION.
   Not applicable.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (A)      EXHIBITS
                  11.  Statement re: computation of per share earnings
                  27.  Financial data schedule (filed in electronic format only)

         (B)      REPORTS ON FORM 8K
                   No reports on Form 8-K were filed by the Company  during
                   the quarter ended October 31, 1996






<PAGE>


                                   SIGNATURES


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



Date:    December 4, 1996             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-QSB

                                FOR QUARTER ENDED
                                OCTOBER 31, 1996




Exhibit No.            Description

11                     Statement re: computation of per share earnings
27                     Financial Data Schedule (filed in electronic format only)