<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               Amendment No. 2 to
                                    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 December 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 January 31, 2005 the issuer had 10,072,666 shares of Common Stock
outstanding.



<PAGE>


                                INTRODUCTORY NOTE

This Amendment No. 2 to Form 10-Q is being filed to amend the Form 10-Q for
Medwave, Inc. filed with the Securities and Exchange Commission on February 4,
2005. The financial statements included in a quarterly report on Form 10-Q must
be reviewed by an independent public accountant in accordance with SAS 100. The
SAS 100 review of the financial statements included in Medwave's Form 10-Q filed
on February 4, 2005 was not completed at the time the 10-Q was filed. The SAS
100 review of Medwave's financial statements was completed on February 21, 2005.
The changes made to the financial statements as a result of the SAS 100 review
are discussed below and are included in this Amendment No. 2 to Form 10-Q.

      1.    The Statements of Operations for 2003 has been restated to reflect
            the reclassification of departmental expenses in order to match
            current year reporting, which contains a classification of
            departmental expenses. This change had no impact on the 2003
            Operating Loss. The 2004 interest income was increased by $2, which
            decreased the reported net loss similarly, from $866,602 to
            $866,660.

      2.    The Statements of Cash Flows reflects a $703 decrease in
            depreciation and amortization with an offset increase in accounts
            payable due to depreciation calculations, again with no change in
            the net cash used in operating activities. The following items have
            been adjusted (not exceeding $3): net loss, inventories, prepaid
            expenses, accrued expenses, and purchase of property and equipment.
            This resulted in the recalculation of net cash used in operating and
            investing activities (not exceeding $3). The cash and cash
            equivalents have been adjusted to reflect the beginning and ending
            period of $4,793,326 and $3,977,015 respectively. Previously,
            Medwave had reported cash and cash equivalents on an accumulative
            basis for the period.

      3.    In Note #3 to the Unaudited Financial Statements, the last line of
            the first paragraph previously stated: "The Company has not incurred
            a material impact due to this new standard." This line has been
            restated as: "The Company has not yet assessed the impact of
            adopting this new standard."

      4.    In Note #4 to the Unaudited Financial Statements, the 2003 number of
            shares was added to the existing line for clarity.

      5.    Note #5 to the Unaudited Financial Statements was added to explain
            the reclassification of the 2003 Statement of Operations expenses.

      6.    In Item 2, Management's Discussion and Analysis of Financial
            Condition and Results of Operations, the third paragraph under
            Results from Operations pertaining to the cost of sales and
            production was expanded to include an explanation on the change in
            gross margin from December 31, 2004 to December 31, 2003. Due to
            rounding, the fourth paragraph was changed to show that the increase
            in research and development from $98,600 to $147,400 was an increase
            of 49%, not 50%, as originally reported. Also, the interest income
            was increased by $3 as noted on the Statements of Operations.

      7.    The table displaying the pro forma disclosure for Stock-Based
            Compensation reflected the net loss adjustment of $2, from $866,602
            to $866,600 with no impact on the reported per share amounts for
            basic and diluted loss per share.

      8.    Under Controls and Procedures a third paragraph was added to
            disclose the identified weakness of the lack of a full time Chief
            Financial Officer, which was noted in the Company's Annual Report on
            Form 10-K as filed on January 12, 2005.

All other information in this Amendment No. 2 to Form 10-Q is the same as the
information in the Form 10-Q filed on February 4, 2005.

<PAGE>
                                  Medwave, Inc.
                               Amendment No. 2 to
                                    Form 10-Q

                                      INDEX

<Table>
<Caption>
                                                                               Page
                                                                              ------
<S>                                                                           <C>
PART I.  FINANCIAL INFORMATION

  Item 1. Financial Statements                                                     2

               Balance Sheets - September 30, 2004 and December 31, 2004           2

               Statements of Operations - Three Months Ended December 31,          3
                  2004 and 2003

               Statements of Cash Flows - Three Months Ended December 31,          4
                  2004 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              13

  Item 4. Controls and Procedures                                                 13

PART II. OTHER INFORMATION

  Item 1. Legal Proceedings                                                       14

  Item 2. Unregistered Sales of Equity Securities And Use Of Proceeds             14

  Item 3. Defaults Upon Senior Securities                                         14

  Item 4. Submission of Matters To A Vote of Security Holders                     14

  Item 5. Other Information                                                       14

  Item 6. Exhibits                                                                14

Signatures                                                                        15

Exhibits                                                                       16-17
</Table>



                                       1
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                  Medwave, Inc.

                                 Balance Sheets
                                   (Unaudited)



<Table>
<Caption>
                                                     DECEMBER 31       SEPTEMBER 30
                                                         2004              2004
                                                     ------------      ------------
<S>                                                  <C>               <C>
ASSETS
Current assets:
      Cash and cash equivalents                      $  3,977,015      $  4,793,326
      Accounts receivable, net                            155,814           176,503
      Inventories, net                                    324,159           393,039
      Prepaid expenses                                    108,956            62,351
                                                     ------------      ------------
Total current assets                                    4,565,944         5,425,219
                                                     ------------      ------------


Property and equipment:
      Research and development equipment                   33,536            31,535
      Office equipment                                    117,089           114,174
      Manufacturing and engineering equipment             286,931           285,937
      Sales and marketing equipment                       113,857           113,482
      Leasehold improvements                               41,913            41,913
      Demonstration equipment                              22,897             6,257
                                                     ------------      ------------
                                                          616,223           593,298
      Accumulated depreciation and amortization          (444,179)         (434,798)
                                                     ------------      ------------
Total net property and equipment                          172,044           158,500
                                                     ------------      ------------


Patents, net                                                1,917             1,917
                                                     ------------      ------------
Total assets                                         $  4,739,905      $  5,585,636
                                                     ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                               $    400,030      $    342,879
      Accrued expenses                                     68,779           113,851
      Deferred revenue                                     68,987            60,197
                                                     ------------      ------------
Total current liabilities                                 537,796           516,927
                                                     ------------      ------------

Stockholders' equity:
      Common stock, .01 par value:
                 Authorized shares--50,000,000
                 Issued and outstanding shares-
                 December 31, 2004 - 10,058,916
                 September 30, 2004 - 10,058,916          100,589           100,589
      Additional paid in capital                       29,350,188        29,350,188
      Accumulated deficit                             (25,248,668)      (24,382,068)
                                                     ------------      ------------
Total stockholders' equity                              4,202,109         5,068,709
                                                     ------------      ------------

Total liabilities and stockholders' equity           $  4,739,905      $  5,585,636
                                                     ============      ============
</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 December 31,
                                                                   -------------------------------
                                                                       2004              2003
                                                                   ------------      ------------
<S>                                                                <C>               <C>
Revenue:
      Net Sales                                                    $    301,991      $    224,927

Operating expenses:
      Cost of sales and production                                      285,683            97,810
      Research and development                                          147,392            98,554
      Sales                                                             384,916           234,771
      General and administrative                                        159,955           165,422
      Finance                                                            34,583            28,063
      Business development                                               28,618            21,416
      Marketing                                                          76,507            66,860
      Clinical education and support                                     66,402            57,094
                                                                   ------------      ------------
Operating loss                                                         (882,065)         (545,063)

Other income(expense):
      Interest income                                                    15,465             2,000
      Loss on disposal of equipment                                          --           (25,302)
                                                                   ------------      ------------
Net loss                                                           $   (866,600)     $   (568,365)
                                                                   ============      ============

Net loss per share - Basic and diluted                             $      (0.09)     $      (0.06)
                                                                   ============      ============
Weighted average number of common and
      common equivalent shares outstanding - basic and diluted       10,058,916         8,762,707
                                                                   ============      ============
</Table>

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





                                       3
<PAGE>

                                  Medwave, Inc.

                            Statements of Cash Flows
                                   (Unaudited)

<Table>
<Caption>
                                                                               Three months ended December 31,
                                                                               -------------------------------
                                                                                    2004              2003
                                                                                ------------      ------------
<S>                                                                             <C>               <C>
OPERATING ACTIVITIES
Net loss                                                                        $   (866,600)     $   (568,365)
Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization                                                    9,381             7,777
      Loss on disposal of equipment                                                       --            25,302
      Changes in operating assets and liabilities:
         Accounts receivable                                                          20,689           (52,004)
         Inventories                                                                  68,880           (51,893)
         Prepaid expenses                                                            (46,605)          (74,800)
         Accounts payable                                                             57,151           (43,822)
         Accrued expenses                                                            (45,072)            7,725
         Deferred revenue                                                              8,790             9,154
                                                                                ------------      ------------
Net cash used in operating activities                                               (793,386)         (740,926)
                                                                                ------------      ------------

INVESTING ACTIVITIES
Purchase of patent                                                                        --            (1,462)
Purchase of property and equipment                                                   (22,925)          (32,624)
                                                                                ------------      ------------
Net cash used in investing activities                                                (22,925)          (34,086)
                                                                                ------------      ------------

FINANCING ACTIVITIES
Proceeds from issuance of common stock                                                    --            16,995
                                                                                ------------      ------------
Cash provided by financing activities                                                     --            16,995
                                                                                ------------      ------------

Decrease in cash and cash equivalents                                               (816,311)         (758,017)
Cash and cash equivalents at beginning of period                                   4,793,326         1,694,648
                                                                                ------------      ------------
Cash and cash equivalents at end of period                                      $  3,977,015      $    936,631
                                                                                ============      ============
</Table>


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




                                       4
<PAGE>

                                  Medwave, Inc.

                     Notes To Unaudited Financial Statements

                                December 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 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 September 30, 2004.


2.    STOCKHOLDERS' EQUITY

      A summary of changes in stockholders' equity for the three months ended
      December 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, 2004           10,058,916     $    100,589     $ 29,350,188     $(24,382,068)     $  5,068,709
Exercise of Stock Options/Warrant               --               --               --               --                --
Net Loss                                        --               --               --         (866,600)         (866,600)
                                      ------------     ------------     ------------     ------------      ------------
Balance at December 31, 2004            10,058,916     $    100,589     $ 29,350,188     $(25,248,668)     $  4,202,109
                                      ============     ============     ============     ============      ============
</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 November 2004, the FASB issued SFAS No. 151, Inventory Costs, an
      amendment of ARB No. 43, Chapter 4. SFAS No. 151 amends the guidance in
      ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for
      abnormal amounts of idle facility expense, freight, handing costs, and
      spoilage. This statement requires that those items be recognized as
      current period charges regardless of whether they meet the criterion of
      "so abnormal" which was the criterion specified in ARB No. 43. In
      addition, this Statement requires that allocation of fixed production
      overheads to the cost of production be based on normal capacity of the
      production facilities. This pronouncement is effective for the Company
      beginning October 1, 2005. The Company has not yet assessed the impact of
      adopting this new standard.

      In December 2004, the FASB issued SFAS No. 123 (revised 2004). Share-Based
      Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based
      Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting
      for Stock Issued to Employees and amends SFAS No. 95, Statement of Cash
      Flows. Generally, the approach in SFAS No. 123(R) is similar to the
      approach described in SFAS No. 123. However, SFAS No. 123(R) requires all
      share-based payments to employees, including grants of employee stock
      options, to be recognized in the income statement based on their fair
      values. Pro forma disclosure is no longer an alternative. The new standard
      will be effective for the Company in the first interim or annual reporting
      period beginning after December 15, 2005. The Company expects the adoption
      of this standard will have a material impact on its financial statements.


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 3,184,950 and
      3,319,950 as of December 31, 2004 and 2003, respectively.

5.    RECLASSIFICATIONS

      Certain reclassifications have been made to the Statement of Operations
      for the three months ended December 31, 2003 to conform to the
      presentation in the December 31, 2004 Statement of Operations.


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 Medwave Inc., or 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, have
affected


                                       6
<PAGE>

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, the magnitude of orders
under the Company's agreement with Zoll Medical, our ability to enter into
agreements, delays in product development or enhancement or regulatory approval,
and other factors detailed from time to time in the Company's reports filed with
the SEC, including those set forth under the caption "Risk Factors" in the
Company's Annual Report on Form 10-K filed on January 12, 2005. Consequently, no
forward-looking statement can be guaranteed and actual results may vary
materially. 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
period ended December 31, 2004 and 2003. This discussion should be read in
conjunction with the financial statements and other financial information
included in our September 30, 2004 Annual Report on Form 10-K filed with the
SEC.

OVERVIEW

Operating revenue was $301,991 and $224,927 for the three-month periods ended
December 31, 2004 and 2003, respectively, an increase of 34%. Revenue from the
North American market was approximately $242,517 and $164,387 for the
three-month periods ended December 31, 2004 and 2003, respectively, representing
an increase of 48%. Revenue generated from patient sensors increased 125% to
$73,624 for the three-month period ended December 31, 2004 compared to $32,672
for the three-month period ended December 31, 2003. Revenue from international
markets remained consistent.

We recently announced the signing of an OEM agreement with ZOLL Medical
Corporation. ZOLL Medical is a leader in cardiac resuscitation devices and an
innovator in their field. We anticipate that we will begin to ship products to
fulfill this agreement in the quarters ahead.

During September 2004, we signed a Joint Investigation Agreement with a global
electronics company. We have been working with this company since that time to
implement and achieve specific milestones that are called out in the agreement.

We continue to place a tremendous amount of management time and focus on other
potential OEM agreements, distribution and sales channel expansion
possibilities. The number of non-disclosure agreements that we have signed with
other companies has increased, as has the scope of the discussions, as we pursue
alternate avenues for Medwave to supply products and technology, including
licensing, distribution, private labeling, and co-development opportunities. We
believe that these agreements with other organizations may provide a significant
possibility to sell large volumes of our technology, as well as complement our
direct sales force's activities by further validating our technology in the
market, across multiple market segments.

We continue to add new sales professionals to our United States sales force. We
have recently hired two Alternate Care Sales Professionals, who will focus on
selling and marketing our technology to physicians offices, outpatient centers,
EMS/EMT organizations, and other non-hospital settings. Blood pressure is the
one vital sign that is measured in virtually every healthcare setting, and we
believe that our technology has application in most, if not all, of these
environments. We believe that with the numerous product validation studies, both
formal and anecdotal, the recent signing of 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 continuing to invest in additional sales professionals to
increase our market penetration and revenue generating capabilities. We have
been recruiting higher level sales professionals in our hospital sales force,
and have recently hired several very seasoned sales professionals from companies
in the medical device industry who have tremendous


                                       7
<PAGE>

experience in selling into healthcare systems and selling complex medical
technology. Several of these individuals have experience selling into multiple
departments within the hospital market and selling into very competitive market
segments.

The success of our sales force in penetrating and ultimately changing the way
blood pressure monitoring is accomplished is highlighted by two recent accounts
of hospitals converting at least a portion of their automatic blood pressure
cuff technology to Medwave's technology. SwedishAmerican Hospital purchased
several Medwave Vasotrac monitors for their general floor and bariatric patient
environments. Medwave, in conjunction with SwedishAmerican Hospital, issued
press releases regarding the hospital's purchase of Medwave's "State-of-the-Art
Technology" for their patients. As a result, local news stations in Rockford,
Illinois picked up coverage of the story, and profiled the Vasotrac in their
news story. In addition, we recently announced a purchase agreement that Medwave
entered into with Arkansas Children's Hospital in Little Rock, Arkansas. This
agreement called for the complete standardization of the pediatric intensive
care unit at this award winning hospital. Each PICU bed will have the Vasotrac
technology to monitor the patients in this care unit. In addition, several
additional departments purchased Vasotrac monitors for their care areas. We
anticipate that these agreements, and others like them, will help drive sales
volume in the quarters ahead.

We continue to hear favorable results from clinical studies, which have been
ongoing for the past few years. Several of these studies are scheduled to be
published in prominent medical journals in the next several months, highlighting
the excellent performance of Medwave's technology in a variety of healthcare
settings, and some of these are considered the most challenging of environments
for measuring vital signs, and specifically blood pressure. A study titled
"Intraoperative Blood Pressure Measurement on the Wrist is more Accurate than on
the Upper Arm in Morbidly Obese Patients" was presented by Dr. Helmut Hager of
Washington University Hospital and School of Medicine in conjunction with the
American Society of Anesthesiology Meeting, held in Las Vegas, Nevada, October
24-26, 2004. Dr. Hager also presented the results of this study during the Post
Graduate Assembly Anesthesia Meeting, held in New York City during December
2004. In summary, the results of this study showed that an automatic blood
pressure cuff correlated to the "Gold Standard" arterial catheter with a factor
of 0.32, while the Vasotrac correlated with a factor of 0.81. In conclusion, the
authors stated that "Patients reported significantly better comfort with
Vasotrac. The Vasotrac is a valuable tool for monitoring of morbidly obese
patients without the possible negative side effects of the arterial canula
(catheter)."

GENERAL

As of December 31, 2004, Medwave employed 31 full-time employees and three
part-time employees. Of the 31 full-time employees, 14 are in sales and field
support, one is in international sales and product marketing, one is in finance,
one is in business development/product marketing, 13 are research &
development/manufacturing/technical support/quality assurance, and one is
President and Chief Executive Officer. Of the three part-time employees, two are
in finance and one is in administrative support/human resources. In the quarters
ahead, we intend to hire a business development executive and additional direct
sales professionals in our continuing effort to penetrate both the U.S. hospital
market as well as the pre and post hospital market. In addition, we will most
likely need to hire additional engineering and support staff to successfully
introduce new products as well as optimize our OEM agreements. 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


                                       8
<PAGE>

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.

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. Recently, reports have been
published, exploiting challenges with conventional blood pressure cuff
technology. The cuff has been reported to have difficulty monitoring people with
fairly large or small arms as well as people with relatively high or low blood
pressure and people who may be in motion or have tremors. Medwave is confident
that its blood pressure monitoring technology will overcome these traditional
challenges, and as a result, continues to work on products that will allow for
broader market penetration, eventually including the personal monitoring
markets. In the near future, Medwave believes that it will have products that
address the pre and post hospital market, additional OEM business opportunities,
and the consumer blood pressure market. It is estimated that approximately 65
million people in the United States are considered hypertensive. This number has
increased approximately 30% over the past decade. In addition, another study
conducted by researchers from Tulane University that was recently published
estimates that by the year 2025, almost 1 billion people in the world population
will be hypertensive. We believe that with the clinical validation, which has
been and continues to be accomplished regarding our technology, the acceptance
of our technology in some of the most prestigious medical centers in the United
States, and our ability to incorporate our technology into handheld devices, we
will have the potential to compete for the very large and growing personal-use
market for blood pressure monitoring.

Medwave Inc. develops, manufactures, and distributes non-invasive blood pressure
products. Its Vasotrax(R) Hand Held Monitor, the Vasotrac(R) APM205A NIBP
Monitor, the Vasotrac DS APM205A 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 2004, Medwave signed a Joint Investigation Agreement with a global
electronics company. The purpose of this agreement is to explore potential areas
where the companies' could work together to examine the possibility of new
products. We have been working on the implementation of this agreement over the
past several months.

In June 2004, Medwave signed an OEM Supplier Agreement with ZOLL Medical
Corporation. ZOLL Medical is a market leader in cardiac resuscitation. In the
months ahead, Medwave expects to begin shipping products as a part of this
agreement. In September 2003, Medwave signed an agreement with Novation, the
leading supply chain management company in healthcare, to offer its sensor-based
blood pressure measurement solutions to the more than 2,300 healthcare
organizations that purchase supplies through Novation. This 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


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<PAGE>

products in Novation's Technology Pavilion 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
in a variety of clinical environments, such as the operating room, cardiology,
recovery, and in their international medical efforts as well.

SwedishAmerican Hospital in Rockford, Illinois recently purchased several
Vasotrac monitors for its care areas where a blood pressure cuff was not
performing adequately. Also, during December 2004, Arkansas Children's Hospital
purchased numerous Vasotrac monitors and disposable sensors. The pediatric
intensive care unit at Arkansas Children's now has a Vasotrac located at each
bed, and the Vasotrac monitors are interfaced into the existing bedside
monitoring systems. Other patient care areas in the hospital that replaced
traditional non-invasive blood pressure cuff technology include the day surgery
center, neurological ICU, and the general medicine area. This purchase occurred
after an extensive multi-department evaluation took place and a multi-question
evaluation survey was completed by more than 50 clinicians. The Vasotrac
technology scored between 4 and 5 out of a total possible rating of 5 in every
category.

We have continued to focus on building our direct sales organization. As of
December 31, 2004, we employed fourteen hospital-based sales/clinical support
specialists and one marketing/international sales manager. Over the next few
months, we plan to hire additional hospital and alternative care sales
professionals to expand our reach into the U.S. market.

RESULTS OF OPERATIONS

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

Operating revenue was $302,000 and $224,900 for the quarters ended December 31,
2004 and 2003, respectively, an increase of 34%. This increase is due to growth
in the Disposable and Service markets. The increased revenue in the Service
market results from an agreement with the global electronics company previously
mentioned.

Cost of sales and production was $285,700 and $97,800 for the quarters ended
December 31, 2004 and 2003, respectively, an increase of 192%. This increase is
due in part to an additional $40,100 in expenses associated with adding three
employees to our manufacturing operations. The implementation of the new
accounting system updates inventory automatically offsetting the need for
quarterly adjustments, which accounted for a $63,500 reduction to COGS in
December 31, 2003. The gross margin is 5% for December 31, 2004 and 56% for
December 31, 2003. The change is due to the inventory adjustment taken in
December 2003 having a favorable impact on the reporting for that period and the
2004 increased salary / related expenses for quality and OEM lines.

We incurred $147,400 and $98,600 for research and development expenses for the
quarters ended December 31, 2004 and 2003, respectively, an increase of 49%.
This increased cost was in support of new product development. Legal and
consulting charges associated with patents are approximately $36,000 higher
compared to last year, because of our continued commitment to the development
and protection of our innovative ideas and products.

We incurred $527,800 as of the quarter ended December 31, 2004 for expenses from
the combination of the sales department and the addition of two new departments,
marketing and clinical education support. When compared to $358,700 for quarter
ended December 31, 2003, this was an increase of 47%. Since December 31, 2003,
we have been building our workforce to align with the growth of a developing


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<PAGE>

company. The addition of 5 employees in this area (3 in sales and 2 in clinical
education) substantially increased such items as salaries, benefits, travel,
telephone and supplies.

We incurred $223,200 as of the quarter ended December 31, 2004 for expenses from
the combination of the general administration department and the addition of two
new departments, finance and business development. When compared to $214,900 for
quarter ended December 31, 2003, this was an increase of 4%.

Interest income was $15,465 and $2,000 for the quarters ended December 31, 2004
and 2003, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents were $3,977,000 and $4,793,300 at December 31,
2004 and September 30, 2004. With the cash and cash equivalents of approximately
$3,977,000, we believe that sufficient liquidity is available to satisfy our
working capital needs through at least December 31, 2005.

Beginning in January, 2004, we began the process of upgrading our accounting
software. 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 facilitate the smooth and concurrent processing of all of our
business functions. Total cost to date is approximately $40,000 for the software
up-grade, implementation, and training, and approximately $5,000 for hardware.
We expect to spend an additional $25,000 to complete the project and to possibly
add more functionality.

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 $793,400 for the quarter ended
December 31, 2004 from $740,900 for the quarter ended December 31, 2003, an
increase of $52,500. 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 three-month period ended December 31, 2004
included an increase in prepaids and accounts payable with decreases in accounts
receivable and inventory. The use of cash in operations for the three-month
period ended December 31, 2003 included increases in accounts receivable,
inventory and prepaids as well as a decrease in accounts payable.

Cash flows used in investing activities decreased to $22,900 for the three
months ended December 31, 2004 from $34,100 for the three months ended December
31, 2003. This decrease reflects our effort to maintain cash reserve.

There were no financing activities for the quarter ended December 31, 2004.
Financing activities provided $16,995 from the exercise of stock options for the
quarter ended December 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 under the following
caption "Contractual Obligations" shows the amount of our operating lease
payments by year.



                                       11
<PAGE>

CONTRACTUAL OBLIGATIONS

The following summarizes our contractual obligations at December 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.........     $271,462      $112,864      $158,598
</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 2003 options was estimated at the date of grant using the
Black-Scholes option pricing model with the following assumptions: risk-free
interest rates of 5.60% for the periods ended December 31, 2003; dividend yield
of 0%; volatility factor of the expected market price of the Company's common
stock of .64, and a weighted average expected life of the option of five years.

The Company granted options to purchase 0 shares and 48,000 shares during the
three-month periods ended December 31, 2004 and 2003 respectively.



                                       12
<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 December 31,
                                                       -------------------------------
                                                            2004              2003
                                                        ------------      ------------
<S>                                                     <C>               <C>
Net loss as reported                                    $   (866,600)     $   (568,365)
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               --          (202,968)
                                                        ------------      ------------
Pro forma net loss                                      $   (866,600)     $   (771,333)
                                                        ============      ============
Basis and diluted loss per share
  As reported                                                  (0.09)            (0.06)
  Pro forma                                                    (0.09)            (0.09)
</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
December 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 December 31, 2004 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

In connection with their audit for the year ended September 30, 2004, BDO
Seidman, LLP, our independent registered public accounting firm, advised
management and our Audit Committee of the


                                       13
<PAGE>

following significant deficiencies which did not individually or in the
aggregate raise to the level of material weakness: The company lacks a full-time
Chief Financial Officer to ensure consistently timely reporting of financial
information. We are currently in the process of recruiting a Chief Financial
Officer to ensure consistently timely reporting of financial information. We
believe this effort will address the conditions raised by BDO Seidman, LLP.


PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS
Not applicable.


ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company did not repurchase any equity securities in the period covered by
this report.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not applicable.


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

Not applicable.


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

    (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>





                                       14
<PAGE>

                                   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: February 22, 2005              Medwave, Inc.


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



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