SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)

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

     For the Quarterly Period Ended July 31, 1997; or

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

     For the transition period from ____________ to _____________


Commission File Number:    0-28010

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

 Minnesota                                                  41-1493458
(State or other jurisdiction of                             (IRS employer
incorporation or organization)                          identification number)
                            4382 Round Lake Road West
                          Arden Hills, Minnesota 55112
                    (Address of principal executive offices,
                                    zip code)

                                 (612) 639-1227
                    (Registrant's telephone number, including
                                   area code)

Indicate by mark  whether  the issuer (1) has filed all  reports  required to be
filed by Section 13 or 15(d) of the  Securities  Exchange Act of 1934 during the
preceding 12 months (or for such shorter  period as the  registrant was required
to file such reports) and (2) has been subject to such filing  requirements  for
the past 90 days.
Yes [X]   No [ ]

As of August  30,  1997,  the  issuer  had  4,820,738  shares  of  Common  Stock
outstanding.

<PAGE>

                                  Medwave, Inc.

                                    Form 10-Q

                                      INDEX
                                                                          Page

PART I.  FINANCIAL INFORMATION

 Item 1. Financial Statements

         Balance Sheets - April 30, 1997 and July 31, 1997                   2

         Statements of Operations - Three Months Ended July 31, 1997         3
          and 1996 and Period from June 27, 1984 (Inception) to
          July 31, 1997

         Statements of Cash Flows - Three Months Ended July 31, 1997         4
          and 1996 and Period from June 27, 1984 (Inception) to
          July 31, 1997

         Notes to Financial Statements                                       5

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

 Item 3. Quantitative and Qualitative Disclosures About Market Risk          7

PART II. OTHER INFORMATION

 Item 1. Legal Proceedings                                                   7

 Item 2. Changes in Securities                                               7

 Item 3. Defaults Upon Senior Securities                                     7

 Item 4. Submission of Matters To A Vote of Security Holders                 7

 Item 5. Other Information                                                   8

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

<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements
                                  Medwave, Inc.
                          (A Development Stage Company)
                                 Balance Sheets
<TABLE>
<CAPTION>
                                                                                         April 30,             July 31,
                                                                                           1997                  1997
                                                                                      --------------------------------------
                                                                                       (see note 2)            (unaudited)
<S>                                                                                        <C>                 <C>    

Assets
Current Assets:
      Cash and cash equivalents                                                            $1,240,100          $    156,955
      Short term investments                                                                2,539,905             2,544,438
      Accounts receivable                                                                      41,986               152,975
      Inventories                                                                             114,467               186,150
      Prepaid expenses                                                                         81,182                46,724
                                                                                      --------------------------------------
Total current assets                                                                        4,017,640             3,087,242

Investments                                                                                 1,298,658             1,809,605

Property and equipment:
      Research and development equipment                                                      237,561               230,721
      Office Equipment                                                                        121,193               118,690
      Manufacturing and engineering equipment                                                  68,262                71,582
      Sales and marketing equipment                                                            34,371                39,420
      Leasehold improvements                                                                   31,613                31,613
                                                                                      --------------------------------------
                                                                                              493,000               492,026
      Accumulated depreciation                                                               (336,320)             (336,662)
                                                                                      --------------------------------------
                                                                                              156,680               155,364

Patents, net                                                                                   78,818                72,468
                                                                                      ======================================
Total Assets                                                                               $5,551,796          $  5,124,679
                                                                                      ======================================

Liabilities and shareholders' equity 
Current liabilities:
      Accounts payable                                                                    $    78,390          $    188,154
      Accrued payroll                                                                          50,810                49,605
                                                                                      --------------------------------------
Total current liabilities                                                                     129,200               237,759

Shareholders' equity:
      Common Stock, no par value:
                 Authorized shares--50,000,000
                 Issued and outstanding shares--4,818,738                                  12,764,703            12,764,703
      Unrealized gain/(loss) on investments                                                   (24,919)                2,554
      Deficit accumulated during the development stage                                     (7,317,188)           (7,880,337)
                                                                                      --------------------------------------
Total shareholders' equity                                                                  5,422,596             4,886,920
                                                                                      --------------------------------------

Total liabilities and shareholders' equity                                                 $5,551,796          $  5,124,679
                                                                                      ======================================
</TABLE>


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




<PAGE>

                                  Medwave, Inc.
                          (A Development Stage Company)

                            Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                             Period from
                                                                                                            June 27, 1984
                                                                                                             (Inception)
                                                                  Three months ended July 31                      to
                                                               ---------------------------------
                                                                       1997                1996             July 31, 1997
                                                               ---------------------------------           -----------------
<S>                                                              <C>                   <C>                  <C>   

Revenue:
      Net Sales                                                  $  186,709             None                $       259,651

Operating expenses:
      Cost of sales and product development                         188,836             None                        302,097
      Research and development                                      276,657             176,020                   4,864,389
      Sales and marketing                                           252,528              73,400                     900,805
      General and administrative                                     93,839             108,414                   2,308,329
                                                               ---------------------------------           -----------------
Operating loss                                                     (625,151)           (357,834)                 (8,115,969)

Other income:
      Interest income                                                62,001              86,780                     862,391
                                                               =================================           =================
Net loss                                                          $(563,150)       $   (271,054)            $    (7,253,578)
                                                               =================================           =================

Net loss per share                                                $   (0.12)       $      (0.06)            $         (3.22)
                                                               =================================           =================
Weighted average number of common and
      common equivalent shares outstanding                        4,818,738           4,721,706                   2,251,284
                                                               =================================           =================
</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 July 31          (Inception)     
                                                                            -----------------------------------         to
                                                                                     1997                 1996    July 31, 1997
                                                                            -----------------------------------  -----------------
<S>                                                                          <C>                  <C>             <C>    

Operating activities
Net loss                                                                     $   (563,150)        $   (271,054)   $    (7,253,578)
Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation                                                                 17,730               10,888            494,613
      Amortization                                                                  6,350                9,697             63,549
      Loss on sale of equipment                                                      ---                  ---               7,375
      Issuance of Common Stock for consulting services                               ---                  ---               3,413
      Changes in operating assets and liabilities:
         Accounts receivable                                                     (110,989)                ---            (152,975)
         Inventories                                                              (71,683)             (15,153)          (186,150)
         Prepaid expenses                                                          34,458               51,044            (46,724)
         Accounts payable and accrued expenses                                    109,764              (24,630)           188,154
         Accrued payroll and related taxes                                         (1,205)               3,110             49,605
                                                                            -----------------------------------  -----------------
Net cash used in operating activities                                            (578,725)            (236,098)        (6,832,718)

Investing activities
Patent expenditures                                                                 ---                (27,157)          (137,858)
Purchase of investments                                                          (488,006)          (2,558,229)       (29,355,624)
Sales and maturity of investments                                                   ---              2,499,773         25,005,978
Purchase of property and equipment                                                (16,414)             (39,464)          (672,908)
Proceeds from sale of equipment                                                     ---                   ---              18,200
                                                                            -----------------------------------  -----------------
Net cash used in investing activities                                            (504,420)            (125,077)        (5,142,212)

Financing activities
Net proceeds from issuance of Convertible Preferred Stock                           ---                   ---           4,848,258
Net proceeds from issuance of Common Stock                                          ---                291,009          7,283,627
                                                                            -----------------------------------  -----------------
Net cash provided by financing activities                                           ---                291,009         12,131,885
                                                                            -----------------------------------  -----------------

(Decrease) increase in cash and cash equivalents                               (1,083,145)             (70,166)           156,955
Cash and cash equivalents at beginning of period                                1,240,100              769,121              ---
                                                                            ===================================  =================
Cash and cash equivalents at end of period                                  $     156,955         $     698,955   $       156,955
                                                                            ===================================  =================
</TABLE>

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


<PAGE>

                                  Medwave, Inc.
                          (A Development Stage Company)

                          Notes To Financial Statements

                                  July 31, 1997

1.   Organization and Description of Business

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

2.   Basis of Presentation

     The financial  information  presented as of July 31, 1997 has been prepared
     from the books and records without audit. Financial information as of April
     30, 1997 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, 1997.


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

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

General

The  Company,  which was formed in 1984,  is a  development  stage  company that
currently employs sixteen full-time employees and 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.
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.

The Company has incurred an accumulated deficit of $7,880,337 from its inception
through July 31, 1997. Significant additional losses from development,  testing,
regulatory compliance,  sales, and other expenses are expected to be incurred by
the Company at least until it emerges from the development stage.

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.
<PAGE>
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  conducting  a controlled  market  rollout of the  Vasotrac(R).  This
controlled  market rollout is designed to provide the Company with user feedback
on the  Vasotrac(R).  The Company is using the  feedback  to make minor  product
enhancements  and hopes to be ready for nationwide  sales by April 1998. This is
highly  dependent  on the  development  process  for the  system,  the  scale-up
process, customer acceptance,  and distribution methods that become available to
the Company.  This strategy also pursues limited unit sales to larger healthcare
organizations  for  review  and trial  before any  significant  unit  orders are
considered by the customer.

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  15  additional  persons,
including  one in the area of  general  and  administrative,  eight in sales and
marketing,  two in research  and  development,  and four in  manufacturing.  The
Company   preliminarily   estimates   that   these   employees   will   increase
employee-related  expenses in excess of $900,000  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 $900,000  for  research and  development,  including  amounts
expected to be spent on clinical  trials.  The funds are  expected to be used to
develop  improved sensors and wrist holders and to sustain  engineering  support
for  manufacturing.  No  significant  amount  of  equipment  is  expected  to be
required.  The Company  believes  that the net proceeds of the IPO offering will
allow the  Company  to meet its cash  requirements  for  approximately  eighteen
months from July 31, 1997.  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,   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  ended July 31, 1997 and
1996,  respectively.  The analysis of liquidity and capital  resources  compares
July 31, 1997 to April 30, 1997.

Operating  revenue was $186,709  and $0 for the quarter  ended July 31, 1997 and
1996, respectively. The Company commenced sales during fiscal 1997.

Cost of sales and product  development was $188,836 and $0 for the quarter ended
July 31, 1997 and 1996, respectively.  The Company commenced sales during fiscal
1997.

The Company incurred $276,657 and $176,020 for research and development expenses
for the quarter  ended July 31, 1997 and 1996,  respectively.  The  research and
development expense increase was primarily attributed to conducting a multi-site
clinical study on the accuracy of the Vasotrac(R) system.

The Company incurred  $252,528 and $73,400 for sales and marketing  expenses for
the quarter ended July 31, 1997 and 1996, respectively.  The sales and marketing
expense  increase was  attributable to the hiring of additional sales associates
and an increase in travel expenses as the Company continues the sales rollout of
the Vasotrac(R).

The Company  incurred  $93,839  and  $108,414  for  general  and  administrative
expenses  for the  quarter  ended  July 31,  1997 and  1996,  respectively.  The
decrease in general and  administrative  expenses was  primarily  attributed  to
decreased insurance expenses associated with more favorable liability rates.

Interest  income was $62,001 and $86,780 for the quarter ended July 31, 1997 and
July 31, 1996, respectively. The decrease reflects lower cash, cash equivalents,
and short and long-term investments as the Company increases the cost of rolling
out the Vasotrac(R) system.

Liquidity and Capital Resources

The Company's cash, cash equivalents,  and short-and long-term  investments were
$4,560,998 and $5,078,663 at July 31, 1997 and April 30, 1997, respectively. The
Company  incurred cash  expenditures  of $578,725 for operations for the quarter
ended July 31, 1997.
<PAGE>

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 eighteen months from July 31, 1997. The Company has no significant
capital expenditure commitments.

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

PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS
   Not applicable.

ITEM 2.  CHANGES IN SECURITIES
   Not applicable.

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

Safe Harbor  Statement  under the Private  Securities  Litigation  Reform Act of
1995:  Statements  in this  filing,  and  elsewhere,  which look forward in time
involve  risks  and  uncertainties  which  may  affect  the  actual  results  of
operations. The following important factors, among others, have affected and, in
the  future,  could  affect the  Company's  actual  results:  resistance  to the
acceptance of new  biotechnology  and medical  monitoring  products,  the market
acceptance  of the  Vasotrac(R)  system,  hospital  budgeting  cycles,  and  the
possibility of adverse findings or negative commentary from clinical researchers
or other users of the product.
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (A)  EXHIBITS:  

          EXHIBITS DESCRIPTION 
            11 Statement regarding Computation of Earnings Per Share 
            27 Financial data schedule

     (B)  REPORTS ON FORM 8K:
            No reports on Form 8-K were filed by the Company  during
            the quarter ended July 31, 1997

                                   SIGNATURES


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



Date:    September 12, 1997            Medwave, Inc.


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

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

<PAGE>

                                  EXHIBIT INDEX


                                  MEDWAVE, INC.

                                    FORM 10-Q

                                FOR QUARTER ENDED
                                  JULY 31, 1997


Exhibit No.          Description
-----------          -----------

   11                Statement regarding Computation of Earnings Per Share

   27                Financial Data Schedule (filed in electronic format only)