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 January 31, 1997

[ ]  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  February  28,  1997,  the issuer  had  4,812,333  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 January 31, 1997                2

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

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

         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                   9
Item 5 Other Information                                                     9
Item 6 Exhibits and Reports on Form 8-K                                      9


<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements

                                  Medwave, Inc.
                          (A Development Stage Company)
                                 Balance Sheets
<TABLE>
<CAPTION>


                                                                                         April 30,           January 31,
                                                                                           1996                  1997
                                                                                      --------------------------------------
                                                                                                              (unaudited)
<S>                                                                                       <C>                 <C>    
Assets
Current Assets:
      Cash and cash equivalents                                                           $   769,121          $    175,376
      Short term investments                                                                4,234,080             4,122,026
      Accounts receivable                                                                       -----                 5,323
      Inventories                                                                               8,974               107,116
      Prepaid expenses                                                                        101,171               109,677
                                                                                      --------------------------------------
Total current assets                                                                        5,113,346             4,519,518

Property and equipment:
      Office equipment                                                                        114,088               119,808
      Research and development equipment                                                      261,076               231,412
      Sales and marketing                                                                       -----                27,356
      Manufacturing and engineering equipment                                                  46,312                63,924
      Leasehold improvements                                                                   31,613                31,613
                                                                                      --------------------------------------
                                                                                              453,089               474,113
      Less accumulated depreciation                                                           339,127               319,568
                                                                                      --------------------------------------
                                                                                              113,962               154,545

Patents, net                                                                                   78,776                85,348
Investments                                                                                 1,525,120             1,279,630
                                                                                      ======================================
Total Assets                                                                               $6,831,204          $  6,039,041
                                                                                      ======================================

Liabilities and shareholders' equity 
Current liabilities:
      Accounts payable and accrued expenses                                               $    83,607         $      43,756
      Accrued payroll and related taxes                                                        28,697                42,064
                                                                                      --------------------------------------
Total current liabilities                                                                     112,304                85,820

Shareholders' equity:
      Common Stock, no par value:
         Authorized  shares--50,000,000 at April 30, 1996 and at January
         31, 1997 
         Issued and outstanding shares--4,690,560 at April 30,
         1996 and 4,812,333 at January 31, 1997                                            12,458,866            12,752,726
Unrealized loss on investments                                                                (33,245)               (6,390)
Deficit accumulated during the development stage                                           (5,706,721)           (6,793,115)
                                                                                      --------------------------------------
Total shareholders' equity                                                                  6,718,900             5,953,221
                                                                                      --------------------------------------
Total liabilities and shareholders' equity                                                 $6,831,204          $  6,039,041
                                                                                      ======================================

</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 January 31         Nine months ended January 31         to
                                            -----------------------------         ----------------------------            
                                                  1996            1997            1996                   1997     January 31, 1997
                                            -----------------------------         ----------------------------    ----------------
<S>                                            <C>            <C>               <C>                <C>             <C>        

Revenue:
  Net sales                                             -     $   20,481                 -         $     25,476    $   25,476

Operating expenses:
  Cost of sales, product  development, and     $  136,502         242,902       $  198,276              666,714     4,438,346
      research and development
  Sales and marketing                              24,990         136,669           25,928              336,228       428,617
  General and administrative                       99,060         139,129          278,468              358,390     2,043,051
                                               ----------     -----------    -------------         ------------     ---------
                                                  260,552         518,700          502,672            1,361,332     6,910,014
                                               ----------     -----------    -------------         ------------     ---------
Operating loss                                   (260,552)       (498,219)        (502,672)          (1,335,856)   (6,884,538)

Other income:
  Interest income                                  67,254          76,818           73,974              249,460       718,180
                                               ==========     ===========    =============         ============     =========
Net loss                                       $ (193,298)      $(421,401)       $(428,698)         $(1,086,396)  $(6,166,358)
                                               ==========     ===========    =============         ============     =========

Net loss per share                             $    (0.05)      $   (0.09)    $      (0.25)         $     (0.23)  $     (2.87)
                                               ===========    ===========    =============          ===========    ==========
Weighted average number of common and
  common equivalent shares outstanding          4,242,166       4,811,034        1,741,798            4,780,629     2,150,338
                                               ==========     ===========    =============          ===========     =========

</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
                                                                                                                       (Inception)
                                                       Three months ended January 31   Nine months ended January 31         to
                                                       -----------------------------   ----------------------------
                                                              1996           1997             1996          1997    January 31, 1997
                                                       -----------------------------   ---------------------------- ----------------
<S>                                                         <C>             <C>            <C>           <C>           <C>   

Operating activities
Net loss                                                  $  (193,298)    $   (421,401)  $  (428,660)  $(1,086,396)  $ (6,166,358)
Adjustments to reconcile net loss to net cash used 
in operating activities:
      Depreciation                                             12,921           12,713        34,715        29,229        446,864
      Amortization                                              3,638            6,530        10,914        23,481         50,669
      Loss on sale of equipment                                   ---              ---           ---           ---          7,375
      Issuance of Common Stock for consulting services            ---              ---           ---           ---          3,413
      Changes in operating assets and liabilities:
         Accounts receivable                                      ---             (328)          ---        (5,323)        (5,323)
         Other receivable                                         ---              ---       (51,530)          ---            ---
         Inventories                                             (458)          18,278          (614)      (98,142)      (107,116)
         Prepaid expenses                                     (97,521)          32,156       (99,094)       (8,506)      (109,677)
         Accounts payable and accrued expenses                (44,729)           5,074        (9,073)      (39,850)        43,757
         Accrued payroll and related taxes                        ---            1,067        (7,314)       13,367         42,064
                                                         -------------  --------------- ------------- ------------- --------------
Net cash used in operating activities                        (319,447)        (345,911)     (550,656)   (1,172,140)    (5,794,332)

Investing activities
Patent expenditures                                            (8,782)             ---       (17,066)      (27,157)      (136,017)
Purchase of investments                                       (18,736)      (6,046,921)      (18,736)  (11,262,975)   (31,215,740)
Sales and maturity of investments                                 ---        6,419,501           ---    11,660,978     25,821,297
Purchase of property and equipment                                ---          (27,660)          ---       (86,310)      (637,939)
Proceeds from sale of equipment                                   ---              ---           ---           ---         18,200
                                                         -------------  --------------- ------------- ------------- --------------
Net cash provided by (used in) investing activities           (27,518)         344,920       (35,802)      284,536     (6,150,199)

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                  6,927,379            2,850     7,019,655       293,859     12,119,907
                                                         -------------  --------------- ------------- ------------- --------------
Net cash provided by financing activities                   6,927,379            2,850     7,019,655       293,859     12,119,907
                                                         -------------  --------------- ------------- ------------- --------------

(Decrease) increase in cash and cash equivalents            6,580,414            1,859     6,433,197      (593,745)       175,376
Cash and cash equivalents at beginning of period              179,858          173,517       327,073       769,121            ---
                                                         =============  =============== ============= ============= ==============
Cash and cash equivalents at end of period                $ 6,760,272    $     175,376   $ 6,760,270   $   175,376   $     175,376
                                                         =============  =============== ============= ============= ==============
</TABLE>


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




<PAGE>

                                  Medwave, Inc.
                          (A Development Stage Company)

                          Notes To Financial Statements

                                January 31, 1997


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  January  31,  1997  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 nine months ended  January 31, 1997 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.


<PAGE>


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 sixteen full-time employees and one part-time employee.  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.

The Company is not presently  generating any significant revenue from operations
and has incurred an accumulated deficit of $6,793,115 from its inception through
January 31,  1997.  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 is  currently  focusing  its sales  efforts on the
operating/surgery  room.  In addition,  the Company is focusing on the Emergency
and Trauma  Centers  because of the need for these  centers to be able to record
low blood pressure.  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.

The Company hired two  additional  sales  representatives  at the end of January
1997 to bring the sales force up to four individuals.  In addition,  the Company
hired a Clinical Coordinator in January to help coordinate the clinical testing.

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.

<PAGE>


The  Company  estimates  that  within the next  twelve  months,  it may  require
approximately  12 additional  persons,  including one in the area of general and
administrative,  seven in sales and marketing,  one in research and development,
and three in  manufacturing.  The  Company  preliminarily  estimates  that these
employees will increase  employee-related  expenses in excess of $860,000 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 1-1/2 - 2 years from the
end of the third quarter (January 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,  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.

Results of Operations

The  results of  operations  compares  the three  months and nine  months  ended
January 31, 1997 and 1996,  respectively.  The analysis of liquidity and capital
resources compares January 31, 1997 to April 30, 1996.

The Company had sales of $20,481 and $0 for the quarter  ended  January 31, 1997
and 1996,  respectively.  Sales for the nine months  ended  January 31, 1997 and
1996 were $25,476 and $0, respectively.  The Company delivered its first unit in
September and did not ship additional  units until December  because the Company
re-designed the software to make the user interface more intuitive.

The  Company  incurred  $242,902  and  $136,502  for  cost  of  sales,   product
development, and research and development expenses for the quarter ended January
31, 1997 and 1996, respectively. Cost of sales, product development and research
and  development  costs for the nine months ended January 31, 1997 and 1996 were
$666,714 and $198,276,  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 produces 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  $136,669 and $24,990 for sales and marketing  expenses for
the quarter ended January 31, 1997 and 1996,  respectively.  Sales and marketing
expenses for the nine months ended  January 31, 1997 and 1996 were  $336,228 and
$25,928,   respectively.   The  sales  and  marketing   expenses   increase  was
attributable  to the hiring of a Vice  President of Sales and  additional  sales
representatives.
<PAGE>

The Company incurred $139,129 and 99,060 for general and administrative expenses
for the  quarter  ended  January 31,  1997 and 1996,  respectively.  General and
administrative  expenses for the nine month  period  ended  January 31, 1997 and
1996 were  $358,390  and  $278,468,  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 $76,818 and $67,254 for the quarter  ended January 31, 1997
and January 31, 1996,  respectively.  Interest  income for the nine months ended
January 31, 1997 and 1996 was $249,458 and $73,974,  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
$5,577,032 and $6,528,321 at January 31, 1997 and April 30, 1996,  respectively.
The Company  incurred  cash  expenditures  of $345,911  for  operations  for the
quarter ended January 31, 1997 and  $1,172,140 for the nine months ended January
31, 1997.

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  1-1/2 - 2 years from the end of the third  quarter  (January  31,
1997). The Company has no significant capital expenditure commitments.



                           PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.
   Not applicable.


ITEM 2.  CHANGES IN SECURITIES.
   On November 7, 1996,  the  Registrant  sold 2,000  shares of Common Stock for
   cash  consideration  of $1,500 and on December 30, 1996, the Registrant  sold
   1,800 shares of Common Stock for cash  consideration  of $1,350.  Such shares
   were sold to two employees of the Registrant  upon exercise of option granted
   under  the  Registrant's  Stock  Option  Plan.  No  commissions  were paid in
   connection with such sales. In such transactions,  the Registrant relied upon
   Rule 701 under the  Securities  Act of 1933 (the "Act") for an exemption from
   registration  under the Act. Such options were granted  pursuant to a written
   plan,  prior  to the date on  which  the  Registrant  became  subject  to the
   reporting  requirements of the Securities Exchange Act of 1934, a copy of the
   plan was provided to each purchaser and the amount of securities  offered and
   sold in reliance  upon Rule 701 did not exceed the amounts  permitted by such
   Rule.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.
   Not applicable.

<PAGE>


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

ITEM 5.  OTHER INFORMATION.
   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 January 31, 1997



<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:    March 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-QSB

                                FOR QUARTER ENDED
                                JANUARY 31, 1997



Exhibit No.          Description

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