<PAGE>

                                 UNITED STATES 
                       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 June 30, 1997 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 0-27214

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

               Delaware                              94-3197941
   --------------------------------             -------------------
   (State or other jurisdiction of               (I.R.S. Employer 
    incorporation or organization)              Identification No.)

                  235 Constitution Drive, Menlo Park, CA 94025
          -----------------------------------------------------------
          (Address of principal executive offices, including zip code)

       Registrant's telephone number, including area code:  (415) 614-2500

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 that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days.

                               Yes [ X ]    No [    ]

The number of shares of Common Stock outstanding as of July 31, 1997 was
8,295,693.



<PAGE>

                                  TABLE OF CONTENTS

                                                                          Page

Part I.  Financial Information

         Item 1.  Financial Statements

                  Condensed Balance Sheets at June 30, 1997 
                  and December 31, 1996                                     3

                  Statements of Operations for the three and six months 
                  ended June 30, 1997 and 1996                              4

                  Statements of Cash Flows for the six months ended
                  June 30, 1997 and 1996                                    5

                  Notes to Condensed Financial Statements                   6

         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                       8

Part II.  Other Information

         Item 4.  Submission of Matters to a Vote of Security Holders      15

         Item 6.  Exhibits and Reports on Form 8-K                         15

Signatures                                                                 16


                                       2
<PAGE>

PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

                               GYNECARE, INC.

                         CONDENSED BALANCE SHEETS
                               (UNAUDITED)

<TABLE>
<CAPTION>

                                                                       JUNE 30,         DECEMBER 31,
                                                                        1997                1996
                                                                   -------------        ------------
                                     ASSETS
<S>                                                                <C>                  <C>
Current assets:
   Cash and cash equivalents . . . . . . . . . . . . . . . .        $  5,592,000        $  3,823,000
   Short-term investments. . . . . . . . . . . . . . . . . .           2,337,000           9,248,000
   Accounts receivable, net. . . . . . . . . . . . . . . . .             371,000             457,000
   Inventories . . . . . . . . . . . . . . . . . . . . . . .             406,000             424,000
   Prepaids and other current assets . . . . . . . . . . . .             179,000             254,000
                                                                   -------------        ------------
      Total current assets . . . . . . . . . . . . . . . . .           8,885,000          14,206,000
Property and equipment, net. . . . . . . . . . . . . . . . .           1,360,000           1,419,000
Prepaid royalties. . . . . . . . . . . . . . . . . . . . . .           1,910,000           1,900,000
Other assets, net. . . . . . . . . . . . . . . . . . . . . .             862,000             873,000
                                                                   -------------        ------------
      Total assets . . . . . . . . . . . . . . . . . . . . .        $ 13,017,000        $ 18,398,000
                                                                   -------------        ------------
                                                                   -------------        ------------


                                  LIABILITIES
Current liabilities:
   Accounts payable. . . . . . . . . . . . . . . . . . . . .        $  1,010,000        $    481,000
   Accrued expenses. . . . . . . . . . . . . . . . . . . . .             562,000             634,000
   Current portion of long-term debt . . . . . . . . . . . .             355,000             291,000
                                                                   -------------        ------------
      Total current liabilities. . . . . . . . . . . . . . .           1,927,000           1,406,000
Long-term debt, net of current portion . . . . . . . . . . .             384,000             458,000
                                                                   -------------        ------------
      Total liabilities. . . . . . . . . . . . . . . . . . .           2,311,000           1,864,000
                                                                   -------------        ------------


                                    STOCKHOLDERS' EQUITY

Common Stock . . . . . . . . . . . . . . . . . . . . . . . .               8,000               8,000
Additional paid-in-capital . . . . . . . . . . . . . . . . .          33,815,000          33,748,000
Deferred compensation. . . . . . . . . . . . . . . . . . . .            (307,000)           (387,000)
Accumulated deficit. . . . . . . . . . . . . . . . . . . . .         (22,810,000)        (16,835,000)
                                                                   -------------        ------------
      Total stockholders' equity . . . . . . . . . . . . . .          10,706,000          16,534,000
                                                                   -------------        ------------
      Total liabilities and stockholders' equity . . . . . .        $ 13,017,000        $ 18,398,000
                                                                   -------------        ------------
                                                                   -------------        ------------
</TABLE>


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


                                        3
<PAGE>
                                  GYNECARE, INC.

                             STATEMENTS OF OPERATIONS
                                    (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                 THREE MONTHS                    SIX MONTHS
                                                                                ENDED JUNE 30,                  ENDED JUNE 30,
                                                                          --------------------------    --------------------------
                                                                              1997           1996           1997           1996
                                                                          -----------    -----------    -----------    -----------
<S>                                                                       <C>            <C>            <C>            <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $   303,000    $   218,000    $   572,000    $   475,000
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . .          409,000        379,000        807,000        700,000
                                                                          -----------    -----------    -----------    -----------
  Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . .         (106,000)      (161,000)      (235,000)      (225,000)
                                                                          -----------    -----------    -----------    -----------
Operating expenses:
  Research and development . . . . . . . . . . . . . . . . . . . . .        1,085,000      1,343,000      2,287,000      2,504,000
  Selling, general and administrative. . . . . . . . . . . . . . . .        1,854,000      1,296,000      3,665,000      2,355,000
                                                                          -----------    -----------    -----------    -----------
    Total operating expenses . . . . . . . . . . . . . . . . . . . .        2,939,000      2,639,000      5,952,000      4,859,000
                                                                          -----------    -----------    -----------    -----------
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . .       (3,045,000)    (2,800,000)    (6,187,000)    (5,084,000)
Interest income, net . . . . . . . . . . . . . . . . . . . . . . . .           94,000        194,000        212,000        430,000
                                                                          -----------    -----------    -----------    -----------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $(2,951,000)   $(2,606,000)   $(5,975,000)   $(4,654,000)
                                                                          -----------    -----------    -----------    -----------
                                                                          -----------    -----------    -----------    -----------
Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . .      $     (0.36)   $     (0.32)   $     (0.72)   $     (0.57)
                                                                          -----------    -----------    -----------    -----------
                                                                          -----------    -----------    -----------    -----------
Shares used in computing net loss per share. . . . . . . . . . . . .        8,295,000      8,160,000      8,297,000      8,157,000
                                                                          -----------    -----------    -----------    -----------
                                                                          -----------    -----------    -----------    -----------

</TABLE>

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

                                         4
<PAGE>

                                  GYNECARE, INC.
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                 SIX MONTHS
                                                                               ENDED JUNE 30,
                                                                     ---------------------------------
                                                                          1997                1996
                                                                     -------------       -------------
<S>                                                                  <C>                 <C>
Cash flows from operating activities:
  Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $  (5,975,000)      $  (4,654,000)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
  Depreciation and amortization. . . . . . . . . . . . . . . . . .         221,000             135,000
  Amortization of deferred compensation. . . . . . . . . . . . . .          80,000              94,000
  Provision for doubtful accounts. . . . . . . . . . . . . . . . .          74,000              32,000
  Changes in operating assets and liabilities:
    Accounts receivable. . . . . . . . . . . . . . . . . . . . . .          12,000            (139,000)
    Inventories. . . . . . . . . . . . . . . . . . . . . . . . . .          18,000             170,000
    Prepaids and other current assets. . . . . . . . . . . . . . .          75,000             129,000
    Accounts payable . . . . . . . . . . . . . . . . . . . . . . .         529,000            (526,000)
    Accrued expenses . . . . . . . . . . . . . . . . . . . . . . .         (72,000)             40,000
                                                                     -------------       -------------
      Net cash used in operating activities. . . . . . . . . . . .      (5,038,000)         (4,719,000)
                                                                     -------------       -------------

Cash flows from investing activities:
  Acquisition of property and equipment. . . . . . . . . . . . . .        (161,000)           (330,000)
  Acquisition of patent rights and
    related technical information. . . . . . . . . . . . . . . . .              --            (400,000)
  Purchase of investments. . . . . . . . . . . . . . . . . . . . .      (1,958,000)        (20,444,000)
  Maturity of investments. . . . . . . . . . . . . . . . . . . . .       8,869,000           7,535,000
                                                                     -------------       -------------
      Net cash provided by/(used in) investing activities. . . . .       6,750,000         (13,639,000)
                                                                     -------------       -------------

Cash flows from financing activities:
  Proceeds from issuance of Common Stock . . . . . . . . . . . . .           3,000              79,000
  Proceeds from issuance of Common Stock pursuant to the
    1995 Employee Stock Purchase Plan. . . . . . . . . . . . . . .          91,000                  --
  Repurchase of shares . . . . . . . . . . . . . . . . . . . . . .         (27,000)                 --
  Proceeds from issuance of debt . . . . . . . . . . . . . . . . .         137,000                  --
  Payments on debt . . . . . . . . . . . . . . . . . . . . . . . .        (147,000)           (146,000)
                                                                     -------------       -------------
      Net cash provided by/(used in) financing activities. . . . .          57,000             (67,000)
                                                                     -------------       -------------
Net increase/(decrease) in cash and cash equivalents . . . . . . .       1,769,000         (18,425,000)
Cash and cash equivalents at beginning of period . . . . . . . . .       3,823,000          22,330,000
                                                                     -------------       -------------
Cash and cash equivalents at end of period . . . . . . . . . . . .   $   5,592,000       $   3,905,000
                                                                     -------------       -------------
                                                                     -------------       -------------

  Supplemental cash flow information:
  Interest paid during the period. . . . . . . . . . . . . . . . .       $  36,000           $  38,000
                                                                     -------------       -------------
                                                                     -------------       -------------
</TABLE>

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


                                      5
<PAGE>

                               GYNECARE, INC.
                  NOTES TO CONDENSED FINANCIAL STATEMENTS
                               JUNE 30, 1997
                                (UNAUDITED)

1.   BASIS OF PRESENTATION
     
     In the opinion of management, the accompanying unaudited financial 
     statements have been prepared by the Company in accordance with 
     generally accepted accounting principles for interim financial 
     information and pursuant to the rules and regulations of the Securities 
     and Exchange Commission.  All adjustments, consisting of only normal 
     recurring adjustments, necessary for a fair presentation have been 
     included.  The results of operations for the six month period ended June 
     30, 1997 are not necessarily indicative of the results to be expected 
     for any other interim period or for the entire year.
     
     The financial statements should be read in conjunction with the audited 
     financial statements and notes thereto included in Gynecare's (the 
     Company's) Annual Report on Form 10-K, for the year ended December 31, 
     1996, filed with the Securities and Exchange Commission pursuant to 
     Section 13 of the Securities Exchange Act of 1934.
     
2.   CASH, CASH EQUIVALENTS, SHORT-TERM INVESTMENTS AND INVESTMENTS
     
     All highly liquid investments purchased with an original maturity of 
     ninety days or less are considered to be cash equivalents. The Company 
     accounts for investments under Statement of Financial Accounting 
     Standards No. 115 "Accounting for Certain Investments in Debt and Equity 
     Securities" (SFAS No. 115), whereby investments that are deemed by 
     management to be held-to-maturity are reported at amortized cost.  All 
     investments as of June 30, 1997 are classified as held-to-maturity and 
     are carried at amortized cost, which approximates fair market value.
     
3.   INVENTORIES
     
     Inventories are stated at the lower of cost (first-in, first-out) or 
     market.  The components of inventory are:
     
                                         June 30,          December  31,
                                           1997                1996
                                        ---------          -------------
     Raw materials                      $ 230,000           $  121,000
     Work-in-process                      113,000              105,000
     Finished goods                        63,000              198,000
                                        ---------           ----------
                                        $ 406,000           $  424,000
                                        ---------           ----------
                                        ---------           ----------

4.   RECENT ACCOUNTING PRONOUNCEMENTS
     
     In February 1997, the Financial Accounting Standards Board issued 
     Statement of Financial Accounting Standards No. 128, "Earnings Per 
     Share" (SFAS 128), which specifies the computation, presentation and 
     disclosure requirements for earnings per share.  SFAS 128 supersedes 
     Accounting Principles Board Opinion No. 15 and is effective for 
     financial statements issued for periods ending after December 15, 1997.  
     SFAS 128 requires restatement of all prior-period earnings per share 
     data presented after the effective date.  SFAS 128 will not have a 
     material impact on the Company's financial position, results of 
     operations or cash flows.
     
     In June 1997, the Financial Accounting Standards Board issued Statement 
     of Financial Accounting Standards No. 130, "Reporting Comprehensive 
     Income" (SFAS 130).  SFAS 130 establishes standards for reporting and 
     display of comprehensive income and its components in a full set of 
     general-purpose financial statements.  Comprehensive income is defined 
     as the change in equity of a business enterprise during a period from 
     transactions and other events and circumstances from nonowner sources.  
     It includes all changes in equity during a period except those resulting 
     from investments by owners and distributions to owners.  SFAS 130 is 
     effective for fiscal years beginning after 


                                       6
<PAGE>

     December 15, 1997, and reclassification of financial statements for 
     earlier periods provided for comparative purposes is required.  SFAS 130 
     is not expected to have a material impact on the Company's financial 
     position, results of operations or cash flows.
     
     In June 1997, the Financial Accounting Standards Board also issued 
     Statement of Financial Accounting Standards No. 131, "Disclosures about 
     Segments of an Enterprise and Related Information" (SFAS 131).  SFAS 131 
     establishes standards for the way that public business enterprises 
     report information about operating segments in annual financial 
     statements and requires that those enterprises report selected 
     information about operating segments in interim financial reports issued 
     to shareholders. SFAS 131 generally supersedes Statement of Financial 
     Accounting Standards No. 14 "Financial Reporting for Segments of a 
     Business Enterprise."  SFAS 131 is effective for financial statements 
     for periods beginning after December 15, 1997, and restatement of 
     comparative information for earlier years is required.  However, SFAS 
     131 is not required to be applied to interim financial statements in the 
     initial year of application.  SFAS 131 will not have a material impact 
     on the Company's financial position, results of operations or cash 
     flows.


                                        7
<PAGE>

PART I.    Continued-

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

     THIS SECTION OF THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS 
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE 
COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED 
IN THE FORWARD-LOOKING STATEMENTS.  FACTORS THAT MIGHT CAUSE SUCH A 
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE SUBSECTION 
ENTITLED "FACTORS AFFECTING OPERATING RESULTS AND MARKET PRICE OF STOCK" 
COMMENCING ON PAGE 8.

This Management's Discussion and Analysis of Financial Condition and Results 
of Operations (MD&A) should be read in conjunction with the MD&A contained in 
the Company's Annual Report on Form 10-K for the fiscal year ended December 
31, 1996.

RESULTS OF OPERATIONS

     Revenues increased 39% to $303,000 in the second quarter of fiscal 1997 
and 20% to $572,000 in the first half of fiscal 1997 from $218,000 and  
$475,000 in the corresponding periods of fiscal 1996.  Substantially all of 
the revenues to-date have been generated from international sales of the 
ThermaChoice-TM- Uterine Balloon Therapy-TM- system.  The growth in revenues 
over the corresponding periods of fiscal 1996 was primarily the result of 
increased sales of the ThermaChoice catheter, as an increasing number of 
ThermaChoice procedures were performed internationally, and shipments of the 
VersaPoint system during the first quarter of 1997.
     
     Cost of goods sold increased 8% to $409,000 in the second quarter of 
fiscal 1997 and 15% to $807,000 in the second half of fiscal 1997 from 
$379,000 and $700,000 in the corresponding periods of fiscal 1996.  These 
increases were primarily the result of the increased level of revenues during 
the related periods.
     
     The Company's research and development expenses decreased 19% to 
$1,085,000 and 9% to $2,287,000 for the quarter and six month period ended 
June 30, 1997 from $1,343,000 and $2,504,000 for the corresponding periods of 
fiscal 1996.  This decrease was principally due to decreased expenditures 
resulting from the completion of the U.S. clinical trials of the ThermaChoice 
Uterine Balloon Therapy system, which commenced in January 1996 and ended in 
early October 1996, and the absence of costs associated with the clinical 
studies and submission for FDA clearance to market VersaPoint in the U.S.  
Such FDA clearance was received in November 1996.
     
     The Company's selling, general and administrative expenses increased 43% 
to $1,854,000 and 56% to $3,665,000 for the second quarter and first half of 
fiscal 1997 from $1,296,000 and $2,355,000 for the corresponding periods of 
fiscal 1996.  The increase was primarily the result of Gynecare's increased 
investment in sales and marketing activities including retention of direct 
marketing personnel in Canada and several other European countries, the 
Company's ongoing efforts to obtain reimbursement in international markets, 
and managing the international distributor network.  Growth in the Company's 
sales and marketing, accounting and administrative staff from sixteen 
employees at June 30, 1996 to twenty-three at June 30, 1997 further 
contributed to the increase in selling, general and administrative expenses.

     Net interest income decreased to $94,000 and $212,000 for the quarter 
and six month period ended June 30, 1997 from $194,000 and $430,000 for the 
corresponding periods of fiscal 1996.  The decrease is primarily the result 
of the decreased level of cash and investments held by the Company during the 
second quarter and first half of fiscal 1997 compared to those held during 
the corresponding periods of fiscal 1996.  This decreased level of cash and 
investments is the result of expending such resources to fund continuing 
operations.
     
     As a result of all of the above factors, the Company's total net loss 
increased to $2,951,000 and $5,975,000 for the quarter and six month period 
ended June 30, 1997 from $2,606,000 and $4,654,000 for the corresponding 
periods of fiscal 1996.


                                       8

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
     
     Since inception, the Company's cash expenditures have significantly 
exceeded its revenues, resulting in an accumulated deficit of $22,810,000 at 
June 30, 1997.  The Company has funded its operations primarily through the 
private placement of equity securities aggregating $15,361,000 during 1994 
and 1995 and the completion of its initial public offering in November 1995 
aggregating net proceeds of $15,223,000.

     Cash used by the Company's operations was $5,038,000 for the six months 
ended June 30, 1997 as compared to $4,719,000 for the corresponding period in 
fiscal 1996.  Cash was used during the first half of fiscal 1997 primarily to 
fund the expansion of marketing programs for the ThermaChoice Uterine Balloon 
Therapy system in the U.S. and in international markets, the costs of 
obtaining reimbursement in existing markets, the ongoing development of the 
ThermaChoice Uterine Balloon Therapy and VersaPoint systems, and increased 
general and administrative expenses to support expanded operations.

     The Company's capital expenditures for the first half of fiscal 1997 and 
for the corresponding period in fiscal 1996 were $161,000 and $330,000, 
respectively.  The decreased level of capital expenditures during the first 
half of fiscal 1997 compared to the corresponding period in fiscal 1996 was 
due primarily to reduced capital requirements to support U.S. clinical 
studies of the ThermaChoice Uterine Balloon Therapy system which commenced in 
January 1996.  The patient treatment phase of this study ended in October 
1996.

     During the first quarter of fiscal 1996, the Company exercised its 
option to extend its license and OEM supply agreement with Gyrus Medical, 
Ltd. ("Gyrus") to include use of the VersaPoint technology in the field of 
laparoscopy.  A $400,000 deposit on this OEM supply agreement was made in 
March 1996.  Additional deposits of up to $600,000 will be due over the next 
12 to 24 months.  

     At June 30, 1997, the Company had outstanding borrowings totaling 
$739,000 under two secured credit facilities.  Borrowings bear interest at 
the bank's prime rate plus 1.25%-1.50% per annum, are required to be repaid 
in monthly installments over 30 months, and are secured by a pledge of all of 
the Company's equipment and fixtures.
     
     The Company believes that its cash, cash equivalents and investments 
together with interest thereon will be sufficient to fund its operations and 
capital requirements through December 31, 1997.  The estimate of this time 
period is a forward-looking statement involving risks and uncertainties, 
including the timing of FDA approval of the ThermaChoice Uterine Balloon 
Therapy system and demand for and market acceptance of the Company's 
products, the progress of the Company's clinical research and product 
development programs, the receipt of and the time required to obtain other 
regulatory clearances and approvals, the resources the Company devotes to 
developing, manufacturing and marketing its products, the resources required 
to hire and develop a direct sales force in the United States, the resources 
required to expand manufacturing capacity and facilities requirements, the 
costs of obtaining reimbursement for use of the Company's ThermaChoice 
Uterine Balloon Therapy and VersaPoint systems in new and existing markets, 
and other factors.  As such, there can be no assurance that the Company will 
not require additional financing prior to the end of 1997. Additional funding 
may not be available when needed or on terms acceptable to the Company, which 
would have a material adverse effect on the Company's business, financial 
condition and results of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

     In February 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" 
(SFAS 128), which specifies the computation, presentation and disclosure 
requirements for earnings per share. SFAS 128 supersedes Accounting 
Principles Board Opinion No. 15 and is effective for financial statements 
issued for periods ending after December 15, 1997.  SFAS 128 requires 
restatement of all prior-period earnings per share data presented after the 
effective date.  SFAS 128 will not have a material impact on the Company's 
financial position, results of operations or cash flows.

In June 1997, the Financial Accounting Standards Board issued Statement of 
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" 
(SFAS 130).  SFAS 130 establishes standards for reporting and display of 
comprehensive income and its components in a full set of general-purpose 
financial statements.  Comprehensive income is 


                                       9
<PAGE>

defined as the change in equity of a business enterprise during a period from 
transactions and other events and circumstances from nonowner sources.  It 
includes all changes in equity during a period except those resulting from 
investments by owners and distributions to owners.  SFAS 130 is effective for 
fiscal years beginning after December 15, 1997, and reclassification of 
financial statements for earlier periods provided for comparative purposes is 
required.  SFAS 130 is not expected to have a material impact on the 
Company's financial position, results of operations or cash flows.

In June 1997, the Financial Accounting Standards Board also issued Statement 
of Financial Accounting Standards No. 131, "Disclosures about Segments of an 
Enterprise and Related Information" (SFAS 131).  SFAS 131 establishes 
standards for the way that public business enterprises report information 
about operating segments in annual financial statements and requires that 
those enterprises report selected information about operating segments in 
interim financial reports issued to shareholders.  SFAS 131 generally 
supersedes Statement of Financial Accounting Standards No. 14 "Financial 
Reporting for Segments of a Business Enterprise."  SFAS 131 is effective for 
financial statements for periods beginning after December 15, 1997, and 
restatement of comparative information for earlier years is required.  
However, SFAS 131 is not required to be applied to interim financial 
statements in the initial year of application.  SFAS 131 will not have a 
material impact on the Company's financial position, results of operations or 
cash flows.

FACTORS AFFECTING OPERATING RESULTS AND MARKET PRICE OF STOCK

     Gynecare operates in a rapidly changing environment that involves a 
number of uncertainties, some of which are beyond the Company's control.  In 
addition to the uncertainties described elsewhere in this report, these 
uncertainties include:

     DEPENDENCE ON A LIMITED NUMBER OF PRODUCTS.  Currently, the ThermaChoice 
Uterine Balloon Therapy and VersaPoint systems are the only products being 
marketed by the Company.  The Company will be required to obtain regulatory 
approvals, including PMA approval from the FDA, before the ThermaChoice 
Uterine Balloon Therapy system can be marketed in the United States and in 
certain foreign countries, including Japan.  There can be no assurance that 
the Company's efforts will be successful or that the ThermaChoice Uterine 
Balloon Therapy system will be safe or effective, capable of being 
manufactured in commercial quantities at acceptable costs, approved by 
appropriate regulatory or reimbursement authorities or successfully marketed. 
The Company's VersaPoint system has only recently received FDA clearance for 
marketing in the United States, and the Company has made limited shipments of 
the system.  Furthermore, because the ThermaChoice Uterine Balloon Therapy 
and VersaPoint systems represent the Company's principal near-term focus, the 
Company could be required to cease operations if these products are not 
successfully commercialized.  In addition, the continuing follow-up phase of 
the U.S. clinical trials of the ThermaChoice Uterine Balloon Therapy system 
may identify significant technical or other obstacles to be overcome prior to 
obtaining necessary regulatory or reimbursement approvals. Although there has 
been a significant success rate in the patients treated to date under the 
current protocol for the ThermaChoice Uterine Balloon Therapy system, there 
is only limited follow-up data for such patients.  As a result, there can be 
no assurance that the success rate of the procedure will be sustainable or 
will not decrease over time.  If the ThermaChoice Uterine Balloon Therapy 
system does not prove to be safe and effective in the long-term follow up of 
clinical trials, there would be a material adverse effect on the Company's 
business, financial condition and results of operations.
     
     LIMITED OPERATING HISTORY AND REVENUES; ANTICIPATED FUTURE LOSSES.  The 
Company has generated only limited revenues to date and has experienced net 
losses since its inception.  As of June 30, 1997, the Company had an 
accumulated deficit of $22.8 million.  The Company expects its operating 
losses to continue for at least the next several years.  In addition, the 
Company expects that it will continue to expend substantial resources to fund 
clinical trials in support of regulatory and reimbursement approvals, 
expansion of marketing and sales activities and research and development.  
There can be no assurance that the ThermaChoice Uterine Balloon Therapy and 
VersaPoint systems will be successfully commercialized or that the Company 
will achieve significant revenues from either international or domestic 
sales.  In addition, there can be no assurance that the Company will achieve 
or sustain profitability in the future.
     
     UNCERTAINTY OF MARKET ACCEPTANCE.  The Company's success is dependent 
upon acceptance of the ThermaChoice Uterine Balloon Therapy and VersaPoint 
products by the medical community as reliable, safe and cost-effective 
treatments for dysfunctional uterine bleeding and benign pathology.  The 
Company is unable to predict how quickly, if at all, its products will be 
accepted by the medical community or, if accepted, the number of procedures 
that will be performed.  The medical indications that can be treated with the 
ThermaChoice Uterine Balloon Therapy and VersaPoint systems can also 


                                     10
<PAGE>

be treated by surgery, drugs or other medical devices. Although the Company 
believes that its products have certain advantages over competing products 
and technologies, the Company does not have long-term clinical data 
demonstrating such advantages.  There can be no assurance that any such 
advantages will be clinically significant.  The ThermaChoice Uterine Balloon 
Therapy and VersaPoint systems are designed to be used with a local 
anesthetic in a clinic or physician's office.  If physicians recommend or 
require that the procedures using the ThermaChoice or VersaPoint products be 
performed under general anesthesia in a hospital or outpatient surgery center 
instead of under local anesthesia in a clinic or physician's office, market 
acceptance of the products would be adversely affected, which would have a 
material adverse effect on the Company's business, financial condition and 
results of operations.  Although the Company believes that the ThermaChoice 
system may be adaptable to other uterine bleeding disorders, there can be no 
assurance that the product will be clinically effective for any other 
indications, that regulatory approval of the product for such other 
indications could be obtained, that treatment of such conditions would be 
commercially feasible or that additional markets for any such indications 
will develop.  Obtaining FDA approval to market the ThermaChoice Uterine 
Balloon Therapy system for other indications is likely to require a long 
period of time and considerable expense.  Patient population estimates are 
subject to inherent uncertainties, and the Company is unable to determine 
with any degree of certainty the number of patients for any indication or the 
number of patients who are suitable for treatment.

     POTENTIAL FLUCTUATIONS IN FUTURE QUARTERLY RESULTS.  The Company expects 
that its operating results will fluctuate significantly from quarter to 
quarter in the future and will depend on a number of factors, many of which 
are outside the Company's control.  These factors include actions relating to 
regulatory and reimbursement matters, the extent to which the Company's 
products gain market acceptance, the rate at which the Company establishes 
its network of distributors and direct sales personnel in the U.S. and 
internationally, the timing and size of customer purchases, which may be 
influenced by volume purchase discounts and extended payment terms, and 
competition.
     
     LIMITED MANUFACTURING EXPERIENCE; DEPENDENCE ON SINGLE CONTRACT 
MANUFACTURERS AND SOLE SOURCE SUPPLIERS; SCALE-UP RISK.  The Company 
currently manufactures certain components of its products and depends on 
contract manufacturers for the production of certain components of the 
ThermaChoice Uterine Balloon Therapy system and the entire VersaPoint system. 
The Company expects to continue to depend on such manufacturers for the 
foreseeable future.  The integration of the Company's operations into new 
facilities, which occurred in November 1995, has resulted and may continue to 
result in inefficiencies.  Specifically, manufacturers often encounter 
difficulties in production of new products, including problems involving 
production yields, quality control and assurance, component supply and 
shortages of qualified personnel.  The Company may experience a shortage of 
manufacturing capacity if the new facility fails to operate as planned.  
Although the Company intends to maintain sufficient levels of inventory to 
avoid any material disruption resulting from the continuing scale-up of the 
Company's facility, there can be no assurance that the Company will be able 
to manufacture and supply sufficient quantities of products to meet product 
requirements for commercial sales. Additionally, any delay or difficulty in 
continuing manufacturing activities at its facility, or the inability of the 
Company's contract manufacturers to supply required materials and the Company 
subsequently not being able to successfully find an alternative source of 
supply in a timely manner, may have a material adverse effect on the 
Company's business, financial condition and results of operations.  For the 
foreseeable future, the Company expects that manufacturing and overhead costs 
spread over low production volumes combined with the cost of using contract 
manufacturers to produce the ThermaChoice controller and VersaPoint system 
will continue to have an adverse effect on gross margins.
     
     LIMITED INTERNATIONAL DISTRIBUTION; NO U.S. DISTRIBUTION.  To date, 
substantially all of the Company's sales have been outside the United States, 
and the Company anticipates that a significant portion of its revenues for 
the next year will continue to be derived from international sales.  The 
Company currently markets and sells its products internationally through a 
network of distributors.  The Company's international sales are dependent 
upon the marketing efforts of, and sales by, these distributors.  The Company 
may also rely on these distributors to assist it in obtaining reimbursement 
approvals from both government and private insurers in certain international 
markets.  In general, the Company has chosen to operate through small 
distribution firms because of its belief that these firms will devote greater 
attention to the Company's products.  The use of small distributors increases 
the risks associated with financial instability, which includes the risk that 
distributors will cease operations or will be unable to satisfy financial 
obligations to the Company.  If a distributor were to fail to invest adequate 
capital promoting the Company's products or were to cease operations, the 
Company would likely be unable to achieve significant sales in the territory. 
To market its products in the United States, Gynecare will need to establish 
a distribution network which may consist of direct sales representatives, 
independent sales representatives, independent distributors, or a combination 
of these.  The Company has only recently hired two direct sales 


                                     11
<PAGE>

representatives in the United States.  There can be no assurance that the 
Company will establish U.S. distribution networks for the ThermaChoice 
Uterine Balloon Therapy and VersaPoint systems in a timely manner.  The 
failure to establish such distribution would have a material adverse effect 
on the Company's business, financial condition and results of operations.

     A number of other risks are inherent in international operations and 
transactions.  International sales and operations may be limited or disrupted 
by the imposition of government controls, export license requirements, 
political instability, trade restrictions, changes in tariffs, difficulties 
in managing international operations and fluctuations in foreign currency 
exchange rates.  There can be no assurance that the Company will be able to 
successfully commercialize the ThermaChoice Uterine Balloon Therapy system, 
VersaPoint system, or any future product in any market.
     
     UNCERTAINTY RELATING TO THIRD-PARTY REIMBURSEMENT.  The Company's 
success will be dependent upon, among other things, its ability to obtain 
satisfactory reimbursement from health care payers for the ThermaChoice 
Uterine Balloon Therapy and VersaPoint systems.  The Company does not expect 
that third-party reimbursement will be available, if at all, for use of the 
ThermaChoice Uterine Balloon Therapy system in the United States unless and 
until FDA approval is received.  Third-party reimbursement for the VersaPoint 
system and the ThermaChoice Uterine Balloon Therapy system, once FDA approval 
is received, would be dependent upon decisions by the HCFA for Medicare, as 
well as by individual health maintenance organizations, private insurers and 
other payors. While the Company believes that the ThermaChoice Uterine 
Balloon Therapy procedure may be reimbursed in the United States under 
existing procedure codes for endometrial ablation and that the VersaPoint 
procedure may be reimbursed under existing procedure codes for surgical 
resection, there can be no assurance that this will occur or that the 
reimbursement under these codes will be adequate. Given the efforts to 
control and decrease healthcare costs in recent years, there can be no 
assurance that any reimbursement will be sufficient to assure profitability.

     Reimbursement systems in international markets vary significantly by 
country, and by region within some countries, and reimbursement approvals 
must be obtained on a country by country basis.  Many international markets 
have government managed health care systems that govern reimbursement for new 
devices and procedures.  In most markets, there are private insurance systems 
as well as government managed systems.  Large scale market acceptance of the 
ThermaChoice Uterine Balloon Therapy and VersaPoint systems will depend on 
the availability and level of reimbursement in international markets targeted 
by the Company.  Only recently has the Company's ThermaChoice products 
obtained reimbursement for a small number of cases in several countries 
internationally. The VersaPoint system has not yet been approved for 
reimbursement in any international market.  Obtaining reimbursement approvals 
can require 12 to 18 months or longer.  There can be no assurance that the 
Company will continue to receive reimbursement in the several countries in 
which it has recently received reimbursement or that it will obtain 
reimbursement in any other countries within a particular time, for a 
particular amount, or at all.

     GOVERNMENT REGULATION.  The manufacture and sale of medical devices, 
including the ThermaChoice Uterine Balloon Therapy and VersaPoint systems, 
are subject to extensive regulation by numerous government authorities in the 
United States and other countries. The ThermaChoice Uterine Balloon Therapy 
system is subject to the FDA's PMA requirements.  As a result, the Company 
will not be able to commence marketing and commercial sales of the 
ThermaChoice Uterine Balloon Therapy system in the United States unless and 
until it receives PMA approval for marketing of such product from the FDA.  
In October 1996, the Company completed the patient treatment phase of its 
U.S. clinical study for the ThermaChoice Uterine Balloon Therapy system and 
the follow-up data collected to-date has indicated overall success in patient 
treatment.  However, there can be no assurance as to whether long-term safety 
and efficacy data collected during clinical trials will be sufficient or 
whether the Company will receive PMA approval for the ThermaChoice system. 
The PMA for the ThermaChoice system was filed with the FDA in June 1997.  In 
addition, if approval is received, there can be no assurance that it would 
not be for a more limited indication than the Company has requested, which 
could limit the addressable market of the ThermaChoice Uterine Balloon 
Therapy system and have a material adverse effect on the Company's business, 
financial condition and results of operations.  There can be no assurance 
that the Company will not be required to conduct additional clinical trials 
for the ThermaChoice Uterine Balloon Therapy system which may result in 
substantial costs and delays.  In addition, changes in existing regulations 
or adoption of new government regulations or policies could prevent or delay 
regulatory approval of the Company's products.  Furthermore, if PMA approval 
is granted, subsequent modifications to the approved device or manufacturing 
process may require a PMA supplement or may require the submission of a new 
PMA, which could require substantial additional clinical efficacy data


                                     12
<PAGE>

and FDA review.  Failure to obtain PMA approval or to obtain such approval on 
a timely basis would have a material adverse effect on the Company's 
business, financial condition and results of operations.

     In the United States, the VersaPoint system received clearance from the 
FDA under a 510(k) application in November 1996. However, if the Company 
wished to propose modifications or enhancements to the VersaPoint system or 
use the system for other indications such as laparoscopic indications, and 
such major changes could affect the safety or effectiveness of the device, a 
new 510(k) submission would be required.  In such a case, the Company may be 
prohibited from marketing the modified product until the 510(k) notice is 
cleared by the FDA.  Such a prohibition could have a material adverse effect 
on the Company's business, financial condition and results of operations.
     
     The Company will be required to adhere to applicable FDA regulations 
regarding Good Manufacturing Practices (GMP) and similar regulations in other 
countries, which include testing, control and documentation requirements.  
The Company's success will depend in part on its ability to manufacture its 
products in compliance with GMP and EN 46001 and other regulatory 
requirements, in sufficient quantities and in a timely manner, while 
maintaining product quality and acceptable manufacturing costs.  Failure to 
increase production volumes in a timely or cost-effective manner or to 
maintain compliance with GMP and EN 46001 and other regulatory requirements 
could have a material adverse effect on the Company's business, financial 
condition and results of operations.

     Regulatory approvals, if granted, may include significant limitations on 
the indicated uses for which the products may be marketed.  FDA enforcement 
policy strictly prohibits the marketing of approved medical devices for 
unapproved uses.  Failure to comply with applicable regulatory requirements, 
including marketing products for unapproved uses, could result in, among 
other things, FDA warning letters, fines, injunctions, civil penalties, 
recall or seizure of products, total or partial suspension of production, 
refusal of the government to grant premarket clearance or premarket approval 
for devices, withdrawal of approvals and criminal prosecution, which would 
have a material adverse effect on the Company's business, financial condition 
and results of operations.
     
     Sales of medical devices outside of the United States are subject to 
international regulatory requirements that vary from country to country.  The 
requirements for approval for sale internationally may differ from those 
required for FDA approval.  In Europe, the Company will be required to obtain 
the certifications necessary to enable the CE mark to be affixed to the 
Company's products by mid-calendar 1998 in order to continue commercial sales 
in member countries of the European Union.  Although the Company has obtained 
all such certifications for its ThermaChoice Uterine Balloon Therapy  and 
VersaPoint systems, there can be no assurance that it will be able to obtain 
certifications for other future products in a timely manner, if at all.  A 
failure to obtain any such certifications could have a material adverse 
effect on the Company's business, financial condition and results of 
operations.
     
     DEPENDENCE ON LICENSES, PATENTS AND PROPRIETARY TECHNOLOGY.  The 
Company's success depends in part on its ability to retain licenses, obtain 
patent protection for products and processes, and preserve its trade secrets 
and proprietary technology.  The Company's one issued United States patent 
was assigned to the Company by Origin pursuant to a royalty-bearing agreement 
covering potential future modifications to the ThermaChoice Uterine Balloon 
Therapy system.  Additionally, pursuant to such agreement, the Company 
granted to Origin a non-exclusive, royalty-free license under such patent for 
use in fields other than gynecology.  The validity and breadth of claims 
covered in medical device technology patents involve complex legal and 
factual questions and, therefore, may be highly uncertain.  No assurance can 
be given that any patents will be issued from pending patent applications or 
from any future patent applications, that the scope of any patent protection 
will exclude competitors or provide competitive advantages to the Company, 
that any of the Company's patents will be held valid if subsequently 
challenged or that others will not claim rights in or ownership of the 
patents and other proprietary rights held by the Company.  For example, one 
of the Company's competitors filed a third party observation investigating 
prior art patents as they relate to a European patent application licensed to 
the Company for the ThermaChoice product.  As a result, the claims have been 
amended and a European patent has been issued.  This competitor has filed a 
similar action in connection with the Company's prosecution of a 
corresponding patent application in Australia.  As a result, the claims have 
been amended and a patent will be issued.  Further, the Company believes such 
competitor recently filed in the U.S. Patent Trademark Office a request for 
re-examination of two issued patents related to the Company's ThermaChoice 
product which request for re-examination has been granted by the Patent 
Trademark Office based on certain prior art references presented to such 
office, certain of which were the subject of the European observation.  There 
can be no assurance that these patents will be held valid after the 
re-examination proceeding or, that if 


                                     13
<PAGE>

held invalid, would not have a material adverse effect on the Company's 
business, financial condition or results of operations.  Furthermore, certain 
of the Company's licenses provide that the license rights revert back to the 
licensors in the event of material breach of the license agreements, 
including failure to pay minimum royalty amounts or milestone payments when 
due, or failure to purchase certain quantities of product from the licensor.  
To the extent license rights are involved, the Company is dependent upon 
technology licensors to prosecute their patents in the United States and in 
foreign countries.  The reversion of rights under the Company's license 
agreements or failure of the licensors to fully prosecute patents would have 
a material adverse effect on the Company's business, financial condition and 
results of operations.

     There has been substantial litigation regarding patent and other 
intellectual property rights in the medical device industry. Litigation, 
which could result in substantial cost to and diversion of effort by the 
Company, may be necessary to enforce patents issued or licensed to the 
Company, protect trade secrets or know-how owned by the Company, defend the 
Company against claimed infringement of the rights of others or determine the 
ownership, scope or validity of the proprietary rights of the Company and 
others.  An adverse determination in any such litigation could subject the 
Company to significant liabilities to third parties, require the Company to 
seek licenses from third parties and prevent the Company from manufacturing, 
selling or using its products, any of which could have a material adverse 
effect on the Company's business, financial condition and results of 
operations. In the event of such an adverse determination, there can be no 
assurance whether a license would be offered on terms acceptable to the 
Company, or at all.
     
     POTENTIAL VOLATILITY OF STOCK PRICE.  The securities markets have, from 
time to time, experienced significant price and volume fluctuations that may 
be unrelated to the operating performance of particular companies.  The 
market prices of the Common Stock of many publicly-held medical device 
companies have in the past been, and can in the future be expected to be, 
especially volatile. Announcements of technological innovations or new 
products by the Company or its competitors, developments or disputes 
concerning patents or proprietary rights, regulatory developments, the 
issuance of new or changed stock market analyst reports and recommendations, 
and economic and other external factors, as well as period-to-period 
fluctuations in the Company's financial results, have had and may continue to 
have in the future a significant impact on the market price of the Common 
Stock.
     
     FUTURE CAPITAL NEEDS.  The Company's capital requirements depend on a 
number of factors, including the timing of FDA approval of the ThermaChoice 
Uterine Balloon Therapy system, and demand for and market acceptance of the 
Company's products, the progress of the Company's clinical research and 
product development programs, the receipt of and the time required to obtain 
regulatory clearances and approvals, the resources the Company devotes to 
developing, manufacturing and marketing its products, the resources required 
to hire and develop a direct sales force in the United States, the resources 
required to expand manufacturing capacity and facilities requirements, the 
costs of obtaining reimbursement for use of the Company's ThermaChoice 
Uterine Balloon Therapy and VersaPoint systems in new and existing markets, 
and other factors. While the Company believes that its cash, cash equivalents 
and short-term investments together with interest thereon will be sufficient 
to fund its operations and capital requirements through December 31, 1997, 
there can be no assurance that the Company will not require additional 
financing prior to the end of 1997.  The estimate of this time period is a 
forward-looking statement involving risks and uncertainties and actual 
results may differ materially as a result of a number of factors including 
those noted above.  Should additional be required, such funding may not be 
available when needed or on terms acceptable to the Company, which would have 
a material adverse effect on the Company's business, financial condition and 
results of operations.

     CONTROL BY DIRECTORS AND PRINCIPAL STOCKHOLDERS.  The directors and 
principal stockholders of the Company, and certain of their affiliates, own 
approximately 65% of the Company's outstanding Common Stock.  Accordingly, 
these persons, individually and as a group, may be able to effectively 
control the Company and direct its affairs and business, including any 
determination with respect to the acquisition or disposition of assets by the 
Company, future issuances of Common Stock or other securities by the Company, 
declaration of dividends on the Common Stock and the election of directors.  
Such concentration of ownership may also have the effect of delaying, 
deferring or preventing a change in control of the Company.


                                     14
<PAGE>

PART II.  OTHER INFORMATION

Item 4.   Submission of Matters to a vote of Security Holders

          (a)   The Annual Meeting of Stockholders of the Company was held on
                May 28, 1997 (the "Meeting").

          (b)   The following directors were elected at the Meeting:

                 A. Lad Burgin
                 A. Grant Heidrich

          (c)    The results of the vote on the matters voted upon at the 
                 Meeting are:

                   (i)  Election of Directors           For           Withheld 
                        ---------------------        ---------        --------
     
                        A. Lad Burgin                7,496,666         31,813
                        A. Grant Heidrich            7,520,699          7,780

                  (ii)  Approval of Amendment to 1994 Stock Plan to increase 
                        the aggregate maximum number of shares issuable 
                        thereunder by 700,000 to a total of 1,884,250.

                          For          Against     Abstained       No Vote
                          ---          -------     ---------       -------
                        6,155,054      222,932       9,775        1,140,718


                 (iii)  Ratification of Coopers & Lybrand, L.L.P. as 
                        independent auditors for the Company for 
                        fiscal year 1997:

                          For          Against     Abstained       No Vote
                          ---          -------     ---------       -------
                        7,516,665       7,736        4,078            0

          The foregoing matters are described in more detail in the Company's
          definitive proxy statement dated April 25, 1997.

Item 6.   (a)  Exhibits

               10.1   Business Loan between Silicon Valley Bank and Gynecare 
                      dated July 12, 1995 as amended on December 17, 1996
               11.1   Computation of Net Loss Per Share
               27.1   Financial Data Schedule

          (b)  Reports on Form 8-K

               No Reports on Form 8-K were filed during the quarter.



                                       15

<PAGE>

                                    SIGNATURES

Pursuant to 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.

                                       GYNECARE, INC.
                              
               


                                    By: /s/ MALCOLM M. FARNSWORTH, JR.
                                        --------------------------------
                                         Malcolm M. Farnsworth, Jr.
                                         Vice President, Finance and 
                                         Chief Financial Officer
                                         (Principal Financial Officer),
                                         Secretary




                                    Date:   August 1, 1997
                                          ------------------------------


                                       16