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


                                   FORM 10-Q/A
                                 AMEMDMENT NO. 1



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

           For the quarterly period ended June 30, 1999

                                       or

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

           For the transition period from                 to
                                          ---------------    -----------------

                         Commission File Number: 0-26082


                                  VIDAMED, INC.
             (exact name of registrant as specified in its charter)



                     Delaware                                  77-0314454
         (State or other jurisdiction of                     (IRS Employer
         incorporation or organization)                   Identification No.)


                              46107 Landing Parkway
                                Fremont, CA 94538
                    (Address of principal executive offices)

                                 (510) 492-4900
              (Registrant's telephone number, including area code)



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


The number of outstanding  shares of the  registrant's  Common Stock,  $.001 par
value, was 20,650,603 as of August 13, 1999.


<PAGE>


                                  VIDAMED, INC.

                                      INDEX

PART I. FINANCIAL INFORMATION
                                                                            Page


Item 1. Condensed Consolidated Financial Statements - unaudited


        Condensed consolidated balance sheets - June 30, 1999
             and December 31, 1998                                             3

        Condensed consolidated statements of operations - three months
             ended June 30, 1999 and 1998 and six months ended June 30,
             1999 and 1998.                                                    4

        Condensed consolidated statements of cash flows - six months
             ended June 30, 1999 and 1998                                      5


        Notes to condensed consolidated financial statements                   6


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

Item 3  Quantitative and Qualitative Disclosure About Market Risk             13


PART II. OTHER INFORMATION


Item 4. Submission of Matters to a Vote of Security Holders                   13

Item 5. Other Information                                                     14

Item 6. Exhibits and Reports on Form 8-K                                      14

        Signatures                                                            15


                                                                    Page 2 of 16

<PAGE>

                          PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                  VidaMed, Inc.
                      Condensed Consolidated Balance Sheets
                                 (In thousands)


                                                          June 30,  December 31,
                                                            1999        1998
                                                          --------     --------
                                                         (Unaudited)     (*)
Assets
Current Assets:
     Cash and cash equivalents                            $  4,411     $  9,384
     Accounts receivable                                       736          228
     Inventories                                               891        1,228
     Other current assets                                      795        1,179
                                                          --------     --------
           Total current assets                              6,833       12,019

     Property and equipment, net                             1,316        1,797
     Other assets, net                                         287          316
                                                          --------     --------
           Total assets                                   $  8,436     $ 14,132
                                                          ========     ========

Liabilities and stockholders' equity
Current liabilities:
     Notes payable, current portion                       $  1,070     $    764
     Accounts payable                                          321          338
     Accrued professional fees                                 181          317
     Accrued clinical trial costs                              271          431
     Accrued and other liabilities                           2,157        2,362
     Accrued advertising costs                                 309          309
     Restructuring accrual                                     198          252
     Current portion of obligations under capital leases      --             22
     Deferred revenue                                          130          229
                                                          --------     --------
           Total current liabilities                         4,637        5,024

     Notes payable, long-term portion                        1,424        1,785

Stockholders' equity:
     Capital stock                                          97,235       95,542
     Accumulated deficit                                   (94,860)     (88,219)
                                                          --------     --------
           Total stockholders' equity                        2,375        7,323
                                                          --------     --------
           Total liabilities and stockholders' equity     $  8,436     $ 14,132
                                                          ========     ========

* The Balance  Sheet at  December  31,  1998 has been  derived  from the audited
financial  statements  at that date but does not include all of the  information
and footnotes required by generally accepted accounting  principles for complete
financial statements.
                             See accompanying notes.


                                                                    Page 3 of 16

<PAGE>


<TABLE>
                                  VidaMed, Inc.
                 Condensed Consolidated Statements of Operations
                     (In thousands except per share amounts)
                                   (Unaudited)

<CAPTION>
                                              Three Months Ended       Six Months Ended
                                                    June 30,                June 30,
                                             --------------------    --------------------
                                                1999       1998        1999         1998
                                             --------    --------    --------    --------
<S>                                          <C>         <C>         <C>         <C>
Revenues:
     Product sales, net                      $  1,208    $    861    $  2,196    $  2,236
     License fees and grant revenue                17          50          67         339
                                             --------    --------    --------    --------
     Net revenues                               1,225         911       2,263       2,575

Cost of Products Sold                             646         608       1,480       1,680
                                             --------    --------    --------    --------
Gross Profit                                      579         303         783         895


Operating Expenses:
     Research and development                     742       1,200       1,555       2,334
     Selling, general and administrative        3,409       3,297       5,913       7,904
                                             --------    --------    --------    --------
     Total operating expenses                   4,151       4,497       7,468      10,238

                                             --------    --------    --------    --------
Loss from operations                           (3,572)     (4,194)     (6,685)     (9,343)

Other income(expense), net                         87         (46)         44        (135)
                                             --------    --------    --------    --------
Net loss                                     $ (3,485)   $ (4,240)   $ (6,641)   $ (9,478)
                                             ========    ========    ========    ========
Basic and diluted net loss per share         $  (0.17)   $  (0.24)   $  (0.33)   $  (0.58)
                                             ========    ========    ========    ========
Shares used in computing basic and diluted
     net loss per share                        20,546      17,443      20,430      16,341
                                             --------    --------    --------    --------

<FN>
                             See accompanying notes.
</FN>
</TABLE>
                                                                    Page 4 of 16


<PAGE>


                                  VidaMed, Inc.
                 Condensed Consolidated Statement of Cash Flows
                                 (In thousands)
                                   (Unaudited)


                                                             Six Months Ended
                                                                 June 30,
                                                           --------------------
                                                             1999        1998
                                                           --------    --------
Cash flows from operating activities:
     Net loss                                              $ (6,641)   $ (9,478)
     Adjustments to reconcile net loss to net cash
        used in operating activities:
           Depreciation and amortization                        626         635

           Changes in assets and liabilities:
               Accounts receivable                             (508)        693
               Inventory                                        337        (251)
               Other current assets                             384        (567)
               Other assets                                      29           5
               Accounts payable                                 (17)       (822)
               Accrued professional fees                       (136)       (178)
               Accrued clinical trial costs                    (160)          6
               Accrued interest payable                        --          (225)
               Accrued restructuring cost                       (54)       (569)
               Accrued and other liabilities                   (205)        348
               Deferred revenue                                 (99)       (272)
                                                           --------    --------
Net cash used in operating activities                        (6,444)    (10,675)
                                                           --------    --------

Cash flows from investing activities:
     Expenditures for property and equipment                   (145)       (611)
                                                           --------    --------
        Net cash used in investing activities                  (145)       (611)
                                                           --------    --------


Cash flows from financing activities:
     Principal payments under capital leases                    (22)        (58)
     Principal payments of notes payable                        (55)       (716)
     Net proceeds from issuance of notes payable               --         1,500
     Net proceeds from issuance of common stock               1,693      17,865
                                                           --------    --------

Net cash provided by financing activities                     1,616      18,591
                                                           --------    --------

Net (decrease) increase in cash and cash equivalents         (4,973)      7,305
Cash and cash equivalents at the beginning
     of the period                                            9,384       8,026
                                                           --------    --------
Cash and cash equivalents at the end of the period         $  4,411    $ 15,331
                                                           ========    ========

Supplemental disclosure of cash flows information:
Cash paid for interest                                     $    124    $    458
                                                           ========    ========


                             See accompanying notes.

                                                                    Page 5 of 16

<PAGE>


                                  VIDAMED, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  June 30, 1999
                                   (Unaudited)

1.       Basis of presentation


The  accompanying  unaudited  condensed  consolidated  financial  statements  of
VidaMed, Inc. (the "Company" or "VidaMed") have been prepared in accordance with
generally accepted accounting  principles for interim financial  information and
with the  instructions  for Form 10-Q and  Article  10 of  Regulation  S-X.  The
balance sheet as of June 30, 1999 and the statements of operations for the three
and six months ended June 30, 1999 and 1998,  and the  statements  of cash flows
for the three and six months  ended June 30, 1999 and 1998,  are  unaudited  but
include all adjustments  (consisting of normal recurring  adjustments) which the
Company considers necessary for a fair presentation of the financial position at
such date and the operating  results and cash flows for those  periods.  Certain
information  normally  included in financial  statements  and related  footnotes
prepared in accordance with generally accepted  accounting  principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange  Commission.  The accompanying  financial  statements should be read in
conjunction  with the financial  statements  and notes included in the Company's
annual  report on Form 10-K,  as amended,  for the year ended  December 31, 1998
filed with the Securities and Exchange Commission.

Results  for any  interim  period  shown  in  this  report  are not  necessarily
indicative  of results to be expected  for any other  interim  period or for the
entire year.

2.       Net Loss Per Share

The  Company  calculates  net loss per share in  accordance  with  Statement  of
Financial  Accounting  Standards No. 128,  "Earnings  per Share."  Statement 128
requires  the  presentation  of basic  earnings  (loss)  per share  and  diluted
earnings (loss) per share, if more dilutive,  for all periods  presented.  Basic
and diluted net loss per share are computed using the weighted-average number of
shares of common stock outstanding during the periods presented. Securities that
could  share in the  earnings of the  Company,  such as  options,  warrants  and
convertible  securities,  are excluded from the computation,  as their effect is
anti-dilutive. As the Company has incurred losses from operations in each of the
periods presented, there is no difference between basic and diluted net loss per
share amounts.


3.       Inventories

Inventories  are  stated at the lower of cost  (determined  using the  first-in,
first-out method) or market value. Inventories at June 30, 1999 and December 31,
1998 consist of the following (in thousands):

                                                      June 30,      December 31,
                                                        1999           1998
                                                       ------         ------
             Raw materials                             $   93         $  404
             Work in process                                0            261
             Finished goods                               798            563
                                                       ------         ------
                                                       $  891         $1,228
                                                       ======         ======


Reductions  in  raw  materials  and  work  in  process  levels  are  due  to the
outsourcing of manufacturing.

4.       Notes Payable

During 1998,  the Company  finalized a  commitment  for $5.5 million in new debt
financing  with  Transamerica  Technology  Finance,  a division of  Transamerica
Corporation.  The facility is secured by the Company's  assets and consists of a
revolving accounts  receivable-based  credit line of up to $3 million and a $2.5
million equipment term

                                                                    Page 6 of 16

<PAGE>

loan.  The term loan was funded in full as of December 31, 1998,  at an interest
rate of 12% per year.  Repayment  of that loan is  amortized  over a  three-year
period,  with the first  monthly  payment  having been made in December 1998 and
continuing monthly thereafter.

As of June 30, 1999, the Company borrowed  approximately  $200,0000  against the
revolving  accounts  receivable-based  line at a rate of 9.75% per year.  It was
eligible to borrow  approximately  $330,000  against this line on June 30, 1999,
and borrowed the remaining  available balance of approximately  $130,000 in July
1999.

5.        Restructuring Accrual

In September 1997, VidaMed announced a restructuring  program designed to reduce
costs  and  improve  operating   efficiencies  by  closing  the  Company's  U.K.
manufacturing facility. The charge in the third quarter of 1997 was $2.1 million
recorded in cost of products sold.

The  elements  of the  total  charge  as of June  30,  1999 are as  follows  (in
thousands):

                                                   Representing
                                     -------------------------------------------
                                                           Cash Outlays
                                                 -------------------------------
                                      Total       Asset
                                     Charges    Write-down   Completed    Future
Fixed assets                          $  390      $  390      $ --        $ --
Facility shut down                     1,305        --         1,305        --
Grant repayment                          405        --           207         198
                                      ------      ------      ------      ------
Total Special Charges                 $2,100      $  390      $1,512      $  198
                                      ------      ------      ------      ------

6.       Reporting Comprehensive Income (Loss)

As of January 1, 1998,  the Company  adopted  Statement of Financial  Accounting
Standards No. 130, "Reporting  Comprehensive  Income" (Statement 130). Statement
130 establishes new rules for the reporting and display of comprehensive  income
and its  components.  Statement 130 requires  unrealized  gains or losses on the
Company's   available-for-sale   securities  and  foreign  currency  translation
adjustments,  to be included in other  comprehensive  income (loss).  During the
three and six months ended June 30, 1999 and 1998, the total  comprehensive loss
was not materially different from the net loss.

7.       Common Stock

The  increase  in capital  stock for the six  months  ended  June 30,  1999,  is
primarily due to the sale of common stock to the principals of Telo Electronics,
one of our  manufacturers.  On December  17, 1998,  the Company  entered into an
agreement to sell 368,596  shares of its common stock to the  principals of Telo
Electronics,  one of our  manufacturers.  The purchase price of the common stock
was $2.713,  the average  closing price of the common stock for the five trading
days preceding  December 17, 1998. The common stock was paid for with promissory
notes  delivered on December 17, 1998. The  transaction  closed in February 1999
when the  promissory  notes plus  interest were paid.  The Company  received net
proceeds of $1,000,000 from that transaction.

8.       Retention Agreements

In October 1998,  the Company  entered into  retention  agreements  with certain
executive officers. Under those agreements,  the Company was obligated to pay up
to $810,000 on April 1,1999, if those officers remained with the Company through
April 1, 1999. All officers  covered by the retention  agreements  remained with
the Company  through April 1, 1999,  and the Company paid $810,000  according to
the terms of the agreements.



                                                                    Page 7 of 16

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS


The following is a discussion and analysis of VidaMed's  consolidated  financial
condition  and results of  operations  for the three months and six months ended
June 30, 1999 and 1998.  We also  discuss  certain  factors  that may affect our
prospective  financial condition and results of operations.  This section should
be read in conjunction with the Condensed  Consolidated Financial Statements and
related Notes in Item 1 of this report and the  Company's  Annual Report on Form
10-K,  as amended,  for the year ended  December 31, 1998,  which has been filed
with the Securities and Exchange Commission and is available from the Company at
no charge.

Cautionary Statement Regarding Forward-Looking Statements


This Management's  Discussion and Analysis of Financial Condition and Results of
Operations  contains,  in addition to  historical  information,  forward-looking
statements that are based on VidaMed's current expectations, beliefs, intentions
or future  strategies.  The  forward-looking  statements  concern,  among  other
things,  the  availability  of cash resources to fund  continued  operations and
market  acceptance  of  and  the  likelihood  of  additional  Medicare  coverage
approvals  for the TUNA  Procedure.  We base all  forward-looking  statements on
information  available to us on the date of this report.  We do not undertake to
update any such  forward-looking  statements to reflect  events that arise after
the date of this report.  Actual results could differ  materially  from those in
the forward-looking statements because of the factors described under "Liquidity
and Capital  Resources"  and "Risk  Factors"  in this  report and other  factors
described  in our annual  report on Form 10-K,  as  amended,  for the year ended
December 31, 1998.


Overview

We design,  develop,  and market  urological  systems  that are used for urinary
tract disorders.  Our products  primarily treat the enlarged  prostate or Benign
Prostatic  Hyperplasia ("BPH"), a noncancerous  condition of the prostrate gland
affecting  urination.  VidaMed's  primary  product,  the  patented  VidaMed TUNA
System,  is a reasonably  priced  alternative  therapy that  minimizes  surgical
invasion,  side  effects and  complications  for this  condition.  In the United
States,  we  sell  our  products   primarily  through  direct  sales  personnel.
Internationally,  we primarily sell to distributors who resell to physicians and
hospitals.


At the beginning of fiscal 1999, we began  restructuring our United States sales
and marketing model to align with current hospital-based reimbursement coverage.
Under the prior  model,  we focused on selling  the TUNA  System  generator  and
related equipment to hospitals, physician groups and ambulatory service centers.
Under the new sales model, an entire TUNA System is placed with a hospital at no
initial  capital  charge,  and a per  use  fee is  charged  for  each  procedure
performed.

We received FDA clearance to market the TUNA System in 1996.  In 1998,  Medicare
reimbursement  coverage became available for procedures using our equipment that
are  performed  in  hospitals.  As of June 30,  1999,  36  states  provide  such
reimbursement  coverage.  To achieve  significant  increases  in sales,  we must
actively  promote  the  fee-per-use  program and secure  Medicare  reimbursement
coverage at least in all states with large  populations  of men over 50 years of
age, which is our target patient population. The Company has several initiatives
underway to facilitate the Medicare  reimbursement  coverage process,  including
working in cooperation  with state Medicare Medical  Directors.  Notwithstanding
the  foregoing,  there  can  be no  assurance  that  the  Company  will  receive
additional Medicare  reimbursement  coverage in major states in a timely manner,
and the failure to receive such coverage would have a material adverse effect on
the business, financial condition and results of operations of the Company.


Medicare  coverage for supplies and devices in the  office-based and ASC markets
was delayed in mid-1998 due to Medicare's  review of its "Year 2000" compliance.
We believe that Medicare  reimbursement in doctors' offices and ASCs, as well as
patient awareness and physician  advocacy of the TUNA System and procedure,  are
our greatest  challenges.  Our business strategy is to focus marketing and sales
efforts on patient education and physician  support

                                                                    Page 8 of 16

<PAGE>

for our fee-per-use  program while at the same time continue to advance Medicare
reimbursement for the TUNA Procedure,  but, as discussed below in "Liquidity and
Capital  Resources,"  we will not be able to do so  without  additional  debt or
equity financing.


Although initial results from our fee-per-use  sales model are favorable,  we do
not  anticipate  reaching  profitability  in the  near  future.  We  expect  our
operating  losses to  continue  as we  commit  substantial  resources  to expand
marketing and sales  activities,  fund clinical  trials in support of regulatory
and  reimbursement  approvals,  and fund  research and  development.  Our future
profitability will be dependent upon, among other factors,  market acceptance of
the VidaMed TUNA Procedure, availability and timing of third-party reimbursement
for  procedures  performed  with the TUNA  System,  adoption of our  fee-per-use
program  and our  ability  to fund  operations  absent  sufficient  sales of our
products.

There  can be no  assurance  that the TUNA  System  will  continue  to be deemed
clinically or cost  effective by health care  providers and payors,  superior to
other  current and emerging  methods for  treating  BPH, or that the TUNA System
will achieve  significant  market acceptance in the United States.  Furthermore,
determinations   of   reimbursement   of  the  TUNA  Procedure  by  private  and
governmental  health payors are made by such payors and their medical  directors
independent of the FDA approval. Accordingly, there can be no assurance that the
TUNA  Procedure  will  be  reimbursed  at  adequate  levels  or  continue  to be
reimbursed  at adequate  levels in the United  States  under  either  private or
governmental  healthcare  payment systems.  Both lack of coverage and inadequate
reimbursement for the TUNA Procedure could adversely affect market acceptance of
the TUNA System.  Failure of the TUNA Procedure to achieve market  acceptance in
the United States, lack of adequate funding,  the impact of competitive products
and  pricing  and  other  risks  could  have a  material  adverse  effect on our
business, financial condition and results of operations.


Results of Operations

Net revenue for the three months ended June 30, 1999 was $1,225,000. This was an
increase  of $314,000 or 34% from  $911,000 in the three  months  ended June 30,
1998.  Product sales in the second  quarter of 1999  increased 40% to $1,208,000
from  $861,000 in the same period in 1998.  The  difference  is due primarily to
increased European sales.


For the first six months of 1999, net revenue  decreased 12% to $2,263,000  from
$2,575,000  during the same period of 1998.  The  decrease is  primarily  due to
non-recurring  grant revenue that was recognized in 1998. Though the net product
revenues  did not  change  materially  from the first six  months of 1998 to the
first six months of 1999, the source of revenues  changed.  Product revenues for
the prior  period were  generated  from the sales of entire TUNA  Systems  while
product  revenues for the first six months of 1999  included  revenues  from our
fee-per-use program, as discussed above in the section entitled "Overview."

Cost of product sold for the three months ended June 30, 1999 was  $646,000,  an
increase of 6% or $38,000  from  $608,000  for the three  months  ended June 30,
1998.  This increase was a function of higher product sales.  For the six months
ended  June  30,  1999  cost of  product  sold  was  $1,480,000,  down  12% from
$1,680,000 in the first six months of 1998.  The decrease is a function of (i) a
transition  from a sales  and  marketing  model  based on the  sales of the TUNA
System to a fee-per-use sales model, and (ii) outsourcing the manufacture of our
disposable product resulting in lower materials cost.


Research and development (R & D) expenses  included  expenditures for regulatory
compliance and clinical trials. Clinical trial costs consist largely of payments
to clinical  investigators,  product for clinical  trials,  and costs associated
with initiating and monitoring  clinical trials.  R&D expenses  decreased 38% to
$742,000 in the three  months ended June 30, 1999 from  $1,200,000  in the three
months  ended June 30,  1998.  For the six months  ended June 30, 1999  expenses
decreased 33% to $1,555,000 from $2,334,000 in the first six months of 1998. The
decrease was primarily due to reduced clinical activity in 1999,  resulting from
the  completion  of FDA  clinical  trial  studies,  and  the  completion  of R&D
expenditures for our current ProVu generation of products in 1998.

                                                                    Page 9 of 16

<PAGE>


Selling,  general and administrative  (SG&A) expenses increased 3% to $3,409,000
in the three  months  ended June 30, 1999 from  $3,297,000  in the three  months
ended June 30, 1998.  The increase is primarily  attributed to costs  associated
with  executive  retention  and  reorganizing  our U.S.  sales force,  including
recruiting costs, offset by legal expenses.

For the first six months ended June 30, 1999 SG&A expenses decreased  $1,991,000
or 25% from $7,904,000 in 1998 to $5,913,000 in 1999. The decrease is a function
of higher  expenditures in the first quarter of 1998,  including a charge to the
allowance for doubtful  accounts  necessitated by the length of time involved in
obtaining state Medicare coverage,  a charge incurred in the transition to a new
chief executive officer and a charge for legal expenses.


Other income/expense for the three months ended June 30, 1999 included income of
$87,000 compared to an expense of $46,000 for the comparable period in 1998. For
the six months  ended June 30,  1999 other  income was  $44,000  compared  to an
expense of $135,000  for the six months  ended June 30,  1998.  Other  income is
primarily composed of interest income and expense.

VidaMed's results of operations have fluctuated in the past and may fluctuate in
the  future  from  year to year as well as from  quarter  to  quarter.  Revenues
fluctuate as a result of several factors, including:

o        Regulatory and reimbursement approvals
o        Results of clinical trials
o        The extent to which the TUNA System gains market  acceptance
o        Varying pricing promotions
o        Volume  discounts to customers and  distributors
o        Introduction  of new products, and
o        Introduction of competing alternative therapies for BPH.

Operating expenses fluctuate as a result of several factors, including:

o        The timing of expansion of sales and marketing activities
o        Costs and frequency of clinical activities, and
o        R&D and SG&A expenses associated with the potential growth of VidaMed's
         organization.

VidaMed expects operating losses to continue at least through fiscal year 2000.

Liquidity and Capital Resources


As of June 30, 1999, our cash and cash equivalents  decreased by $5.0 million to
$4.4 million, compared to $9.4 million at December 31, 1998. The decrease is due
to operating expenses incurred in the normal course of business,  offset in part
by the issuance of equity as discussed in footnote 7.

As we began fiscal 1999, we believed that our current cash  balances,  projected
cash flows from operations  including a U.S.  procedure based sales program (the
"fee-per-use  program")  and cash  available  under the  Transamerica  financing
facility  would  be  sufficient  to  meet  our  current  operating  and  capital
requirements  through  the end of the  fiscal  year.  We now  believe  that  the
fee-per-use program will take longer to implement than originally planned. In an
effort to increase revenues, we believe that it is necessary to:

         o Increase consumer awareness of the treatment options available to BPH
           patients  with the view that an  informed  patient and his doctor are
           more likely to choose the TUNA procedure;
         o Provide  opportunities  for  our  field  organization to increase the
           number of physicians who perform TUNA Procedures; and


                                                                   Page 10 of 16

<PAGE>



         o Implement  marketing  initiatives  to assist  physicians  build their
           practices by increasing the number of TUNA Procedures performed.

The increased costs associated with this  three-pronged  approach  together with
lower than anticipated  revenues from the fee-per-use program will require us to
obtain   additional   financing  to  meet  our  current  operating  and  capital
requirements  through the end of the fiscal year.  Management  is pursuing,  and
believes it can obtain,  financing  to fund  operations  through the end of this
fiscal  year and into  fiscal  year 2000.  Additional  financing  will likely be
required in order to fund operations throughout fiscal 2000.

We cannot give any assurance  that we will be successful in securing any debt or
equity  financing,  or that such financing,  if available,  will be on favorable
terms. Any future equity financing would result in dilution to our stockholders.
If we are unable to secure additional  financing this year, we would not be able
to  continue  as a going  concern.  We  would be  forced  to  explore  strategic
relationships,  reduce  staff and  discontinue  clinical  trials,  research  and
development and marketing and sales activities.

During 1998,  we finalized a commitment  for $5.5 million in new debt  financing
with Transamerica  Technology  Finance, a division of Transamerica  Corporation.
The  facility  is secured by our assets and  consists  of a  revolving  accounts
receivable-based  credit line of up to $3 million and a $2.5  million  equipment
term  loan.  The term loan was funded in full as of  December  31,  1998,  at an
interest  rate of 12% per  year.  Repayment  of that  loan is  amortized  over a
three-year  period,  with the first monthly payment having been made in December
1998 and continuing monthly thereafter.

As of June 30, 1999, we borrowed  approximately  $200,0000 against the revolving
accounts  receivable-based line at a rate of 9.75% per year. We were eligible to
borrow  approximately  $330,000 against this line on June 30, 1999, and borrowed
the remaining available balance of approximately $130,000 in July 1999.

Restructuring Accrual

In September 1997, VidaMed announced a restructuring  program designed to reduce
costs and  improve  operating  efficiencies  by closing  our U.K.  manufacturing
facility.  In 1997, we incurred a $2,100,000 charge in cost of goods sold due to
the closure of the plant. The charge reflects $390,000 for the estimated loss on
the  abandonment  of  fixed  assets,  a  $1,305,000  charge  for our  short-term
obligation  related to the closure of our British  manufacturing  facility and a
$405,000 obligation to repay a grant received when we opened the facility. As of
June 30, 1999, the remaining  accrual balance is $198,000 and consists mainly of
a grant  repayment  due by the end of 1999.  See  Note 5 of  Notes to  Condensed
Consolidated Financial Statements.

RISK FACTORS

Our  business,  results of operations  and financial  condition are subject to a
number of risk factors,  in addition to those  described above under "Results of
Operations"  and "Liquidity  and Capital  Resources" and in our annual report on
Form 10-K for the year ended December 31, 1998, as amended.


                                                                   Page 11 of 16

<PAGE>


Potential Loss of Nasdaq Listing

The  continuing  listing  requirements  for inclusion of our stock on the Nasdaq
National  Market  require that we maintain  minimum net tangible  assets of $4.0
million.  As of June 30,  1999,  our net  tangible  assets  decreased  to $2.375
million.  Although we are attempting to increase our net tangible assets through
the sale of securities  and increased  sales of our  products,  the  Nasdaq-Amex
Market Group of the NASD ("Nasdaq-Amex") could initiate de-listing  proceedings.
There  is no  assurance  that we will be able to  raise  sufficient  capital  or
increase sales to meet the minimum net tangible asset listing  requirements.  In
addition,  there  are other  minimum  listing  requirements  that  VidaMed  must
continually  satisfy. For example, our common stock cannot close below $1.00 for
30  consecutive  trading  days.  The  failure to  satisfy  any  minimum  listing
requirement could result in the initiation of delisting proceedings.

In August 1999,  Nasdaq-Amex notified us that we were out of compliance with the
net tangible  assets  requirement  for continued  listing on the Nasdaq National
Market. The Company has been asked to submit a plan for achieving  compliance to
Nasdaq-Amex.  No delisting action will be taken against VidaMed until we have an
adequate opportunity to respond.

Delisting from the Nasdaq National  Market could adversely  affect the liquidity
and price of the Company's  common stock.  Moreover,  investors may find it more
difficult  to  dispose of or obtain  accurate  quotations  for our common  stock
because the bid and asked quotations would be reported on an electronic bulletin
board such as the OTC Bulletin Board or a similar quotation medium.

Manufacturing

Three of the four major  components of the TUNA System are manufactured by third
parties.  We  manufacture  the VTS PROVu  Reuseable  Handle at our  headquarters
facility in Fremont, California. Telo Electronics manufactures the VTS Generator
(Model 7600) at its facility in San Jose,  California.  Ziess  Humphrey  Systems
manufactures the VTS Disposable Cartridge at its facility in Dublin, California.
Karl Storz manufactures the VTS PROVu Telescope at its facility in Germany.  The
transition to Zeiss Humphrey Systems was completed during the quarter ended June
30, 1999.

By outsourcing our manufacturing, we are at risk that our manufacturers will not
be able to supply us with our products as ordered. Our products are continuously
subject to Food and Drug Administration regulation,  including recordkeeping and
reporting  requirements  regarding use of the device.  Manufacturing  facilities
where we outsource products are also subject to periodic  inspection by federal,
state and foreign  regulatory  agencies.  Failure of our manufacturers to comply
with regulatory requirements could adversely effect our business.

Impact of Year 2000

Many currently  installed  computer  systems and software  products are coded to
accept,  store,  or report  only two digit  year  entries  in date code  fields.
Beginning  in the Year 2000  (Y2K),  these date code  fields will need to accept
four digit entries to  distinguish  21st century dates from 20th century  dates.
The Y2K  issue is a result  of these  programs  being  written  with two  digits
instead of four. As a result,  computer  systems and software used by companies,
including  us and our  vendors and  customers,  will need to comply with the Y2K
requirements. We presently believe that as a byproduct of normal business system
modifications  and  upgrades  and the  short  length  of  time  we have  been in
operation,  the Y2K issue  should  not have a  material  effect  on our  current
financial position,  liquidity or results of operations.  However, this does not
completely  prevent the possibility of problems arising related to the Y2K issue
that could have a material impact on our operations.

We have been  proactive in addressing the Y2K issue  internally and  externally.
Our primary  software  system is currently  Y2K  compliant.  We do not depend on
in-house  custom  systems and  generally  purchase  off-the-shelf  software from
reputable  vendors who have tested their  software for Y2K  compliance.  The Y2K
issue is being

                                                                   Page 12 of 16

<PAGE>

considered for all future software purchases.  Although we believe the Y2K issue
will not pose material operational problems for our computer systems,  there can
be no assurance  that  problems  arising  from the Y2K issue will be  completely
eliminated.

We have initiated  communication with our significant suppliers and customers to
determine the extent to which our  operations are vulnerable to a failure of any
of those third parties to remediate their own Y2K issues. The Company determined
that  Medicare  coverage for supplies  and devices in the  office-based  and ASC
markets was delayed in mid-1998 due to Medicare announced Y2K problems.  The ASC
reimbursement program, which was expected to be effective January 1, 1999 is not
likely  to be  effective  before  June 30,  2000.  As a result  of the  Medicare
coverage  delays,  the Company  established a $2.7 million  reserve in the third
quarter of 1998 for all office-based and ASC sales. Other than issues related to
Medicare,  none of our significant  suppliers or large customers has notified us
that they have significant Y2K problems. Even where assurances are received from
third  parties,  however,  there  remains a risk that  failure  of  systems  and
products  of other  companies  on which we rely could  have a  material  adverse
effect on our business.

Our  products  are Y2K  compliant  and are able to  operate in the Year 2000 and
beyond.  There  are  two  processors  used in the  TUNA  System  generator.  One
processor  does not have date  sensitivity  while the other does. We have tested
the date sensitive  processor and have concluded that it has no significant  Y2K
problems.

We believe  we have an  effective  program  in place to resolve  Y2K issues in a
timely manner. We also have contingency plans for certain critical  applications
and are working on such plans for others. These contingency plans involve, among
other actions:

o        Manual workarounds (e.g. manual preparation of invoices, paychecks)
o        Adjusting staffing strategies.

In the  event  that we do not  completely  resolve  all of the Y2K  issues,  our
business  operations could be adversely  affected.  Although the resulting costs
and loss of business  cannot be  reasonably  estimated at this time, we have not
and do not expect to have material costs associated with the Y2K issues.

The most reasonably likely worst case scenario relates to our ability to use our
computerized  manufacturing and accounting system. Although the software product
is Y2K compliant, other unforeseen factors could render it inoperative,  such as
the inability of public  utilities to provide  service.  This  occurrence  could
materially adversely effect our business.  We could also be required to manually
prepare documents, such as shipping documents, invoices and checks and the like.
Such tasks would be more time  consuming  and would  likely  require  additional
human resources to complete.


Item 3.           Quantitative and Qualitative Disclosures About Market Risk


         We are exposed to interest rate risk on the  investments  of our excess
cash.  The  primary  objective  of  our  investment  activities  is to  preserve
principal  while  at  the  same  time  maximize  yields  without   significantly
increasing risk. To achieve this objective,  we invest in highly liquid and high
quality debt  securities.  To minimize  the  exposure  due to adverse  shifts in
interest rates, we invest in short-term  securities with maturities of less than
one year.  Due to the nature of our  short-term  investments,  we have concluded
that we doe not have a material market risk exposure.


PART II: OTHER INFORMATION

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


VidaMed held its annual meeting on June 3, 1999. Our  stockholders  voted on the
following proposals.


                                                                   Page 13 of 16

<PAGE>

The stockholders  approved an amendment to the Company's Restated Certificate of
Incorporation  increasing the number of authorized common shares from 30,000,000
to 60,000,000.  There were 14,940,299  votes for and 1,815,378 votes against the
proposal, with 1,852,359 abstentions.

The election of directors was conducted and the following nominees were elected,
with the following vote count:

                                               Votes                    Votes
         Name                                   For                   Withheld
         -------------------------          ----------               ---------

         Franklin D. Brown                  18,380,044                 227,992
         Robert Erra                        18,381,589                 226,447
         David J. Illingworth               18,386,371                 221,665
         Wayne I. Roe                       15,579,406               3,028,630
         Michael H. Spindler                18,380,289                 227,747


The stockholders  approved an amendment to our 1995 Employee Stock Purchase Plan
to increase  the number of shares of common stock  reserved for future  issuance
under the plan by 200,000  shares to a new total of 600,000  shares.  There were
10,312,832  votes for and 589,954  votes  against the  amendment,  with  122,591
abstentions and 7,582,659 shares not voting.

The stockholders did not approve an amendment to the 1992 Stock Plan to increase
the number of shares of common stock  reserved for future  issuance by 1,200,000
shares to a new total of 5,500,000  shares.  There were 4,058,264  votes for and
6,591,311  votes against the amendment,  with 148,901  abstentions and 7,809,560
shares not voting.


The  stockholders  approved an  amendment  to the 1995  Director  Option Plan to
eliminate the vesting  provisions  and to vest  immediately  any future  options
granted under the plan.  There were  14,761,446  votes for and  3,649,417  votes
against the amendment, with 197,173 abstentions.

The stockholders  ratified Ernst & Young LLP as our independent auditors for the
fiscal  year ending  December  31,  1999.  There were  18,336,879  votes for and
189,177 votes against ratification, with 81,980 abstentions.

Item 5.           Other Information

Management Changes


In June 1999,  several  changes  occurred in our  management and on our Board of
Directors.  David Illingworth  resigned as President and Chief Executive Officer
to become  Executive  Chairman  of the  Board,  effective  August 1,  1999.  Mr.
Illingworth  will  devote up to 50  percent  of his  working  time to  strategic
relationships and strategic  planning.  He continues to serve as Chairman of the
Board of Directors.  Mr. Illingworth's contract with VidaMed for his services as
Executive Chairman is attached as an exhibit to this report.

Randy  Lindholm,  who had  been  our  Executive  Vice  President  of  Sales  and
Marketing,  was promoted to President  and Chief  Executive  Officer,  effective
August 1, 1999. Mr. Lindholm also joined the Board of Directors.  Mr. Lindholm's
contract with VidaMed for his services as President and Chief Executive  Officer
is attached as an exhibit to this report.


Two members of the Board of  Directors of VidaMed  resigned in June 1999.  Wayne
Roe resigned due to potential  conflicts in his relationship with a major health
care industry  consulting  firm. Mr. Roe's  resignation was effective  August 1,
1999.  Frank  Brown  resigned  due  to  personal  health  reasons.  Mr.  Brown's
resignation was effective July 1, 1999.

                                                                   Page 14 of 16

<PAGE>

VidaMed now has 4 members on its Board of Directors.  A nominating  committee of
the Board,  consisting  of Robert Erra and Mr.  Illingworth,  has been formed to
conduct a search for a new Board member.


On August  23,  1999,  John F.  Howe  replaced  Richard  D.  Brounstein  as Vice
President  Finance,  Chief Financial  Officer.  Mr.  Brounstein will remain with
VidaMed to effectuate a smooth transition.


Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits


                  10.19(1) Transition Agreement between VidaMed, Inc. and David
                           Illingworth, dated June 26, 1999.
                  10.20(1) Employment Agreement between VidaMed, Inc. and Randy
                           Lindholm, dated June 22, 1999.
                   27.1    Financial Data Schedule


         (b)      Reports on Form 8-K.

                           No reports on Form 8-K were filed  during the quarter
                           ended June 30, 1999.


(1) Filed as an Exhibit to the  Company's  original  Report on Form 10-Q for the
Quarter ended June 30, 1999 and incorporated herein by reference.

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.

                                  VIDAMED, INC.

Date:  August 26, 1999         By:     /s/   Randy D. Lindholm
      -------------------           ------------------------------------
                                    Randy D. Lindholm
                                    President, Chief Executive Officer

Date:  August 26, 1999         By:     /s/   John F. Howe
      -------------------           -------------------------------
                                    John F. Howe
                                    VP Finance, Chief Financial Officer
                                    (Principal Financial and Accounting Officer)