<PAGE>

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

                                   FORM 10-Q


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

     For the quarterly period ended March 31, 2000

                                       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:  0-26082


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



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


                             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 30,090,833 as of March 31, 2000.
<PAGE>

                                 VIDAMED, INC.

                                     INDEX

<TABLE>
<CAPTION>
                                                                                     Page
<S>        <C>                                                                       <C>
PART I.   FINANCIAL INFORMATION

Item 1.        Condensed Consolidated Financial Statements - unaudited

               Condensed consolidated balance sheets - March 31, 2000
                    and December 31, 1999                                             3

               Condensed consolidated statements of operations - three months
                    ended March 31, 2000 and 1999.                                    4

               Condensed consolidated statements of cash flows - three months
                    ended March 31, 2000 and 1999                                     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             12

PART II.  OTHER INFORMATION

Item 5.        Other Information                                                     13

Item 6.        Exhibits and reports on Form 8-K                                      13

               Signatures                                                            14

Financial Data Schedule                                                              15

Exhibit Index                                                                        16
</TABLE>
<PAGE>

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                                                     March 31, 2000         December 31,1999
                                                                  -------------------    ----------------------
                                                                        (Unaudited)               (*)
    <S>                                                           <C>                    <C>
    Assets
    Current Assets:
         Cash and cash equivalents                                     $        12,173      $        2,748
         Accounts receivable                                                     1,753               1,443
         Inventories                                                               349                 415
         Other current assets                                                      390                 531
                                                                       ---------------      ---------------
                     Total current assets                              $        14,665      $        5,137


         Property and equipment, net                                             2,426               2,017
         Other assets, net                                                         101                 166
                                                                       ---------------      ---------------
                     Total assets                                      $        17,192      $        7,320
                                                                       ===============      ===============


    Liabilities and stockholders' equity
    Current liabilities:
         Accounts payable                                              $           568      $          461
         Accrued liabilities                                                     1,973               2,558
         Deferred revenue                                                          339                 272
         Notes payable, current portion                                          1,390               1,394
                                                                       ---------------      ---------------
                     Total current liabilities                         $         4,270      $        4,685

         Notes payable, long-term portion                                          829               1,030

    Stockholders' equity:
        Capital stock                                                          114,351             101,725
        Accumulated deficit                                                   (102,258)           (100,120)
                                                                       ---------------      ---------------
                     Total stockholders' equity                                 12,093               1,605
                                                                       ---------------      ---------------
                     Total liabilities and stockholder's equity        $        17,192      $        7,320
                                                                       ===============      ===============
</TABLE>

  *The Balance Sheet at December 31, 1999 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>

                                 VidaMed, Inc
                Condensed Consolidated Statement of Operations
              (In thousands, except share and per share amounts)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                               Three Months Ended
                                                                                    March 31
                                                                             2000              1999
                                                                       ----------------  ----------------
                   <S>                                                 <C>               <C>
                   Revenues                                               $      2,524      $      1,037

                   Cost of Product Sold                                            767               833
                                                                       ----------------  ----------------
                   Gross Profit                                                  1,757               204


                   Operating Expenses:
                          Research and Development                                 783               814
                          Selling, General and Administrative                    3,265             2,504
                                                                       ----------------  ----------------
                          Total Operating Expenses                               4,048             3,318

                                                                       ----------------  ----------------
                   Loss from Operations                                         (2,291)           (3,114)

                   Other income (expense), net                                     153               (42)
                                                                       ----------------  ----------------
                   Net loss                                               $     (2,138)     $     (3,156)
                                                                       ================  ================

                   Basic and diluted net loss per share                   $      (0.07)     $      (0.16)
                                                                       ================  ================
                   Shares used in computing basic and
                   diluted net loss per share                               28,936,000        20,313,000
                                                                       ================  ================
</TABLE>


                            See accompanying notes


                                                                    Page 4 of 16
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                     Three Months Ended
                                                                                          March 31
                                                                                 2000                 1999
                                                                          -------------------  --------------------
<S>                                                                       <C>                  <C>
Cash flows from operating activities:
 Net loss                                                                 $      (2,138)          $        (3,156)
 Adjustments to reconcile net loss to net cash
    used in operating activities:
           Depreciation and amortization
           Changes in current assets and liabilities:                               380                       313
              Accounts receivable                                                  (310)                     (271)
              Inventory                                                              66                       208
              Other current assets                                                  141                        66
              Other assets                                                           65                        (2)
              Accounts payable                                                      107                       (83)
              Accrued liabilities                                                  (379)                       77
              Deferred revenue                                                       67                         2
                                                                         --------------           ---------------
Net cash used in operating activities                                            (2,001)                   (2,846)
                                                                         --------------           ---------------

Cash flows from investing activities:
 Expenditures for property and equipment                                           (789)                      (58)
                                                                         --------------           ---------------
 Net cash used in investing activities                                             (789)                      (58)
                                                                         --------------           ---------------

Cash flows from financing activities:
 Principal payments under capital leases                                              -                       (22)
 Principal payments of notes payable                                               (205)                      (30)
 Net cash proceeds from issuance of common stock                                 12,420                     1,388
                                                                         --------------           ---------------
Net cash provided by financing activities                                        12,215                     1,336
                                                                         --------------           ---------------

Net increase (decrease) in cash and cash equivalents                              9,425                    (1,568)
Cash and equivalents at the beginning of the period                               2,748                     9,384
                                                                         --------------           ---------------
Cash and equivalents at the end of the period                             $      12,173           $         7,816
                                                                         ==============           ===============

Supplemental disclosure of cash flows information:
Cash paid for interest                                                    $         153           $            95
                                                                         ==============           ===============
</TABLE>


                            See accompanying notes.

                                                                    Page 5 of 16
<PAGE>

                                 VIDAMED, INC.
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                March 31, 2000
                                  (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 March 31, 2000, the statements of operations for the three
months ended March 31, 2000 and 1999, and the statements of cash flows for the
three months ended March 31, 2000 and 1999, are unaudited but include all
adjustments (consisting of normal recurring adjustments) that 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 for the year ended December 31, 1999, 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

Basic net loss per share is computed using the weighted-average number of shares
of common stock issued and outstanding during the periods presented. Diluted net
loss per share is computed based on the weighted average number of shares of our
common stock and common equivalent shares (stock options and warrants to
purchase common stock) if dilutive. Because 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. As of March 31, 2000, we had
30,090,833 issued and outstanding shares of common stock , with an additional
3,291,554 options outstanding under employee and director stock option plans,
and an additional 3,945,563 warrants outstanding to purchase common stock. The
options and warrants will be included in the calculation of net loss per share
at such time as their effect is no longer anti-dilutive, as calculated using the
treasury stock method.

3.   Inventories

Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market value. Inventories at March 31, 2000 and December
31, 1999 consist of the following (in thousands):

                                   March 31,        December 31,
                                     2000              1999
                                   ---------        ------------
          Raw materials            $     129          $      147
          Work in process                 16                  39
          Finished goods                 204                 229
                                   ---------          ----------
                                   $     349          $      415
                                   =========          ==========

                                                                    Page 6 of 16
<PAGE>

4.   Notes Payable

In October 1998, we finalized a $5.5 million debt facility 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 March 31, 2000, we had borrowed approximately $505,000 against
the revolving accounts receivable-based line at a rate of 10.5% per year.

In January 2000, we renewed our debt facility arrangement with Transamerica and
in consideration of this renewal paid a fee of $15,000 and issued a warrant to
Transamerica to acquire an additional 77,320 shares of common stock for a
purchase price of $1.94 per share. The warrant has a term of five years.

5.   Reporting Comprehensive Income (Loss)

We follow the 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 our available-for-sale securities and
foreign currency translation adjustments, to be included in other comprehensive
income (loss). During the three months ended March 31, 2000 and 1999, the total
comprehensive loss was not materially different from the net loss.

6.   Common Stock

The increase in capital stock for the three months ended March 31, 2000, is due
to the issuance of 7,129,221 additional shares. In January, we sold 5,300,000
shares of common stock to Medtronic and 1,160,000 to existing shareholders. The
purchase price per share of common stock was $1.73, which represented a premium
to the average closing price for the five days preceding the sale. The
investors, including Medtronic, received warrants to purchase 1,938,000 shares
of common stock at an exercise price of $1.80 per share. The warrants have a
term of five years. In February 2000,we sold 106,648 shares of common stock to
MC Medical, Inc. at a per share price of $2.81, which was the average purchase
price five days preceding the sale. We issued 78,272 shares of common stock on
the exercise of outstanding warrants, 42,334 shares of common stock in
employment-related settlements and 441,967 shares of common stock under employee
stock option and purchase plans.

                                                                    Page 7 of 16
<PAGE>

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

The following is a discussion and analysis of VidaMed's consolidated financial
condition and results of operations for the three months ended March 31, 2000
and 1999. 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 for
the year ended December 31, 1999, which has been filed with the Securities and
Exchange Commission and is available from the Company at no charge.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995

This report contains, in addition to historical information, forward-looking
statements that are based on current expectations and beliefs but involve a
number of risks and uncertainties that could cause actual results to differ
materially form those anticipated in the forward-looking statements. Some of the
factors that could cause actual results to differ are discussed below in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in the "Risk Factors" discussion that follows. You should also
refer to the risk factors described in our annual report on Form 10-K for the
year ended December 31, 1999, which has been filed with the Securities and
Exchange Commission and is available from VidaMed at no charge. The
forward-looking statements included in this report are made only as of the date
hereof, and we undertake no obligation to publicly revise or update them to
reflect subsequent events or circumstances.

Overview

Since its founding in 1992, VidaMed has been engaged in the design, development
and marketing of urological systems, primarily focused on the treatment of the
enlarged prostate or benign prostatic hyperplasia, commonly known as BPH.
International sales of the patented TUNA System commenced in late 1993, and
commercial sales began in the United States in late 1996, after we received FDA
clearance. In 1997 the TUNA System was sold to office-based urology practices in
the U.S., assuming that after receiving FDA clearance, third-party
reimbursement, including Medicare, would be approved for those locations.

     In mid-1998, Medicare announced that approval of any new office-based or
ambulatory surgery center procedures, would be delayed until at least mid-2000
due to Y2K compliance issues. As a result, Medicare reimbursement for the TUNA
procedure was made available only for procedures performed in hospital-based
settings, and required individual state-by-state approval.

     Starting in late 1998 and throughout 1999, we focused our sales and
marketing efforts on obtaining the required individual state Medicare
reimbursement approvals and implementing of a new U.S. hospital-based "fee-per-
use" sales and marketing model. Under this model, an entire TUNA System is
placed in a hospital at no charge to the hospital. Revenue is generated by
selling a single-use component needed for each TUNA Procedure performed. Once
the procedure is performed the single-use component is discarded and a new
component must be purchased for the next procedure.

     As of March 31, 2000, 47 states have approved hospital-based Medicare
reimbursement coverage for the TUNA procedure. Recently, the Health Care Finance
Administration, which administers Medicare, proposed a new fixed rate or
"prospective payment system" for hospital-based procedures, to

                                                                    Page 8 of 16
<PAGE>

be implemented on July 1, 2000, that may cause a reduction in our current fee-
per-use pricing. The prospective payment system is expected to be easier to
administer than the current "reasonable cost basis" Medicare reimbursement
system. Although the full effect of the prospective payment system on our
current pricing structure is unknown at this time, we believe that the
simplified administration of Medicare reimbursement could accelerate our sales.
We cannot predict, however, whether an accelerated sales cycle and any related
increased revenues will offset any required price reductions.

     To achieve widespread acceptance of the TUNA Procedure, we believe that
Medicare reimbursement will need to be available for in physician offices and in
ambulatory surgery centers. If Medicare reimbursement coverage becomes available
in those settings, we expect the number of procedures performed will increase.
We do not, however, expect that Medicare reimbursement in those alternative
sites will be approved until at least mid to late 2000, if at all. The failure
to receive Medicare reimbursement coverage at adequate reimbursement rates for
procedures performed in physician offices and ambulatory surgery centers, or a
failure to continue to receive adequate Medicare reimbursement for procedures
performed in hospitals, could have a material adverse effect on our future
revenues and results of operations.

Results of Operations

Net revenue for the three months ended March 31, 2000 was $2,524,000, an
increase of $1,487,000 or 143% from $1,037,000 in the same period in 1999. Net
revenue in the first quarter of 2000 increased 17% from $2,156,000 in the three
months ended December 31, 1999. The difference is due primarily to increasing
acceptance of our fee-per-use program.

Cost of product sold for the three months ended March 31, 2000 was $767,000, a
decrease of 8% or $66,000 from $833,000 for the three months ended March 31,
1999. Despite lower product sales in the first quarter of 1999 as compared to
2000, overall cost of product sold were higher in the first quarter of 1999 due
to manufacturing expenditures incurred in transferring the manufacturing of our
single-use catheters from our Fremont facility to Zeiss Humphrey Systems, our
contract manufacturer.

Gross margin expressed as a percentage of sales in the three months ended March
31, 2000 was 70%, up from 20% for the three months ended March 31, 1999. This
improvement in gross margin is primarily attributed to the introduction and
acceptance of the fee-per-use program in early 1999. Gross margin for the three
months ended March 31, 2000 and December 31,1999 were $1,757,000 and $1,391,000,
respectively. This increase of $366,000 is primarily attributed to the increased
volume in our U.S. based fee-per-use program.

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 4% to
$783,000 in the three months ended March 31, 2000, from $814,000 in the three
months ended March 31, 1999. The decrease was primarily due to reduced clinical
activity in 2000. R&D expenses for the first quarter of 2000 decreased $13,000
from $798,000 in the three months ended December 31,1999.

Selling, general and administrative (SG&A) expenses for the three months ended
March 31, 2000 was $3,265,000, an increase of $761,000 or 30%, compared to
expenditures of $2,504,000 in the in the same period in 1999. The difference is
do to expansion of the sales and marketing departments to increase revenues from
the fee-per-use program. SG&A expenses for the first quarter of 2000 increased
$330,000 from $2,935,000 in the three months ended December 31, 1999. This is
attributed to higher sales

                                                                    Page 9 of 16
<PAGE>

commissions, higher effective employer payroll tax rates and one-time charges to
SG&A for outside consultants.

Other income/expense for the three months ended March 31, 2000, increased to
$153,000 in net income compared to an expense for the comparable period in 1999
of $42,000. Other income is primarily composed of interest income and expense.
Other income/expense in the three months ended December 31, 1999 was a net
expense of $150,000. This change is a result of additional interest income
realized in the first quarter of 2000.

History of Operating Losses

We have incurred significant operating losses since our inception in 1992 and,
as of March 31,2000, had an accumulated deficit of approximately $102.2 million.
We expect to continue to incur operating losses through the end of the year 2000
as we expend funds on sales and marketing activities, clinical trials in support
of reimbursement approvals and research and development. Our future
profitability depends on numerous factors, including:


     .  our success in promoting the fee-per-use program;

     .  our success in achieving market acceptance of the TUNA Procedure;

     .  our success in obtaining and maintaining necessary regulatory
        clearances;

     .  the extent to which Medicare and other healthcare payors approve
        reimbursement of the costs of TUNA Procedures performed in hospitals,
        doctors' offices and ambulatory surgery centers; and

     .  the amount of reimbursement provided and the effects of the proposed
        "prospective payment system" on our future revenues


Liquidity and Capital Resources

     For the quarter ended March 31, 2000, our cash and cash equivalents
increased by $9.4 million to $12.2 million, compared to $2.7 million at December
31, 1999. The increase is due primarily to $11.2 million received from the
private placement of our common stock and warrants during the quarter, offset by
operating expenses incurred in the normal course of business.

     While management believes that the proceeds of the equity financing in the
first quarter, plus revenues from the fee-per-use program will be sufficient to
fund operations at current levels through the end of fiscal 2000, additional
financing may be required to fund operations at current levels in 2001. If
required, management will pursue, and believes it can obtain, financing to fund
operations at current levels in 2001. Additional financing may not be available,
or if available, may not be on favorable terms.

     If additional financing is unavailable, management believes that it would
be able to fund operations into fiscal 2001 by scaling back research and
development, clinical trials, expansion into the office-based market and other
areas of discretionary spending. Reductions in those areas could have a

                                                                   Page 10 of 16
<PAGE>

material adverse effect on our long-term opportunities to develop new and
competitive products, obtain necessary governmental approvals of those products
and develop additional markets for our products.

     We have a line of credit 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. We may be
able to obtain additional debt financing from Transamerica, but we cannot give
any assurance that we will be able to do so or that the terms of the financing
would be favorable. Collaborative arrangements, if necessary to raise additional
funds, may require us to relinquish rights to certain of our technologies or
products. Our failure to raise capital when needed could have a material adverse
effect on our business, financial condition and results of operation.

     As of March 31, 2000, we had borrowed approximately $505,0000 against the
Transamerica revolving accounts receivable-based line at a rate of 10.5% per
year.

Recent Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" (Statement
133), which is required to be adopted in the first quarter of the year ending
December 31, 2001. Management does not anticipate that the adoption of Statement
133 will have a significant effect on our results of operations or our financial
position.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No.101 (SAB 101). SAB 101 summarizes certain areas of the
views of the SEC staff in applying generally accepted accounting principles to
revenue recognition in financial statements. We believe that our current revenue
recognition principles comply with SAB 101.

RISK FACTORS

Our business, results of operations and financial condition are subject to the
following 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, 1999.

Our Future Revenues Are Subject to Uncertainties Regarding Healthcare
Reimbursement and Reform

     The continuing efforts of government and insurance companies, health
maintenance organizations and other payors of healthcare costs to contain or
reduce costs of health care may affect our future revenues and profitability. In
the United States, given recent federal and state government initiatives
directed at lowering the total cost of health care, the U.S. Congress and state
legislatures will likely continue to focus on healthcare reform including the
reform of Medicare and Medicaid systems, and on the cost of medical products and
services.

   Our ability to commercialize the TUNA Procedure successfully will depend in
part on the extent to which the users of our products obtain appropriate
reimbursement for the cost of the TUNA Procedure. Third-party payors are
increasingly challenging the prices charged for medical products and services.
Also, legislative proposals to reform health care or reduce government insurance
programs, coupled with the trend toward managed health care in the United States
and the concurrent growth of organizations

                                                                   Page 11 of 16
<PAGE>

such as HMOs, which organizations could control or significantly influence the
purchase of healthcare services and products, may all result in lower prices for
or rejection of our products. The cost containment measures that healthcare
payors and providers are instituting and the effect of health care reform could
cause reductions in the amount of reimbursement available to users of our
products, and could materially adversely affect our ability to operate
profitably.

If Coverage Is Not Approved for Procedures Performed Outside of Hospitals, or if
the Amount of Coverage Is Inadequate, We Will Not Be Able to Achieve Widespread
Acceptance of the Tuna Procedure

To achieve widespread acceptance of the TUNA Therapy, we believe that
reimbursement will need to be available for procedures performed outside of the
hospital setting, in physician offices and ambulatory surgery centers. In
addition, the amount of reimbursement for TUNA Procedures performed in those
locations must be adequate. Medicare has not yet approved reimbursement for the
costs of supplies, equipment and overhead outside of hospital settings. In 1998,
Medicare announced that it would delay consideration of coverage in physician
offices and ambulatory surgery centers while it reviewed its Y2K compliance
issues. Medicare is now behind schedule in many areas, and we do not expect that
coverage for procedures performed at these alternative sites will be approved
until at least mid to late 2000. When and if reimbursement is approved, it most
likely will be subject to a prospective payment system. Under this system,
ambulatory surgery centers and physician offices will be allowed a flat rate of
reimbursement for each TUNA Procedure performed, and will need to manage their
costs of supplies, equipment and overhead to fit within the approved payment.
The amount of reimbursement allowed for a TUNA Procedure under a prospective
payment system has not been determined. As a result of these factors, we can
give no assurance that procedures performed in physician offices and ambulatory
surgery centers will generate significant revenue for us in the United States.

     If coverage becomes available for procedures performed in physician
offices and ambulatory surgery centers, we expect that the number of procedures
performed will increase. The amount of reimbursement could decrease, however,
and is likely to decrease under the "prospective payment system" and the
decrease could be substantial. We cannot predict whether the amount of
reimbursement, when and if it is approved, will be deemed adequate by physicians
and patients or whether our revenues from procedures performed outside of
hospitals will be sufficient to cover our operating expenses.

We Offer One Product Line

The VidaMed TUNA System consists of a radio frequency generator, a reusable
handle, a disposable cartridge and an optical telescope. If a material problem
develops with any one or more of those components, our revenues would likely
suffer because we do not have other products to rely on. Possible problems
include, but are not necessarily limited to, malfunctions, failure to comply
with or changes in governmental regulations, product recalls, product
obsolescence, injunctions resulting from litigation, inability to protect our
intellectual property, invalidity of our patents or shortages of one or more of
the components of the system.

We Rely on Contract Manufacturers for the Majority of Our Manufacturing Needs

We outsource the manufacture of the disposable cartridge and most other
components of the TUNA System, and we rely on contract manufacturers to supply
our components in sufficient quantities, in compliance with regulatory
requirements and at an acceptable cost. Manufacturers often encounter
difficulties in scaling up production of new products, including problems
involving production yields, product recalls, quality control and assurance,
component supply and lack of qualified personnel. If any

                                                                   Page 12 of 16
<PAGE>

of our manufacturers experience production problems, we may not be able to
locate an alternate manufacturer promptly. Delays in production could adversely
affect the success of our fee-per-use program and our future revenues.

Impact of Year 2000

     In prior years, we discussed the nature and progress of our plans to
become Y2K ready. In late 1999, we completed our remediation and testing of
systems. We experienced no significant disruption in mission critical
information technology and non-information technology systems. We will continue
to monitor our mission critical computer applications and those of our
customers, suppliers and vendors throughout the year 2000 to ensure that any
latent Y2K matters that may arise are addressed promptly.

ITEM 3    QUANTITATIVE AND QUALITATIVE DISCLOSURE 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 5.   OTHER INFORMATION

Management Changes

     On March 20, 2000, in connection with a January 2000 equity investment in
the Company by Medtronic Asset Management, Inc., a subsidiary of Medtronic,
Inc., Michael Ellwein was appointed to the Board of Directors. Mr. Ellwein
currently is Vice President and Chief Development Officer of Medtronic, Inc.
(NYSE:MDT), where he is responsible for mergers, acquisitions, divestitures,
joint ventures, strategic alliances and licensing opportunities.

     On April 6, 2000, Steve Williams, formerly Vice President of Operations
for Zeiss Humphrey Systems, was appointed Chief Operating Officer. We have a
manufacturing agreement with Zeiss Humphrey Systems, which runs through 2001, to
produce the VidaMed PROVu disposable cartridge.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          10.24  [Form of] Severance Agreement (Change in Control) between
                 VidaMed and Randy D. Lindholm and VidaMed and John F. Howe and
                 VidaMed and Steve J. Williams

          10.25  Amendment Agreement renewing debt financing agreement between
                 the Company and Transamerica Business Credit Corporation, dated
                 January 7, 2000

          27.1   Financial Data Schedule

                                                                   Page 13 of 16
<PAGE>

     (b)  Reports on Form 8-K.

               No reports on Form 8-K were filed during the quarter ended March
               31, 2000.

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:  May 12, 2000                     By: /s/   Randy D. Lindholm
      ----------------------               --------------------------------
                                            Randy D. Lindholm
                                            President, Chief Executive Officer

Date:  May 12, 2000                     By: /s/   John F. Howe
      -----------------------              --------------------------------
                                            John F. Howe
                                            VP Finance, Chief Financial Officer
                                            (Principal Financial and Accounting
                                            Officer)

                                                                   Page 14 of 16
<PAGE>

                                 EXHIBIT INDEX


Exhibit Number                     Description
--------------                     -----------

10.24                              [Form of] Severance Agreement (Change in
                                   Control) between VidaMed and Randy D.
                                   Lindholm, VidaMed and John F. Howe, and
                                   VidaMed and Steve Williams

10.25                              Amendment Agreement renewing debt financing
                                   agreement between the Company and
                                   Transamerica Business Credit Corporation,
                                   dated January 7, 2000

                                                                   Page 16 of 16