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, 1997

                                       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 Identification No.)
    incorporation or organization)


                           1380 Willow Road, Suite 101
                              Menlo Park, CA 94025
                    (Address of principal executive offices)

                                 (415) 328-8781
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
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 11,653,050 as of April 30, 1997.

                                                                    Page 1 of 15
                                                        Exhibit Index at Page 14
<PAGE>
<TABLE>

                                  VIDAMED, INC.

                                      INDEX

PART I: FINANCIAL INFORMATION
<CAPTION>

                                                                                        Page
<S>          <C>                                                                        <C>
Item 1.      Condensed consolidated financial statements - unaudited

             Condensed consolidated balance sheets - March 31, 1997
                  and December 31, 1996                                                    3

             Condensed consolidated statements of operations - three months
                  ended March 31, 1997 and 1996                                            4

             Condensed consolidated statements of cash flows - three months
                  ended March 31, 1997 and 1996                                            5

             Notes to condensed consolidated financial statements                          6

Item 2.      Management's discussion and analysis of financial condition
                 and results of operations                                                 8

PART II: OTHER INFORMATION

Item 1.      Legal Proceedings                                                            11

Item 2.      Changes in Securities                                                        11

Item 3.      Defaults Upon Senior Securities                                              11

Item 4.      Submission of Matters to a Vote of Security Holders                          11

Item 5.      Other Information                                                            11

Item 6.      Exhibits and Reports on Form 8-K                                             11

             Signatures                                                                   12

                                                                                Page 2 of 15
</TABLE>

<PAGE>


                          PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

                                                         March 31,  December 31,
                                                           1997        1996
                                                        ----------  ------------
                                                        (Unaudited)     (*)
Assets
Current Assets:
     Cash and cash equivalents                             $  4,301    $  3,879
     Short-term investments                                    --         1,976
     Accounts Receivable                                      4,105       2,413
     Other current assets                                     2,326       2,112
                                                           --------    --------
           Total current assets                              10,732      10,380

     Property and equipment, net                              2,214       2,259
     Other assets, net                                          204         208
                                                           --------    --------
           Total assets                                    $ 13,150    $ 12,847
                                                           ========    ========

Liabilities and stockholders' equity
Current liabilities:
     Notes payable, current portion                        $  1,094    $  1,064
     Accounts payable                                         1,381       1,246
     Accrued professional fees                                  449         498
     Accrued clinical trial costs                               852         982
     Accrued and other liabilities                            3,635       3,114
     Current portion of obligations under
        capital leases                                          345         470
     Deferred revenue                                           446         467
                                                           --------    --------
           Total current liabilities                          8,202       7,841

     Notes payable, noncurrent                                  194         480
     Other long-term liabilities                                751         825

Stockholders' equity:
     Capital stock                                           59,623      55,577
     Accumulated deficit                                    (55,620)    (51,876)
                                                           --------    --------
           Total stockholders' equity                         4,003       3,701
                                                           --------    --------
           Total liabilities and stockholders' equity ..   $ 13,150    $ 12,847
                                                           ========    ========

* The Balance  Sheet at  December  31,  1996 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 15
<PAGE>


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



                                                            Three Months Ended
                                                                  March 31,
                                                         -----------------------
                                                           1997          1996
                                                         --------      ---------
Revenues:
     Product sales, net                                  $  3,252      $    381
     License fees and grant revenue                            50           107
                                                         --------      --------
     Net revenues                                           3,302           488

Cost of Goods Sold                                          1,783           790
                                                         --------      --------
     Gross Profit (Loss)                                    1,519          (302)

Operating Expenses:
     Research and development                               1,898         1,411
     Selling, general and administrative                    3,358         1,614
                                                         --------      --------
     Total operating expenses                               5,256         3,025

     Loss from operations                                  (3,737)       (3,327)

Other income(expense), net                                     (7)           (3)
                                                         --------      --------
Net loss                                                 $ (3,744)     $ (3,330)
                                                         ========      ========
Net loss per share                                       $   (.34)     $   (.36)
                                                         ========      ========
Shares used in computing net loss per share                11,128         9,350
                                                         ========      ========


                             See accompanying notes.
                                                                    Page 4 of 15
<PAGE>


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


                                                             Three Months Ended
                                                                  March 31,
                                                             -------------------
                                                              1997        1996
                                                             -----       -----
Cash flows from operating activities:
     Net loss                                              $ (3,744)   $ (3,330)
     Adjustments to reconcile net loss to
       net cash used in operating activities:
           Depreciation and amortization                        326         353
           Other                                                (24)        (22)
           Changes in assets and liabilities:
               Accounts Receivable                           (1,692)       (229)
               Other current assets                            (214)       (127)
               Other assets                                       4           3
               Accounts payable                                 135         (45)
               Accrued and other liabilities                    342         (58)
               Deferred revenue                                 (21)       (106)
                                                           --------    --------
Net cash used in operating activities                        (4,888)     (3,561)
                                                           --------    --------

Cash flows from investing activities:
     Expenditures for property and equipment                   (257)       (284)
     Purchase of short-term investments                        --        (4,902)
     Proceeds from maturities of
        short-term investments                                1,976       7,000
                                                           --------    --------
Net cash provided by investing activities                     1,719       1,814
                                                           --------    --------

Cash flows from financing activities:
     Net cash proceeds from issuance of Common Stock          4,021         209
     Principal payments under capital leases                   (164)       (170)
     Principal payments of long-term debt                       (11)         (5)
     Principal payments of notes payable                       (255)     (2,928)
     Net proceeds from issuance of notes payable
         and convertible notes                                 --        10,100
                                                           --------    --------
Net cash provided by financing activities                     3,591       7,206
                                                           --------    --------
Net increase in cash and cash equivalents                       422       5,459
Cash and cash equivalents at the beginning
  of the period                                               3,879       5,686
                                                           --------    --------
Cash and cash equivalents at the end of the period         $  4,301    $ 11,145
                                                           ========    ========

                            See accompanying notes.
                                                                    Page 5 of 15
<PAGE>


                                  VIDAMED, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 1997
                                   (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, 1997 and the  statements  of  operations  for the
three months ended March 31, 1997 and 1996, and the statements of cash flows for
the three months ended March 31, 1997 and 1996,  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
dates and the operating  results and cash flows for those periods.  Although the
Company believes that the disclosures in these financial statements are adequate
to make the information  presented not misleading,  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 thereto  included in the Company's annual report
on Form 10-K for the year ended  December 31, 1996 filed with the Securities and
Exchange Commission.

Results for any interim period are not necessarily indicative of results for any
other interim period or for the entire year.

2.       Net loss per share

Net loss per share is computed  using the weighted  average  number of shares of
common stock outstanding during the periods presented.  Common equivalent shares
are excluded from the computation as their effect is  antidilutive.  In February
1997,  the  Financial  Accounting  Standards  Board  issued  Statement  No. 128,
Earnings per Share,  which is required to be adopted on December  31,  1997.  At
that time,  the Company will be required to change the method  currently used to
compute  loss  per  share  and to  restate  all  prior  periods.  Under  the new
requirements  for calculating  primary earnings per share the dilutive effect of
stock options will be excluded.  The impact of Statement 128 on the  calculation
of loss per share is not expected to be material.

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, 1997 and December
31, 1996 consist of the following:

                                                  March 31,         December 31,
                                                    1997                 1996
                                                 ----------           ----------

Raw Materials                                    $  295,000           $  600,000
Work in process                                     142,000              174,000
Finished Goods                                      553,000              673,000
                                                 ----------           ----------
                                                 $  990,000           $1,447,000
                                                 ==========           ==========

                                                                    Page 6 of 15

<PAGE>

4.       Intellectual Property Litigation Risks

In 1995, EP Technologies,  Inc. ("EPT") and the University of California ("UC"),
which have filed United States patent applications  relating to ablation of body
tissue,  requested the United  States Patent and Trademark  Office to declare an
interference  with two of VidaMed's  United States patent  applications on which
notices of allowances have been received. The inventors identified on the EPT/UC
application  are Stuart  Edwards,  who was previously  VidaMed's Chief Executive
Officer  and  was  previously  the  Chief  Technical   Officer  of  EPT,  and  a
cardiologist from the University of California,  San Francisco,  who worked as a
consultant to EPT while Mr. Edwards was employed there.

Although the Company believes,  based on current available information,  that an
interference will not be allowed on the patents, an adverse determination in the
current  patent  office  proceeding  or  in  other  litigation  or  interference
proceedings to which the Company may become a party could subject the Company to
significant liabilities to third parties or require the Company to seek licenses
from third parties.  There can be no assurance that necessary  licenses would be
available  to the  Company  on  satisfactory  terms or at all.  Accordingly,  an
adverse  determination in a judicial or administrative  proceeding or failure to
obtain  necessary  licenses  could  prevent the Company from  manufacturing  and
selling  its  products,  which  would  have a  material  adverse  effect  on the
Company's business, financial condition and results of operations.

5.       Cash, cash equivalents and short-term investments

The Company  considers all highly liquid  investments  with  maturities from the
date of purchase of 90 days or less to be cash equivalents.  The Company invests
its excess cash with major banks or investment managers.  Short-term investments
consist of corporate paper and government  securities with remaining  maturities
at the  date of  purchase  of  greater  than 90 days and  less  than  one  year.
Short-term  investments are designated as available for sale and carried at fair
market value, with unrealized gains and losses reported in stockholders' equity.

6.       Convertible notes

In March 1996, the Company completed the sale of $10.1 million of 5% convertible
subordinated notes (the "Notes").  The Notes were converted into Common Stock of
VidaMed based upon a percentage (ranging from 80% to 85%) of the average closing
bid price over a period of five trading days prior to conversion. As of December
31, 1996 all of the $10.1 million in principal and accrued interest on the Notes
had been converted into an aggregate of 1,375,676 shares of Common Stock.

7.       Common stock

In February 1997, the Company entered into an equity financing  agreement with a
European  investment banker under which the Company may, at its option,  sell to
such  investment  bank up to $10.0 million of VidaMed common stock in increments
up to $2.5  million.  The common  stock will be priced at a 10%  discount to the
current  market  price at the time of sale,  subject  to  adjustment  based on a
formula  linked to the market price of the Company's  common stock during the 21
trading days  following the sale. As of March 31, 1997 the Company had completed
two  issuances of common stock  resulting in $4.0 million in net proceeds to the
Company.  The first sale of $2.5  million  resulted  in the  issuance of 286,123
common stock shares. The second sale of $1.5 million resulted in the issuance of
242,424  common stock  shares,  although  additional  proceeds of $103,896  were
received in April 1997 after the pricing  period was completed due to adjustment
of the purchase price.

                                                                    Page 7 of 15

<PAGE>


ITEM 2.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's  Discussion and Analysis of Financial Condition and Results of
Operations for the three months ended March 31, 1997 and 1996, should be read in
conjunction with the Management's Discussion and Analysis of Financial Condition
and  Results of  Operations  included  in the  Company's  10K for the year ended
December 31, 1996.

This Management's  Discussion and Analysis of Financial Condition and Results of
Operations   contains   forward-looking   statements  which  involve  risks  and
uncertainties.  The Company's actual results may differ significantly from those
anticipated by the forward-looking  statements.  Factors that might cause such a
difference  include,  but are not limited to, those  discussed  below and in the
Company's report on Form 10-K for the year ended December 31, 1996.

Overview

VidaMed has a limited  history of  operations  and has  experienced  significant
operating  losses  since  inception.  As of March 31,  1997,  the Company had an
accumulated deficit of $55.6 million. The Company commenced  international sales
of its  TransUrethral  Needle  Ablation  ("TUNA") system in late 1993 and United
States sales in October 1996. Revenues for the quarters ended March 31, 1997 and
1996 include license fees for  distribution  rights in Japan and for the quarter
ended March 31, 1996 includes a United Kingdom government grant which ended June
30, 1996.

VidaMed anticipates that a substantial amount of its revenues from product sales
in the future  will be from  sales in the United  States.  The  Company  filed a
premarket 510(k) notification with the Food and Drug Administration  ("FDA") for
the TUNA System in March 1996. The company  received FDA clearance to market the
TUNA  System for the  treatment  of symptoms  associated  with BPH in the United
States on October 8, 1996. In the United  States,  the Company  markets the TUNA
System  through a network of five VidaMed sales  managers and  approximately  35
independent dealers and representatives. A network of distributors, supported by
VidaMed staff, cover other countries in Europe, Asia and South America.

The Company  expects its  operating  losses to continue  through at least fiscal
year 1997 as it  continues  to expend  substantial  resources  in  expansion  of
marketing  and sales  activities  as a result of FDA  clearance of the Company's
510(k) premarket  notification  for the TUNA System,  funding clinical trials in
support of regulatory and reimbursement approvals, and research and development.
The Company's future  profitability will be dependent upon, among other factors,
market   acceptance  of  the  TUNA  System  and   availability   of  third-party
reimbursement for procedures performed with the TUNA System.

Although the Company has received FDA clearance of its 510(k)  notification  for
the TUNA System for treatment of symptoms  associated with BPH and has commenced
marketing  of the TUNA System in the United  States,  there can be no  assurance
that the TUNA System will be deemed  clinically or cost effective by health care
providers  and payors,  will be deemed  superior to other  current and  emerging
methods for treating BPH or will achieve  significant  market  acceptance in the
United States market. Furthermore,  determinations as to eligibility of the TUNA
System for  reimbursement by private and governmental  health payors are made by
such payors independently of the FDA approval, and, accordingly, there can be no
assurance  that the TUNA  procedure  will be eligible for  reimbursement  in the
United States under either private or governmental  healthcare  payment systems.
Ineligibility of TUNA procedures for reimbursement

                                                                    Page 8 of 15

<PAGE>

would have an adverse effect on the ability of the TUNA System to achieve market
acceptance.  Failure of the TUNA  System to  achieve  market  acceptance  in the
United  States  would  have a material  adverse  effect on  business,  financial
condition and results of operations of the Company.

The  Company  does not have a backlog of orders for its  products  in  countries
where the TUNA  System is  approved  and  anticipates  that it will  continue to
manufacture and ship orders after their receipt.  Accordingly,  the Company does
not anticipate that it will develop a significant backlog in the future.

Results of Operations

Net  revenue  for the three  months  ended  March  31,  1997  increased  577% to
$3,302,000 from $488,000 in the three months ended March 31, 1996. Product sales
in the first quarter of 1997 increased  755% to $3,252,000  from $381,000 in the
same period in 1996.  The increase in product sales between the first quarter of
1997 and 1996 is the result of sales of the TUNA System in the United States.

Cost of product  sales  increased  126% to  $1,783,000 in the three months ended
March 31, 1997 from  $790,000 in the three  months  ended  March 31,  1996.  The
increase is due to higher  product  sales in the three months of 1997,  although
the Company also experienced excess manufacturing  overhead in the first quarter
of 1996.  Increased  sales in the first  quarter of 1997  resulted  in  improved
absorption of manufacturing overhead.

Research and  development  expenses  increased  35% to  $1,898,000  in the three
months ended March 31, 1997 from  $1,411,000 in the three months ended March 31,
1996.  The increase was  primarily due to product  development  for the new TUNA
System RF generator  resulting from increased  outside  services and development
material.

Selling, general and administrative expenses increased 108% to $3,358,000 in the
three  months  ended March 31, 1997 from  $1,614,000  in the three  months ended
March 31, 1996. The increase was primarily due to increased  sales and marketing
expense  incurred in the continuing  product  introduction of the TUNA System in
the  United  States.   Significant   sales  and  marketing   expenses   included
commissions,  advertising expenses and physician workshops. Advertising expenses
included  cooperative  advertising amounts related to Tenet Healthcare,  a major
private  organization  with which VidaMed entered into an agreement in the first
quarter of 1997 to provide TUNA Systems to Tenet's hospitals.

Total operating  expenses in the three months ended March 31, 1997 increased 74%
to  $5,256,000  from  $3,025,000  in the three months ended March 31, 1996.  The
increase in  operating  expenses  was due  primarily to the increase in selling,
general and administrative expenses.

Other expense for the three months ended March 31, 1997 was $7,000,  compared to
$3,000 for the three months ended March 31, 1996. This change in the three month
amount  is  primarily  due  to  lower  interest  income  attributable  to  lower
investment balances.

The net loss for the three month  periods  ended March 31, 1997 was  $3,744,000,
compared to $3,330,000 for the three months ended March 31, 1996.

Liquidity and Capital Resources

At March 31,  1997 the  Company's  cash and cash  equivalents  were  $4,301,000,
compared to  $5,855,000  at December 31,  1996.  In February  1997,  the Company
entered  into  an  equity  financing  agreement  with a  European  institutional
investor  under which the Company  may, at its option,  sell to such  investment
bank up to $10.0  million  of  VidaMed  common  stock in  increments  up to $2.5
million. The common stock will be priced at a 10% discount to the current market
price at the time of sale, subject to adjustment based on a

                                                                    Page 9 of 15

<PAGE>

formula  linked to the market price of the Company's  common stock during the 21
days  following  each sale. As of March 31, 1997 the Company had drawn down $4.0
million under this agreement.

In April 1995, the Company  obtained a $3,000,000  secured credit  facility.  To
date, the Company has borrowed  $3,000,000 under this facility.  Borrowings bear
interest at the prime rate plus 3% per annum plus additional  lump-sum  interest
of 15% of each  borrowing,  payable at  maturity.  Repayment is based on a three
year amortization schedule.

During the three months ended March 31, 1997 and 1996,  VidaMed consumed cash in
operations of $4,888,000 and $3,561,000  respectively.  The changes in cash used
in operations were due to increased accounts receivable due to increased product
sales and sales and marketing expenses associated with the product launch of the
TUNA System in the United States.

Although  VidaMed  believes that its current capital  resources,  cash generated
from  the  sale of  products  and  remaining  balance  on the  equity  financing
agreement  will be  sufficient  to meet  the  Company's  operating  and  capital
requirements  through the next twelve months, there can be no assurance that the
Company will not require additional  financing within this time frame. There can
be no assurance that  additional  financing,  if required,  will be available on
satisfactory  terms or at all.  In any event,  VidaMed may in the future seek to
raise  additional  funds through bank  facilities,  debt or equity  offerings or
other sources of capital.  VidaMed's future  liquidity and capital  requirements
will depend on numerous other factors,  including  progress of clinical  trials,
actions related to regulatory and reimbursement matters, and the extent to which
the TUNA system gains market acceptance.

                                                                   Page 10 of 15

<PAGE>


                                  VIDAMED, INC.

PART II: OTHER INFORMATION

Item 1.           Legal Proceedings

                  None

Item 2.           Changes in Securities

                  See page 13.

Item 3.           Defaults upon Senior Securities

                  None

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

                  None

Item 5.           Other Information

                  None

Item 6.           Exhibits and Reports on Form 8-K

                           a) Exhibits

                               (27.1)  Financial Data Schedule

                           b) Reports on Form 8-K. On March 14, 1997 the Company
                           filed  a  report  on Form  8-K  regarding  an  equity
                           financing  agreement with a European  investment bank
                           under which the Company  may, at its option,  sell to
                           such  investment  bank up to $10.0 million of VidaMed
                           common stock in increments  up to $2.5  million.  The
                           common  stock will be priced at a 10% discount to the
                           current market price at the time of sale,  subject to
                           adjustment  based on a formula  linked to the  market
                           price of the  Company's  common  stock  during the 21
                           trading days following each sale.

                                                                   Page 11 of 15

<PAGE>


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.


                                               VIDAMED, INC.

Date:     May 12, 1997                         By:     /s/   James A. Heisch
       ------------------------                    -----------------------------
                                                    James A. Heisch
                                                    President, Chief Executive
                                                    Officer

Date:     May 12, 1997                         By:    /s/  Richard D. Brounstein
       ------------------------                    -----------------------------
                                                    Richard D. Brounstein  
                                                    VP Finance, Chief Financial
                                                    Officer (Principal Financial
                                                    Officer)

Date:     May 12, 1997                         By:    /s/   Thomas M. Fahey
       ------------------------                    -----------------------------
                                                    Thomas M. Fahey
                                                    Director of Finance
                                                    (Principal Accounting
                                                    Officer)

                                                                   Page 12 of 15

<PAGE>


PART II.          OTHER INFORMATION

Item 2.           CHANGES IN SECURITIES

During the first  quarter of 1997 the  Company  issued  common  stock  under the
equity  financing  agreement.  The first sale of $2.5 million of VidaMed  common
stock  resulted  in the  issuance  of 286,123  shares.  The second  sale of $1.5
million of VidaMed  common  stock  resulted in the  issuance  of 242,424  shares
although  additional  proceeds of $103,896 were received in April 1997 after the
pricing period was concluded due to an adjustment in the purchase price.
 .

                                                                   Page 13 of 15

<PAGE>


INDEX TO EXHIBITS



EXHIBIT
NUMBER            DESCRIPTION

            27.1  Financial Data Schedule

                                                                   Page 14 of 15