SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ----------------

                                   FORM 10-QSB

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

For the quarter ended SEPTEMBER 30, 1997.
                                       OR

[_]     TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
        EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-21934

                               TELEPAD CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            DELAWARE                                             52-1680936
------------------------------                               -------------------
(State or other jurisdiction of                                (IRS Employer
incorporation or organization)                               Identification No.)

380 HERNDON PARKWAY, SUITE 1900, HERNDON, VIRGINIA                 20170
--------------------------------------------------               ----------
(Address of principal executive offices)                         (Zip Code)

Issuer's telephone number, including area code:          (703) 834-9000
                                                         --------------

                                 NOT APPLICABLE
             ------------------------------------------------------
               Former name, former address and former fiscal year,
                         if changed since last report.

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

                Indicate  the  number  of  shares  outstanding  of  each  of the
        issuer's classes of common stock, as of the latest practical date:

                                             Shares Outstanding
           Class of Common Stock             at November 1, 1997
           ---------------------             -------------------

           Class A Common Stock              11,755,624 shares, $0.01 par value
           Class B Common Stock              none

Transitional Small Business Disclosure Format (check one):
            Yes [_]              No [X]



<PAGE>






                               TELEPAD CORPORATION

                              INDEX TO FORM 10-QSB

                                                                        PAGE NO.

PART I.    FINANCIAL INFORMATION

Item 1.     Financial Statements

        Balance Sheets - September 30, 1997 (unaudited)
            and December 31, 1996                                          3

        Statements of Operations for the three and
            nine-month periods ended September 30,
            1997 (unaudited) and 1996 (unaudited)                          4

        Statements of Cash Flows for the nine-month
            periods ended September 30, 1997 (unaudited) 
            and 1996 (unaudited)                                           5

        Notes to Financial Statements                                      6

Item 2.     Management's Discussion and Analysis of Financial 
            Condition and Results of Operations                          7-9


PART II.   OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K                               9

SIGNATURES                                                                10


                                      - 2 -



<PAGE>

                               TELEPAD CORPORATION

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         SEPTEMBER 30,    DECEMBER 31,
                                                                             1997            1996
                                                                         ------------    ------------
                                                                          (UNAUDITED)
<S>                                                                      <C>             <C>         
Assets
Current assets:
     Cash and cash equivalents                                           $  1,151,919    $  1,418,770
     Short-term investments                                                      --         4,078,679
     Restricted cash                                                          347,216       2,000,000
     Accounts receivable, less allowance of $126,000
        at September 30, 1997 and $107,000 at December 31, 1996             2,093,686         668,922
     Inventory, less allowance of $14,000 at September 30, 1997
        and December 31, 1996                                               2,252,001       3,474,782
     Other current assets                                                   1,862,857         243,988
                                                                         ------------    ------------
Total current assets                                                        7,707,679      11,885,141

Furniture and equipment:
     Office furniture and equipment                                           203,140         197,932
     Computer equipment                                                       953,964         880,656
                                                                         ------------    ------------
                                                                            1,157,104       1,078,588
Less accumulated depreciation                                                (702,314)       (505,639)
                                                                         ------------    ------------
Net furniture and equipment                                                   454,790         572,949
Deposits and other assets                                                     223,589          27,689
                                                                         ------------    ------------
Total assets                                                             $  8,386,058    $ 12,485,779
                                                                         ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable and accrued expenses                               $  1,654,633    $  1,991,805
     Deferred revenue                                                          14,201          34,643
                                                                         ------------    ------------
Total current liabilities                                                   1,668,834       2,026,448

Stockholders' equity
     Preferred stock, $.01 par value, 5,000,000 shares
        authorized; none issued
     Common stock, $.01 par value; 95,000,000 shares authorized:
        Class A common stock, 94,406,937 shares designated,
            11,755,624 and 11,558,905 shares issued and outstanding
            at September 30, 1997 and December 31, 1996, respectively         117,556         115,589
        Class B common stock, 593,063 shares designated,
            none issued or outstanding at September 30, 1997 and
            150,000 shares issued and outstanding at December 31, 1996           --             1,500
     Additional paid-in capital                                            39,283,613      39,250,820
     Accumulated deficit                                                  (32,683,945)    (28,908,578)
                                                                         ------------    ------------
Total stockholders' equity                                                  6,717,224      10,459,331
                                                                         ------------    ------------
Total liabilities and stockholders' equity                               $  8,386,058    $ 12,485,779
                                                                         ============    ============
</TABLE>

See accompanying notes

                                     - 3 -
<PAGE>

                               TELEPAD CORPORATION

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED SEPTEMBER 30,  NINE MONTHS ENDED SEPTEMBER 30,
                                            --------------------------------  -------------------------------
                                                  1997            1996            1997            1996
                                              ------------    ------------    ------------    ------------
                                               (UNAUDITED)     (UNAUDITED)     (UNAUDITED)     (UNAUDITED)
<S>                                           <C>             <C>             <C>             <C>         
Revenues:
    TelePad products                          $  1,217,234    $    821,723    $  2,662,813    $  1,440,922
    Service contracts                               90,899          34,281         123,230         194,055
                                              ------------    ------------    ------------    ------------
Total revenues                                   1,308,133         856,004       2,786,043       1,634,977

Costs and expenses:
    Cost of goods sold - TelePad products        1,226,816         748,064       2,575,803       1,410,959
    Cost of goods sold - service contracts          62,214          12,578          75,631          87,867
    Costs related to manufacturing startup
                                                      --              --              --           317,607
    Research and development                       154,924         405,090         778,622       1,197,755
    Selling, general and administrative          1,132,883       1,135,210       3,407,242       3,232,459
                                              ------------    ------------    ------------    ------------
Total costs and expenses                         2,576,837       2,300,942       6,837,298       6,246,647
                                              ------------    ------------    ------------    ------------

Loss from operations                            (1,268,704)     (1,444,938)     (4,051,255)     (4,611,670)

Interest income                                    127,042         207,466         290,384         395,637
Interest expense
                                                      (214)           --              (214)       (253,197)
Amortization of debt issue costs
                                                      --              --              --          (118,302)
Other income (expense)                              (7,904)           --           (14,282)        (85,655)
                                              ------------    ------------    ------------    ------------

Net loss                                      $ (1,149,780)   $ (1,237,472)   $ (3,775,367)   $ (4,673,187)
                                              ============    ============    ============    ============

Net loss per share                            $      (0.10)   $      (0.11)   $      (0.32)   $      (0.53)
                                              ============    ============    ============    ============

Weighted average shares outstanding             11,755,624      11,604,573      11,742,194       8,786,588
                                              ============    ============    ============    ============
</TABLE>

See accompanying notes

                                      - 4 -



<PAGE>


                               TELEPAD CORPORATION


                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                       NINE MONTHS ENDED SEPTEMBER 30,
                                                 -------------------------------
                                                        1997            1996
                                                    ------------    ------------
                                                    (UNAUDITED)     (UNAUDITED)
<S>                                                 <C>             <C>          
OPERATING ACTIVITIES
Net loss                                            $ (3,775,367)   $ (4,673,187)

Adjustments to reconcile net loss to net cash
 used in operating activities:
        Depreciation and amortization                    196,675         157,680
        Amortization of debt discount                       --           118,302
        Provision for loss on accounts receivable         18,924           1,061
        Changes in assets and liabilities:
           Restricted cash                             1,652,784            --
           Accounts receivable                        (1,443,688)        152,097
           Inventory                                   1,222,781      (2,056,494)
           Other current assets                       (1,418,869)       (299,280)
           Deposits and other assets                    (195,900)         (6,628)
           Accounts payable and accrued expenses        (337,172)        171,849
           Deferred revenue                              (20,442)         (2,953)
                                                    ------------    ------------
Net cash used in operating activities                 (4,100,274)     (6,437,553)

INVESTING ACTIVITIES
Purchase of furniture and equipment                      (78,516)       (297,113)
Investment in Intellibit Corporation                    (200,000)           --
Sales of short-term investments                        4,078,679            --
                                                    ------------    ------------
Net cash provided by (used in) investing activities    3,800,163        (297,113)

FINANCING ACTIVITIES
Net cash proceeds from issuance of common stock           33,260      20,599,774
Proceeds from notes payable                                 --           750,000
Repayment of notes payable                                  --        (4,750,000)
                                                    ------------    ------------
Net cash provided by financing activities                 33,260      16,599,774
                                                    ------------    ------------

Net (decrease) increase in cash and cash equivalents    (266,851)      9,865,108
Cash and cash equivalents, beginning of period         1,418,770       1,257,948
Cash and cash equivalents, end of period            $  1,151,919    $ 11,123,056
                                                    ============    ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Actual cash payments for interest                   $        214    $    418,685
                                                    ============    ============
</TABLE>

See accompanying notes

                                     - 5 -
<PAGE>

                               TELEPAD CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

                  (INFORMATION PERTAINING TO THE PERIODS ENDED
                   SEPTEMBER 30, 1997 AND 1996 IS UNAUDITED.)

1.  ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

        Basis of Presentation

        The  accompanying  unaudited  condensed  financial  statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-QSB and Item 310 of
Regulation  S-B.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included.  Operating  results for the  three-month  and nine-month  periods
ended September 30, 1997 are not necessarily  indicative of the results that may
be expected  for the year ending  December 31,  1997.  For further  information,
refer to the  financial  statements  for the year ended  December  31,  1996 and
footnotes thereto included in the Company's Form 10-KSB.

        Net Loss Per Share

        Net loss per share is calculated  using the weighted  average  number of
common shares outstanding during the period, with shares of Class A common stock
and  Class B  common  stock  treated  as a  single  class  for  purposes  of the
calculation.  Shares  issuable  upon the exercise of stock  options and warrants
have been excluded from the  computation  because the effect of their  inclusion
would be 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  earnings  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 basic  earnings per share and fully diluted  earnings
per share for the periods presented is not expected to be material.


                                      - 6 -



<PAGE>







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

Results of Operations
---------------------

        For the quarter  ended  September  30, 1997,  TelePad  product  revenues
increased 48% to $1,217,000  from $822,000  recorded in the same period in 1996.
For  the  first  nine  months  of  1997,   TelePad  product  revenues  increased
$1,222,000, or 85%, from $1,441,000 in the same period in 1996. The increases in
both periods are primarily the result of increased  unit  shipments of TelePad 3
computers.  Service contract revenue increased $57,000,  or 168%, in the current
quarter,  but decreased  $71,000,  or 71%, from the  nine-month  period in 1996.
Although services  represent a small portion of the Company's revenue currently,
more  emphasis is being placed on  opportunities  for the sale of services in an
attempt to more fully capitalize on the Company's knowledge of mobile computing.

        Cost of products  sold during the three months ended  September 30, 1997
totaled  $1,227,000  (101% of related  revenue)  compared  to  $748,000  (91% of
related  revenue) in the same period in 1996. For the first nine months of 1977,
the cost of products sold was $2,576,000 (97% of related revenue)  compared with
$1,411,000 (98% of related revenue) in the comparison  period. The Company began
shipping  TelePad 3 computers with 586  microprocessors  in the third quarter of
1997 and this has put downward  pricing pressure on TelePad 3 computers with 486
microprocessor  technology.  The  comparison  of revenue to cost in the  current
quarter was also affected by selected price  reductions to encourage the sale of
TelePad  3  computers  with  the  486  microprocessor  and  to  encourage  field
evaluation  trials where there appears to be significant  sales  potential.  The
pricing  pressure  caused  by the shift in  microprocessors  is  expected  to be
focused on the third and forth  quarters  of fiscal  1997 when the supply of 486
machines is expected to be exhausted,  whereas  competitive  pricing pressure is
expected to be an ongoing  factor in the business.  The nine month period ending
September 30, 1996 included  product related  charges of $318,000  recognized in
connection with the shift in  manufacturers  and restarting  production in a new
facility.

        Research  and  development   ("R&D")  expenses  for  third  quarter  and
nine-month  period of 1997 were  down 62% and 35%,  respectively,  from the same
periods  in  1996.  These  reductions  in R&D  spending  are  due  primarily  to
completion of the primary engineering  development of the TelePad 3 computer and
a shift to a lower  level of work on  modules  which  add  functionality  to the
TelePad 3. The reductions in  engineering  development of the TelePad 3 expenses
were partially offset by increased costs of a slightly larger engineering staff,
which was  increased  after the first  quarter of 1996, to facilitate a shift in
emphasis  to  product  enhancements  and to the  development  of new  modules to
broaden the TelePad 3 product line.

        Selling,  general and  administrative  expenses  for the  quarter  ended
September 30, 1997 increased $14,000, from the same period in 1996. For the nine
month period,  selling,  general and administrative expenses increased $191,000,
or 6% from the same period in 1996.  The  increase in the nine month  period was
primarily  the result of  increases  in selling  expenses in response to the new
supply of TelePad 3 units and the addition of personnel  and space to expand the
Company's capabilities.

        Interest  income in the third  quarter of 1997 was $127,000  compared to
$207,000 in the same period in 1996.  This  reflects the  investment  of the net
proceeds  of the  secondary  public  offering  completed  in April  1996 and the
subsequent use of cash in operations. Interest expense and amortization



                                     - 7 -


<PAGE>



of debt issue costs in 1996 were related to  outstanding  indebtedness  that was
retired with the proceeds from the Company's secondary public offering which was
completed in April 1996.

Liquidity and Capital Resources
-------------------------------

        Net cash used in operating  activities  was $4,100,000 in the nine-month
period ended  September  30, 1997 as compared to  $6,438,000  in the  comparable
period in 1996.  Net cash  used in  operating  activities  in both  periods  was
primarily due to the net losses  incurred in each  respective  period.  Accounts
receivable   increased  by  $1,444,000  in  the  current  period  based  on  the
combination  of increased  sales and extended  payment terms on one  significant
sale. In the prior period, collections exceeded increases in accounts receivable
and this  increased cash by $152,000.  Inventory  reductions due to sales in the
period  contributed  $1,223,000 to cash,  whereas in the prior period  inventory
accumulations  resulted in a $2,056,000 use of cash. Other current assets in the
current period increased  $1,419,000,  primarily as a result of advance payments
in the amount of $1,653,000 made to the Company's contract  manufacturer against
open purchase orders for inventory.  The original product delivery  schedule was
significantly delayed by the 586 microprocessor development schedule. The letter
of credit issued to the contract  manufacturer to facilitate  production,  which
was reflected in restricted cash, was reduced by an equivalent amount.

        In the  nine-month  period  ended  September  30,  1997,  cash  used  in
operating   activities  was  primarily  funded  by  a  reduction  in  short-term
investments  whereas in the prior period cash used in operating  activities  was
primarily  funded by the  completion by the Company of a public  offering of its
securities.  In September 1997, the Company purchased 20% of the common stock of
Intellibit  Corporation,  a Virginia corporation,  for $200,000 in cash, with an
option  to  increase  the  investment  to 80%  subject  to  certain  conditions.
Intellibit   Corporation  is  a  privately  held  developer  of  digital  signal
processing products.

        On April 3, 1996,  the  Company  completed  a public  offering of 20,000
Units. Each Unit consisted of 285 shares of Class A common stock and 1,000 Class
D  warrants  and was sold for  $1,000 per Unit,  pursuant  to which the  Company
raised  $20,000,000.  The net  proceeds  to the Company  from the Unit  offering
amounted to  $17,779,000.  On April 25,  1996,  the  underwriter  exercised  the
over-allotment  option to purchase an additional  3,000 Units  pursuant to which
the Company raised an additional  $3,000,000.  The Company received net proceeds
of  $2,736,000  from the exercise of the  over-allotment  option.  Cash was also
increased by the proceeds received by the Company on February 15, 1996, upon the
issuance of a note payable to an individual investor in the amount of $750,000.

        On April  25,  1996 the  Company  paid  $4,268,685  to repay  $4,000,000
principal  amount of outstanding  promissory  notes and accrued  interest in the
amount of $268,685.  On May 1, 1996, the Company paid $825,000 to the individual
investor  holding the $750,000  promissory note to repay the $750,000  principal
amount and $75,000 in interest.


                                      - 8 -



<PAGE>







        "Safe Harbor" Statement under the private  Securities  Litigation Reform
Act  of  1995:  The  statements   above  which  are  not  historical  facts  are
forward-looking statements that involve risks and uncertainties,  including, but
not limited to, demand for the Company's  products and market  acceptance risks,
the effect of  economic  conditions,  the  impact of  competitive  products  and
pricing, product development,  commercialization and technological difficulties,
capacity,  and supply  constraints  or  difficulties,  the results of  financing
efforts,  possible  delisting of  securities  by Nasdaq,  the risk of low-priced
stock,  and other  risks  detailed  in the  Company's  Securities  and  Exchange
Commission filings.


PART II.   OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        (a)     Exhibits - None

        (b)     Reports on Form 8-K - None


                                      - 9 -



<PAGE>







                                   SIGNATURES


            Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


                                         TELEPAD CORPORATION



Date:  NOVEMBER 13, 1997                    /S/ DONALD W. BARRETT
       -----------------                  -----------------------
                                           Donald W. Barrett
                                           Chairman of the Board and Chief 
                                           Executive Officer



Date:  NOVEMBER 13, 1997                    /S/ ROBERT D. RUSSELL
       -----------------                  -----------------------
                                           Robert D. Russell
                                           Vice President, Secretary and 
                                           Treasurer Principal Financial and 
                                           Accounting Officer


                                     - 10 -