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 JUNE 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 Identification No.)
incorporation or organization)

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 August 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



         PART I.           FINANCIAL INFORMATION

         Item 1. Financial Statements

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

              Statements of Operations for the three and six month 
                 periods ended June 30, 1997 (unaudited) 
                 and 1996 (unaudited)                                         4

              Statements of Cash Flows for the six-month periods
                 ended June 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                      7-8


         PART II.          OTHER INFORMATION

         Item 4. Submission of Matters to a Vote of Securities Holders        9

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

         SIGNATURES                                                          10


                                       2
<PAGE>

                                     TELEPAD
                                   CORPORATION

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                          JUNE 30,      DECEMBER 31,
                                                                            1997            1996
                                                                        ------------    ------------
                                                                         (UNAUDITED)
<S>                                                                     <C>             <C>         
ASSETS
Current assets:
    Cash and cash equivalents                                           $  1,263,116    $  1,418,770
    Short-term investments                                                 1,170,685       4,078,679
    Restricted cash                                                        2,000,000       2,000,000
    Accounts receivable, less allowance of $113,000
       at June 30, 1997 and $107,000 at December 31, 1996                    944,975         668,922
    Inventory, less allowance of $14,000 at June 30, 1997
       and December 31, 1996, respectively                                 3,349,846       3,474,782
    Other current assets                                                     149,242         243,988
                                                                        ------------    ------------
Total current assets                                                       8,877,864      11,885,141
                                                                        ------------    ------------
Furniture and equipment:
    Office furniture and equipment                                           203,140         197,932
    Computer equipment                                                       932,597         880,656
                                                                        ------------    ------------
                                                                           1,135,737       1,078,588
Less accumulated depreciation                                               (633,622)       (505,639)
                                                                        ------------    ------------
Net furniture and equipment                                                  502,115         572,949
Deposits and other assets                                                     23,589          27,689
                                                                        ------------    ------------
Total assets                                                            $  9,403,568    $ 12,485,779
                                                                        ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable and accrued expenses                               $  1,515,164    $  1,991,805
    Deferred revenue                                                          21,402          34,643
                                                                        ------------    ------------
Total current liabilities                                                  1,536,566       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 June 30,1997 and December 31, 1996, respectively                  117,556         115,589
      Class B common stock, 593,063 shares designated,  none issued or
        outstanding at June 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                                                    (31,534,167)    (28,908,578)
                                                                        ------------    ------------
Total stockholders' equity                                                 7,867,002      10,459,331
                                                                        ------------    ------------
Total liabilities and stockholders' equity                              $  9,403,568    $ 12,485,779
                                                                        ============    ============
</TABLE>
See accompanying notes



                                       3
<PAGE>


                               TELEPAD CORPORATION

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                             THREE MONTHS ENDED JUNE 30,       SIX MONTHS ENDED JUNE 30,
                                             ----------------------------    ----------------------------
                                                 1997            1996            1997            1996
                                             ------------    ------------    ------------    ------------
                                              (UNAUDITED)     (UNAUDITED)     (UNAUDITED)     (UNAUDITED)
<S>                                          <C>             <C>             <C>             <C>         
Revenues:
    TelePad products                         $    956,219    $    428,305    $  1,445,580    $    619,198
    Service contracts                                --            58,752          32,331         159,774
                                             ------------    ------------    ------------    ------------
Total revenues                                    956,219         487,057       1,477,911         778,972

Costs and expenses:
    Cost of goods sold - Telepad products         913,940         407,814       1,348,987         662,896
    Cost of goods sold - service contracts           --            34,639          13,417          75,289
    Costs related to manufacturing startup           --           317,607            --           317,607
    Research and development                      317,408         552,461         623,699         792,665
    Selling, general and administrative         1,132,086       1,217,763       2,274,360       2,097,249
                                             ------------    ------------    ------------    ------------
Total costs and expenses                        2,363,434       2,530,284       4,260,463       3,945,706
                                             ------------    ------------    ------------    ------------

Loss from operations                           (1,407,215)     (2,043,227)     (2,782,552)     (3,166,734)

Interest income                                    66,160         185,933         163,342         188,172
Interest expense                                     --            (3,288)           --          (253,197)
Amortization of debt issue costs                     --              --              --          (118,302)
Other expenses                                     (6,378)        (15,212)         (6,378)        (85,655)
                                             ------------    ------------    ------------    ------------

Net loss                                     $ (1,347,433)   $ (1,875,794)   $ (2,625,588)   $ (3,435,716)
                                             ============    ============    ============    ============

Net loss per share                           $      (0.11)   $      (0.19)   $      (0.22)   $      (0.47)
                                             ============    ============    ============    ============

Weighted average shares outstanding            11,753,976       9,740,786      11,735,479       7,377,596
                                             ============    ============    ============    ============
</TABLE>

See accompanying notes



                                       4
<PAGE>



                               TELEPAD CORPORATION

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                      SIX MONTHS ENDED JUNE 30,
                                                    ----------------------------
                                                        1997            1996
                                                    ------------    ------------
                                                     (UNAUDITED)     (UNAUDITED)
<S>                                                 <C>             <C>          
OPERATING ACTIVITIES
Net loss                                            $ (2,625,588)   $ (3,435,716)
Adjustments  to  reconcile  net loss to net cash
  used in operating activities:
     Depreciation and amortization                       127,983         109,210
     Amortization of debt discount                          --           118,302
     Provision for loss on accounts receivable             5,989            --
     Changes in assets and liabilities:
         Accounts receivable                            (282,042)        133,687
         Inventory                                       124,936        (116,821)
         Other current assets                             94,746        (558,127)
         Deposits and other assets                         4,100          (6,628)
         Accounts payable and accrued expenses          (476,642)       (549,989)
         Deferred revenue                                (13,241)          8,551
                                                    ------------    ------------
Net cash used in operating activities                 (3,039,759)     (4,297,531)

INVESTING ACTIVITIES
Purchase of furniture and equipment                      (57,149)       (131,884)
Sales of short-term investments                        2,907,994            --
                                                    ------------    ------------
 Net cash provided (used) by investing activities      2,850,845        (131,884)

FINANCING ACTIVITIES
Net cash proceeds from issuance of common stock           33,260      20,530,281
Proceeds from notes payable                                 --           750,000
Repayment of notes payable                                  --        (4,750,000)
                                                    ------------    ------------
Net cash provided by financing activities                 33,260      16,530,281
                                                    ------------    ------------
Net (decrease) increase in cash                         (155,654)     12,100,866
Cash and cash equivalents, beginning of period         1,418,770       1,257,948
                                                    ------------    ------------
Cash and cash equivalents, end of period            $  1,263,116    $ 13,358,814
                                                    ============    ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Actual cash payments for interest                   $       --      $     75,000
                                                    ============    ============

</TABLE>
                             See accompanying notes



                                       5
<PAGE>


                               TELEPAD CORPORATION
                          NOTES TO FINANCIAL STATEMENTS

                  (INFORMATION PERTAINING TO THE PERIODS ENDED
                      JUNE 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 six-month periods ended
June 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 June 30, 1997,  revenues increased 96% to $956,000
from $487,000  recorded in the same period in 1996.  For the first six months of
1997,  revenues increased  $699,000,  or 90% from $779,000 in the same period in
1996.  The increases in both periods are primarily the result of increased  unit
shipments  of TelePad 3  computers.  Sales of the TelePad 3 in the first half of
1996 were  hampered  by the lack of a supply of  TelePad  3s due to being out of
production during a switch in contract manufacturers.

        Cost of products  and  services  sold during the three months ended June
30, 1997 totaled $914,000 (96% of revenue) compared to $442,000 (91% of revenue)
in the same  period  in 1996.  For the first  six  months  of 1997,  the cost of
products  and  services  sold was  $1,362,000  (91% of  revenue)  compared  with
$738,000 (95% of revenue) in the comparison  period.  The second quarter of 1996
included  product related charges of $318,000  recognized in connection with the
shift in manufacturers and restarting production in a new facility. Gross margin
percentages  in the second  quarter of 1997 are reduced  from the same period in
1996 by a combination of not having service revenue in the current period, which
has higher  margins than hardware,  and pricing  pressure on TelePad 3 computers
which contain a 486 microprocessor. The Company has announced that it is putting
586  microprocessor  technology  into production  resulting in downward  pricing
pressure   and  reduced   gross   margins  on  TelePad  3  computers   with  486
microprocessor technology.

        Research and  development  ("R&D")  expenses for second  quarter of 1997
were  $317,000  compared  to  $552,000  for the same  period  in 1996.  This 43%
decrease in R&D spending was due primarily to nonrecurring charges in the second
quarter of 1996 for engineering work required to startup  production at Sanmina,
the new  contract  manufacturer.  This  reduction  was  partially  offset by the
increased cost 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 June
30, 1997  decreased  7%, or $86,000,  from the same period in 1996.  For the six
month period,  selling,  general and administrative expenses increased $177,000,
or 8% from the same period in 1996.  The  increase  in the six 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 second  quarter of 1997 was $66,000  compared to
$186,000 in the  comparison  period.  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 of debt
issue costs in 1996 were related to  outstanding  indebtedness  that was retired
with the proceeds from the second public offering.



                                       7
<PAGE>


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

        Net cash used in operating  activities  was  $3,040,000 in the six-month
period ended June 30, 1997 as compared to $4,298,000 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 $282,000 in the current period based on increased  sales whereas in the prior
period collections  exceeded increases in accounts receivable and this increased
cash by  $134,000.  Other  current  assets  in the  prior  period  increased  by
$558,000,  primarily as a result of an advance  payment of $608,000  made to the
Company's  new  contract  manufacturer  in April 1996 to start the  transfer  of
production from the former contract  manufacturer.  Accounts payable and accrued
expenses  were  reduced  in both  periods  and the  reductions  in both  periods
primarily  reflect  payments  to  the  Company's  contract  manufacturer  in the
respective period.

         In the  six-month  period ended June 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.

        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 of a note payable from 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.

        "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,  and other risks  detailed in the  Company's  Securities  and  Exchange
Commission filings.




                                       8
<PAGE>


PART II. OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

         The annual  meeting of  shareholders  of the Registrant was held on May
12, 1997 for the purpose of (i) electing  two  directors of the Company to serve
as Class I directors of the Company's  Board of Directors for terms  expiring at
the third  succeeding  annual  meeting  after  their  election,  and until their
successors  shall  be  duly  elected  and  qualified,  and  (ii)  ratifying  the
appointment  of the Registrant 's independent  public  accountants  for the year
ending  December 31, 1997.  Proxies for the meeting were  solicited  pursuant to
Regulation  14A  of the  Securities  Exchange  Act  of  1934  and  there  was no
solicitation in opposition.

        The following directors were elected by the following vote:

                                      Votes
                                      -----
                                   Class         For           Against
                                   -----         ---           -------
         Sydney H. Dankman           I        10,760,120       91,455
         John M. Toups               I        10,760,120       91,455

         The  proposal  to ratify  the  appointment  of the  independent  public
accountants  for the year ending December 31, 1997 was approved by the following
vote:

              For           Against         Non Votes/Abstentions
              ---           -------         ---------------------
           10,767,025        63,200                 21,350


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: AUGUST 14, 1997            /S/ DONALD W. BARRETT
      ---------------          -----------------------
                               Donald W. Barrett
                               Chairman of the Board and Chief Executive Officer



Date: AUGUST 14, 1997            /S/ ROBERT D. RUSSELL
      ---------------          -----------------------
                               Robert D. Russell
                               Vice President, Secretary and Treasurer
                               Principal Financial and Accounting Officer




                                       10