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 MARCH 31, 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 MAY 1, 1997
        ---------------------                       --------------

        Class A Common Stock                11,680,624 shares, $0.01 par value
        Class B Common Stock                    37,500 shares, $0.01 par value

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 - March 31, 1997 (unaudited)
                 and December 31, 1996                                        3

              Statements of Operations for the three-month periods
                 ended March 31, 1997 (unaudited) and 1996 (unaudited)        4

              Statements of Cash Flows for the three-month periods
                 ended March 31, 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 6.    Exhibits and Reports on Form 8-K                        8

           SIGNATURES                                                         9



                                       2
<PAGE>
                               TELEPAD CORPORATION
                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                         MARCH 31,     DECEMBER 31,
                                                                           1997            1996
                                                                       ------------    ------------
                                                                       (UNAUDITED)
<S>                                                                    <C>             <C>         
ASSETS

Current assets:
     Cash and cash equivalents                                         $  1,282,874    $  1,418,770
     Short-term investments                                               2,137,558       4,078,679
     Restricted cash                                                      2,000,000       2,000,000
     Accounts receivable, less allowance of $104,000
        at March 31, 1997 and $107,000 at December 31, 1996                 391,503         668,922
     Inventory, less allowance of $14,000 at March 31, 1997
        and $14,000 at December 31, 1996                                  4,281,241       3,474,782
     Other current assets                                                   114,571         243,988
                                                                       ------------    ------------
Total current assets                                                     10,207,747      11,885,141
                                                                       ------------    ------------
Furniture and equipment:

     Office furniture and equipment                                         197,932         197,932
     Computer equipment                                                     880,656         880,656
                                                                       ------------    ------------
                                                                          1,078,588       1,078,588
Less accumulated depreciation                                              (568,893)       (505,639)
                                                                       ------------    ------------

Net furniture and equipment                                                 509,695         572,949

Deposits and other assets                                                    27,689          27,689
                                                                       ------------    ------------

Total assets                                                           $ 10,745,131    $ 12,485,779
                                                                       ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

     Accounts payable and accrued expenses                             $  1,510,041    $  1,991,805
     Deferred revenue                                                        21,154          34,643
                                                                       ------------    ------------
Total current liabilities                                                 1,531,195       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,
             11,568,124 and 11,558,905 shares issued and outstanding
             at March 31,1997 and December 31, 1996, respectively           115,681         115,589
          Class B common stock, 593,063 shares designated,
             150,000 shares issued and outstanding
             at March 31,1997 and December 31, 1996, respectively             1,500           1,500
     Additional paid-in capital                                          39,283,488      39,250,820
     Accumulated deficit                                                (30,186,733)    (28,908,578)
                                                                       ------------    ------------
Total stockholders' equity                                                9,213,936      10,459,331
                                                                       ------------    ------------

Total liabilities and stockholders' equity                             $ 10,745,131    $ 12,485,779
                                                                       ============    ============
</TABLE>


See accompanying notes


                                       3
<PAGE>

                               TELEPAD CORPORATION

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED MARCH 31,
                                                      1997             1996
                                                  ------------     ------------
                                                  (UNAUDITED)      (UNAUDITED)
<S>                                               <C>              <C>         
Revenues:
    TelePad products                              $    489,361     $    190,893
    Service contracts                                   32,331          101,022
                                                  ------------     ------------
Total revenues                                         521,692          291,915

Costs and expenses:
    Cost of goods sold - Telepad products              435,047          255,082
    Cost of goods sold - service contracts              13,417           40,650
    Research and development                           306,290          240,204
    Selling, general and administrative              1,142,275          879,485
                                                  ------------     ------------
Total costs and expenses                             1,897,029        1,415,421
                                                  ------------     ------------

Loss from operations                                (1,375,337)      (1,123,506)

Interest income                                         97,182            2,239
Interest expense                                          --           (249,909)
Amortization of debt issue costs                          --           (118,302)
Other expenses                                            --            (70,443)
                                                  ------------     ------------

Net loss                                          $ (1,278,155)    $ (1,559,921)
                                                  ============     ============

Net loss per share                                $      (0.11)    $      (0.31)
                                                  ============     ============

Weighted average shares outstanding                 11,716,982        5,014,405
                                                  ============     ============
</TABLE>

See accompanying notes


                                       4
<PAGE>

                               TELEPAD CORPORATION

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED MARCH 31,
                                                         1997           1996
                                                     -----------    -----------
                                                     (UNAUDITED)    (UNAUDITED)
<S>                                                  <C>            <C>         
OPERATING ACTIVITIES
Net loss                                             $(1,278,155)   $(1,559,921)
Adjustments to reconcile net loss to net cash
  used in operating activities:
     Depreciation and amortization                        63,254         52,523
     Amortization of debt discount                          --          118,302
     Provision for loss on accounts receivable            (3,558)          --
     Changes in assets and liabilities:
        Accounts receivable                              280,977        358,246
        Inventory                                       (806,459)      (157,175)
        Other current assets                             129,417        (71,007)
        Accounts payable and accrued expenses           (481,764)      (217,129)
        Deferred revenue                                 (13,489)        39,162
                                                     -----------    -----------
Net cash used in operating activities                 (2,109,777)    (1,436,999)

INVESTING ACTIVITIES
Purchase of furniture and equipment                         --          (29,926)
Sales of short-term investments                        1,941,121           --
                                                     -----------    -----------
Net cash provided (used) in investing activities       1,941,121        (29,926)


FINANCING ACTIVITIES
Net cash proceeds from issuance of common stock           32,760         14,810
Proceeds from notes payable                                 --          750,000
                                                     -----------    -----------
Net cash provided by financing activities                 32,760        764,810

                                                     -----------    -----------
Net decrease in cash                                    (135,896)      (702,115)

Cash and cash equivalents, beginning of period         1,418,770      1,257,948
                                                     -----------    -----------
Cash and cash equivalents, end of period             $ 1,282,874    $   555,833
                                                     ===========    ===========

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
                     MARCH 31, 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 period ended March 31, 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 this quarter 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
---------------------

        Three  Months  ended March 31, 1997  Compared to the Three  Months ended
March 31, 1996

        For the three  months  ended  March 31,  1997,  the  Company  recognized
revenues  of  $522,000  compared  to  revenues of $292,000 in the same period in
1996. The $230,000  (79%)  increase is the net result of a $298,000  increase in
product sales and a $69,000 decrease in service sales. Sales of the TelePad 3 in
the first  quarter of 1996 were  hampered  by the lack of a supply of TelePad 3s
due to a switch in contract manufacturers.  In addition,  uncertainties relating
to the timing of the  resumption of  production  and the  corresponding  lack of
evaluation units that incorporated the latest  engineering  changes  interrupted
the TelePad 3 sales cycle during the change in  manufacturers.  The sales effort
was  subdued  until June 1996 when a new supply of  TelePad 3  computers  became
available.

        Cost of products and  services  sold during the three months ended March
31,  1997  totaled  $448,000  (86% of revenue)  compared  to  $296,000  (101% of
revenue)  in the same  period in 1996.  The  product  gross  margin in the prior
period was reduced by charges of  approximately  $47,000 to expense  accessories
for the  TelePad 3, which were made  obsolete  by design  modifications,  and by
approximately $29,000 in warranty costs.

        Research  and  development  ("R&D")  expenses for the three months ended
March 31, 1997 were  $306,000  compared to $240,000 for the same period in 1996.
This 28% increase in R&D spending was due primarily to the addition of engineers
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.  This compares to a lower level of  engineering  work in the prior
period, which was focused on the manufacturing transition and on quality issues.

        Selling,  general and administrative expenses for the three months ended
March 31, 1997 were $1,142,000 compared to $879,000 for the same period in 1996.
This $263,000  (30%)  increase in expenses 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 current period was $97,000  compared to $2,000 in
the  comparison  period as a result of the investment of the net proceeds of the
secondary  public  offering  completed in April 1996.  The interest  expense and
amortization  of debt  issue  costs in the same  period 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 $2,110,000 in the three-month
period ended March 31, 1997 as compared to $1,437,000 in the  comparable  period
in 1996.  The use of cash in both  quarters was  primarily due to the net losses
incurred in each period.  Collections of accounts receivables  increased cash by
$281,000 in the current  period and by  $358,000  in the prior  period.  In each
case,  collections exceeded increases in receivables resulting from sales due to
sales being lower than the respective preceding periods.  Inventory increased in
the current  quarter by $806,000 as scheduled  production of TelePad 3 computers
exceeded  sales.  Inventory  increased by a net $157,000 in the first quarter of
1996 as  TelePad 3  inventory  declined  through  sales,  but  increased  by the
purchase of $300,000 in TelePad SL parts from IBM. In the current  period,  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
only partially funded by a $750,000 note payable.

        "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.

PART II.          OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits - None

         (b)  Reports on Form 8-K - None


                                       8
<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:  MAY 14, 1997                                 /S/ DONALD W. BARRETT
      -----------------                           -----------------------
                                                  Donald W. Barrett
                                                  Chairman of the Board and 
                                                  Chief Executive Officer



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




                                       9