<PAGE>   1
                       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 December 31, 2000

                                      OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

         SECURITIES EXCHANGE ACT OF 1934

         For the transition period from                    to               .
                                        ------------------    --------------

                           Commission File No. 0-9407
                                REHABILICARE INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                             <C>
          MINNESOTA                                                         41-0985318
(State or other jurisdiction of                                 (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>

                               1811 OLD HIGHWAY 8
                          NEW BRIGHTON, MINNESOTA 55112
                    (Address of principal executive offices)

                                 (651) 631-0590
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes   X     No
    -----      -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of February 9, 2001 was:

COMMON STOCK, $.10 PAR VALUE                                   10,788,902 SHARES





<PAGE>   2
            CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS


The following Quarterly Report on Form 10-Q contains various "forward looking
statements" within the meaning of federal securities laws. These forward looking
statements represent management's expectations or beliefs concerning future
events, including statements regarding anticipated product introductions;
changes in markets, customers and customer order rates; changes in third party
reimbursement rates; expenditures for research and development; growth in
revenue; taxation levels; and the effects of pricing decisions. When used in
this 10-Q, the words "anticipate," "believe," "expect," "estimate" and similar
expressions are generally intended to identify forward-looking statements. These
and other forward looking statements made by the Company must be evaluated in
the context of a number of factors that may affect the Company's financial
condition and results of operations, including, but not limited to, the
following:

-    The Company acquired two businesses during the year ended June 30, 1999 and
     a third in July 1999. Although integration of those businesses has been
     substantially completed without significant problems, complete integration
     may not be concluded as smoothly as anticipated and the Company may
     discover issues with respect to acquired businesses of which it was
     unaware.

-    Like many medical device companies, the Company has a large balance of
     uncollected receivables. If it cannot collect an amount of receivables that
     is consistent with historical collection rates, it might be required to
     charge off a portion of uncollected receivables, significantly impacting
     earnings.

-    The Company has incurred a significant amount of indebtedness to finance
     acquired businesses. The interest expense on such indebtedness reduces
     earnings and could cause the Company to be short of cash if its operations
     do not meet expectations.

-    In the United States, the Company's products and services are frequently
     reimbursed by private and public insurers that impose limits on
     reimbursement and strict rules on applications for reimbursement. Changes
     in the rates, eligibility or requirements for reimbursement, or failure to
     comply with reimbursement requirements, could cause a reduction in earnings
     or fines or both.

-    The Company maintains significant amounts of inventory on consignment at
     clinics for distribution to patients. It may not be able to completely
     control losses of this inventory and if inventory losses are not consistent
     with historical experience, the Company might be required to write off a
     portion of the carrying value of inventory.

-    The clinical effectiveness of the Company's electrotherapy products has
     periodically been challenged. Publicity about the effectiveness of
     electrotherapy for pain relief or other clinical applications could
     negatively impact sales and earnings.

-    The Company formed a subsidiary in the United Kingdom in fiscal 1999 and
     acquired a Swiss company in the first quarter of fiscal 2000. These
     European operations may be more difficult to supervise, and may be subject
     to different economic influences than United States operations, and may
     subject the Company to significant exposure from currency fluctuations.











                                       2
<PAGE>   3
                         PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

         Included herein is the following unaudited condensed financial
information:

              Consolidated Balance Sheets as of December 31, 2000 and June 30,
              2000

              Consolidated Statements of Operations for the three months and six
              months ended December 31, 2000 and 1999

              Consolidated Statements of Cash Flows for the six months ended
              December 31, 2000 and 1999

              Notes to Consolidated Financial Statements




























                                       3
<PAGE>   4
                       REHABILICARE INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                  December 31,           June 30,
                                                                                      2000                 2000
                                                                              ------------------     ----------------
<S>                                                                           <C>                    <C>
                        ASSETS
                        ------
CURRENT ASSETS:
   Cash and cash equivalents                                                  $        1,510,881     $      2,227,352
   Receivables, less reserve for uncollectible accounts of $6,901,609                 18,990,756           19,268,252
        and $6,575,715
   Inventories -
     Raw materials                                                                     1,784,501            1,283,791
     Work in process                                                                      45,962              334,900
     Finished goods                                                                    6,264,970            6,817,964
   Deferred tax assets                                                                 3,351,294            3,351,294
   Prepaid expenses                                                                    1,885,131            1,404,968
                                                                              ------------------     ----------------
         Total current assets                                                         33,833,495           34,688,521
                                                                              ------------------     ----------------

PROPERTY, PLANT AND EQUIPMENT:                                                        13,508,132           12,932,485
   Less accumulated depreciation                                                      (8,072,224)          (7,336,310)
                                                                              ------------------     ----------------
         Net property, plant and equipment                                             5,435,908            5,596,175
                                                                              ------------------     ----------------

  Intangible assets, net                                                              11,804,164           12,152,185
  Deferred tax assets                                                                    218,669              223,923
  Other assets                                                                           442,882               47,158
                                                                              ------------------     ----------------
                                                                              $       51,735,118     $     52,707,962
                                                                              ==================     ================
      LIABILITIES AND STOCKHOLDERS' EQUITY
      ------------------------------------

CURRENT LIABILITIES:
   Current maturities of long-term debt                                       $        2,162,277     $      2,170,468
   Note payable                                                                          400,000            1,200,000
   Accounts payable                                                                    2,921,345            3,108,514
   Medicare lawsuit payable                                                            1,588,510            1,677,021
   Accrued liabilities -
     Payroll                                                                             397,061              327,856
     Commissions                                                                         283,041              350,893
     Income taxes                                                                      1,023,962            1,672,636
     Other                                                                             2,688,377            2,684,301
                                                                              ------------------    -----------------
         Total current liabilities                                                    11,464,573           13,191,689

LONG-TERM LIABILITIES:
   Long term-debt                                                                     11,785,850           13,662,792
   Deferred tax liabilities                                                              766,256              583,927
                                                                              ------------------    -----------------
         Total liabilities                                                            24,016,679           27,438,408
                                                                              ------------------    -----------------

STOCKHOLDERS' EQUITY
   Common stock, $.10 par value:  25,000,000 shares authorized;                        1,076,449            1,055,871
     issued and outstanding 10,764,487 and 10,558,710 shares,
     respectively
   Preferred stock, no par value; 5,000,000 shares authorized; none
     issued and outstanding                                                                 ----                 ----

   Additional paid-in capital                                                         21,367,816           20,873,737
   Less note receivable from officer/stockholder                                        (210,417)            (210,417)
   Accumulated other non-owner changes in equity                                        (164,754)            (154,719)
   Retained earnings                                                                   5,649,345            3,705,082
                                                                              ------------------     ----------------
         Total stockholders' equity                                                   27,718,439           25,269,554
                                                                              ------------------     ----------------
                                                                              $       51,735,118       $   52,707,962
                                                                              ==================     ================
</TABLE>


                                       4
<PAGE>   5

                       REHABILICARE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                        Three Months Ended                             Six Months Ended
                                                           December 31                                    December 31
                                              --------------------------------------       ---------------------------------------
                                                    2000                 1999                    2000                 1999
                                              -----------------    -----------------       -----------------    ------------------
<S>                                           <C>                  <C>                     <C>                  <C>
  Net sales and rental revenue                    $15,028,717          $14,778,144            $ 30,096,364          $ 28,654,356

  Cost of sales and rentals                         4,646,357            4,107,485               9,396,197             8,706,291
                                                  -----------          -----------            ------------          ------------
       Gross profit                                10,382,360           10,670,659              20,700,167            19,948,065

  Operating expenses:
     Selling, general and administrative            8,047,110            7,677,079              15,764,117            15,004,223
     Research and development                         481,563              353,071                 839,906               606,879
                                                  -----------          -----------            ------------          ------------

                                                    8,528,673            8,030,150              16,604,023            15,611,102
                                                  -----------          -----------            ------------          ------------

       Income from operations                       1,853,687            2,640,509               4,096,144             4,336,963

  Other income (expense):
     Interest expense                                (333,821)            (404,281)               (712,720)             (749,862)
     Other income (expense)                            16,219              (84,331)                 28,839               (87,455)
     Minority interest                                    ---               11,931                     ---                17,798
     Gain on sale of building                             ---                  ---                     ---             1,075,680
                                                  -----------          -----------            ------------          ------------

       Income before income taxes                   1,536,085            2,163,828               3,412,263             4,593,124

  Provision for income taxes                          714,000              932,000               1,468,000             1,927,000
                                                  -----------          -----------            ------------          ------------
       Net income                                 $   822,085          $ 1,231,828            $  1,944,263          $  2,666,124
                                                  ===========          ===========            ============          ============

  Net income per common and
  common equivalent share

       Basic                                      $      0.08          $      0.12            $       0.18          $       0.25
                                                  ===========          ===========            ============          ============
       Diluted                                    $      0.08          $      0.12            $       0.18          $       0.25
                                                  ===========          ===========            ============          ============


  Weighted average number of shares
  outstanding
        Basic
                                                   10,764,487           10,546,701              10,743,862            10,538,617
                                                  ===========          ===========            ============          ============
        Diluted                                    10,778,078           10,705,843              10,762,378            10,698,821
                                                  ===========          ===========            ============          ============
</TABLE>






                                       5
<PAGE>   6
                       REHABILICARE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                             Six Months Ended
                                                                                                December 31
                                                                            --------------------------------------------------

                                                                                      2000                      1999
                                                                             ----------------------      --------------------
<S>                                                                         <C>                          <C>
OPERATING ACTIVITIES:

  Net income                                                                  $     1,944,263             $     2,666,124
      Adjustments to reconcile net income to net cash
       provided by (used in) operating activities
         Gain on sale of building                                                         ---                  (1,075,680)
         Depreciation and amortization                                              1,283,935                     940,925
         Change in long-term portion of deferred taxes                                187,583                      92,389
         Minority interest                                                                ---                     (17,798)
         Change in current assets and liabilities, excluding effects of
          business combinations
            Receivables                                                               277,495                    (230,833)
            Inventories                                                               341,222                   1,784,709
            Prepaid expenses                                                         (789,613)                   (461,222)
            Accounts payable                                                         (187,169)                     88,050
            Accrued liabilities                                                      (771,045)                 (1,313,203)
                                                                              ---------------             ---------------
               Net cash provided by  operating activities                           2,286,671                   2,473,461
                                                                              ---------------             ---------------
INVESTING ACTIVITIES:
  Purchases of property and equipment                                                (235,929)                   (983,394)
  Cash paid in asset acquisition, net of cash received                                    ---                 (12,598,117)
  Proceeds from sale of building                                                          ---                   1,726,930
  Change in other assets, net                                                        (625,992)                        ---
                                                                              ---------------             ---------------
               Net cash used in investing activities                                 (861,921)                (11,854,581)
                                                                              ---------------             ---------------

FINANCING ACTIVITIES:
  Proceeds from new financing                                                             ---                  15,339,364
  Principal payments on long-term obligations                                      (1,885,157)                 (2,874,804)
  Proceeds from (payments on) line of credit, net                                    (800,000)                   (450,000)
  Payment of finance obligation                                                           ---                  (1,261,733)
  Proceeds from issuance of restricted stock grants and
     exercise of stock options                                                        455,000                      37,059
  Proceeds from issuance of employer stock purchase                                    59,657                      43,097
                                                                              ---------------             ---------------
               Net cash provided by (used in) financing activities                 (2,170,500)                 10,832,983
                                                                              ---------------             ---------------

  Effect of exchange on cash and cash equivalents                                      29,279                     (25,791)
                                                                              ---------------             ---------------
               Net increase (decrease) in cash and cash equivalents                  (716,471)                  1,426,072


CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                    2,227,352                     561,207
                                                                              ---------------             ---------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                    $     1,510,881            $      1,987,279
                                                                              ===============            ================

SUPPLEMENTAL CASH FLOW INFORMATION

            Interest paid                                                     $       712,708            $        715,247
                                                                              ===============            ================

            Income taxes paid                                                 $     1,653,728            $      1,382,418
                                                                              ===============            ================
</TABLE>


                                       6
<PAGE>   7
                                REHABILICARE INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000

1. ACCOUNTING POLICIES

The amounts set forth in the preceding financial statements are unaudited as of
and for the periods ended December 31, 2000 and 1999 but, in the opinion of
management, reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair statement of the results for the periods
presented. Such results are not necessarily indicative of results for the full
year. The significant accounting policies and certain financial information
which are normally included in financial statements prepared in accordance with
generally accepted accounting principles, but which are not required for interim
reporting purposes, have been omitted. The accompanying financial statements of
the Company should be read in conjunction with the audited consolidated
financial statements for the year ended June 30, 2000, included in the Company's
Annual Report on Form 10-K.

Certain previously reported amounts have been reclassified to conform to
classifications adopted in fiscal year 2001. These reclassifications had no
effect on net income, cash flows or shareholders' equity.

2. BUSINESS COMBINATIONS

On July 16, 1999, the Company acquired substantially all the assets of Compex
SA, a Swiss-based medical products company for cash of approximately $11.0
million. The acquisition was financed principally with debt and provided for
additional contingent consideration of up to $2 million based on the performance
of Compex through December 31, 2000. In connection with the acquisition, the
purchase consideration and transaction costs were allocated as follows:


<TABLE>
<S>                                                           <C>
               Net assets acquired                            $      1,612,085
               Goodwill                                              9,060,772
               Developed technology                                  1,400,000
               Existing workforce                                    1,400,000
               Debt structuring costs                                  346,970
                                                              ------------------
                                                              $     13,819,827
                                                              ==================
</TABLE>


Included in goodwill is a contingent payment of $1,777,185 made during fiscal
2000 to the former Compex shareholders. The final contingent payment of $222,815
was accrued at December 31, 2000 and will be paid in March 2001. That amount is
also included in goodwill and will be amortized beginning in January 2001.

3. NOTE PAYABLE AND LONG TERM DEBT

In conjunction with its acquisition of Compex SA, the Company entered into a new
$20,000,000 credit facility which provides for both term and revolving
borrowings at varying rates based either on the bank's prime rate or LIBOR. The
initial term loan of $15,000,000 was used to fund the acquisition and repay the
balance of a note and a revolving loan provided under a credit facility with
another bank.






                                       7
<PAGE>   8



Borrowings under the credit facility are secured by substantially all assets of
the Company other than those pledged as collateral on existing lease or mortgage
obligations. The interest rate on the term loan was 8.99% at December 31, 2000.
There were borrowings of $400,000 under the revolving line of credit as of
December 31, 2000, and had a weighted average interest rate of 9.5%.

The Company was in compliance with all financial covenants in its credit
agreement as of December 31, 2000 and for the period then ended.

4. SEGMENT INFORMATION

Rehabilicare and its consolidated subsidiaries operate their business in one
reportable segment, the manufacture and distribution of electromedical pain
management and rehabilitation products. The Company's chief operating decision
makers use consolidated results to make operating and strategic decisions. Net
revenue from the United States and foreign sources (primarily Europe) are as
follows:


<TABLE>
<CAPTION>
                                                    For the Six Months Ended December 31
                                        -------------------------------------------------------------

                                                     2000                            1999
                                        -------------------------------    --------------------------
<S>                                     <C>                                <C>
         United States revenue                  $    21,692,082                $    21,023,638
         Foreign revenue                              8,404,282                      7,630,718
                                                ---------------                ---------------
                                                $    30,096,364                $    28,654,356
                                                ================               ===============
</TABLE>

Net revenue by product line was as follows:

<TABLE>
<CAPTION>
                                                              For the Six Months Ended
                                                                     December 31
                                                   -----------------------------------------------

                                                           2000                       1999
                                                   -------------------        --------------------
<S>                                                <C>                        <C>
           Rehabilitation products                    $    6,139,659           $    5,893,597
           Pain management                                 6,990,371                7,117,778
           Consumer Products                               5,997,539                5,334,690
           Accessories and supplies                       10,968,795               10,308,291
                                                      --------------           --------------
                                                      $   30,096,364           $   28,654,356
                                                      ==============           ==============
</TABLE>


During the first six months of fiscal 2001, one customer accounted for
approximately 15% of total consolidated revenue. This customer represented
approximately 4% of total accounts receivable at December 31, 2000.









                                       8
<PAGE>   9



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


OVERVIEW

The Company designs, manufactures and distributes electrotherapy products used
for pain management, rehabilitation and training. Its products are used in
clinical, home health care, sports medicine and occupational medicine
applications. It also distributes other medical products used in related
applications. The Company operates in one business segment, distributing its
products through sales to medical product dealers and distributors, sport shops
and, in the United States, through direct rental or sale to patients.

The direct rental or sale approach involves placing electrotherapy units with
physicians, physical therapists and other health care providers who then refer
those units to patients after determining an appropriate treatment regimen.
Units are left on consignment with the health care providers for such referral.
The Company then bills the patient or the patient's insurance carrier directly
after being notified that a unit has been prescribed and provided to the
patient. The Company takes responsibility for subsequent patient follow-up,
including extension of the rental period, sale of the unit, if appropriate, and
sale of additional supplies required for continued use of the electrotherapy
units. This distribution approach requires the Company to maintain significant
investments in inventories and receivables.























                                       9
<PAGE>   10


RESULTS OF OPERATIONS

The following table sets forth information from the statements of operations as
a percentage of revenue for the periods indicated:


<TABLE>
<CAPTION>
                                                  Three Months Ended                Six Months Ended
                                                      December 31                     December 31
                                              ----------------------------      -------------------------

                                                 2000              1999          2000             1999
                                              -----------         --------      --------        ---------
<S>                                           <C>                 <C>           <C>             <C>
Net sales and rental revenue                     100.0%           100.0%        100.0%           100.0%

Cost of sales and rentals                        (30.9)           (27.8)        (31.2)           (30.4)

Gross profit                                      69.1             72.2          68.8             69.6

Operating expenses -
   Selling, general and administrative           (53.6)           (51.9)        (52.4)           (52.4)
   Research and development                       (3.2)            (2.4)         (2.8)            (2.1)
                                                 -----            -----         -----            -----
            Total operating expenses             (56.8)           (54.3)        (55.2)           (54.5)
                                                 -----            -----         -----            -----

   Income from operations                         12.3             17.9          13.6             15.1

   Other income (expense), net                    (2.0)            (3.3)         (2.2)            (2.8)

   Gain on sale of building                        ---              ---           ---              3.8

   Income tax provision                           (4.8)            (6.0)         (4.9)            (6.6)
                                                 -----            -----         -----            -----

   Net income                                      5.5              8.6           6.5              9.5
                                                 =====            =====         =====            =====
</TABLE>

Revenue was $15,029,000 for the second quarter of fiscal 2001, a 2% increase
from $14,778,000 for the second quarter of fiscal 2000. Revenue for the six
months ended December 31, 2000 increased 5% to $30,096,000 from $28,654,000 in
the first six months of fiscal 1999. The increase was primarily attributable to
United States operations where revenue increased 6% in the second quarter and
11% for the first six months of fiscal 2001 over the same period in fiscal 2000.
The Company continues its recovery from the impact of a whistleblower lawsuit
disclosed in the third quarter of fiscal 2000, which adversely impacted earnings
growth during the last half of fiscal 2000. Compex accounted for $3,822,000 of
revenue in the second quarter and $7,856,000 for the first six months of fiscal
2001, compared to $4,043,000 in the second quarter and $7,019,000 for the first
six months of fiscal 2000. Revenue from Compex was lower than expected in the
second quarter of fiscal 2001 due mainly to poor weather in Europe during
November and December that impacted consumer retail sales.

Gross profit was $10,383,000 or 69.1% of revenue in the second quarter and
$20,701,000 or 68.8% of revenue for the first six months of fiscal 2001 compared
with $10,671,000 or 72.2% of revenue in the second quarter and $19,948,000 or
69.6% of revenue for the first six months of fiscal 2000. Cost of sales in the
first quarter of fiscal 2000 included a one-time charge of $645,000 related to
the step-up in basis of inventory recorded in connection with the Compex
acquisition. Without that charge, gross profit would have been 71.5% of revenue
for the six months. The current year reduction in gross profit resulted




                                       10
<PAGE>   11

primarily from increased focus on sales of Compex sport products through retail
store outlets, rather than direct to consumers, in order to expand market
penetration.

Selling, general and administrative expenses increased 5% to $8,048,000 in the
second quarter of fiscal 2001 from $7,677,000 in fiscal 2000. As a percent of
revenue, those expenses increased from 52% to 54%. For the six months ended
December 31, 2000, those expenses increased 5% to $15,765,000 from $15,004,000
in fiscal 2000, but stayed the same as a percentage of revenue at 52%. That
increase is primarily attributable to an increase in the provision for
uncollectible accounts receivable to reflect actual collection experience.

Research and development expense increased 36% to $482,000 in the second quarter
of fiscal 2001, compared with $353,000 in fiscal 2000. For the six months ended
December 31, 2000, these costs increased 38% to $840,000 compared to $607,000 in
fiscal 2000. Those increases reflect expanded new product development
activities.

Interest expense decreased slightly from $750,000 in the first six months of
fiscal 2000 to $713,000 in the current period. The decrease resulted from
slightly lower interest rates and lower outstanding borrowings under the
Company's revolving line of credit.

Operating results for the first six months of fiscal 2000 include a gain on the
sale of the former Staodyn building in Longmont, Colorado in the amount of
$1,076,000. The Company exercised its option to purchase that building in the
first quarter of fiscal 1999 and closed the purchase and the subsequent sale on
July 7, 1999.

The provision for income taxes was increased from 40% of income before taxes in
the first quarter of fiscal 2001 to 43% for the six months ended December 31,
2000, compared with 41% and 42%, respectively, in the prior year. The Company
now operates in various countries in Europe as well as the United States. Some
countries have higher tax rates than the United States as well as different
rules on the deductibility of certain expenses and the availability of certain
credits for taxes paid to other jurisdictions. In addition, the Company has
relocated certain operations and negotiated new agreements with certain European
taxing authorities. The Company believes that 43% is a reasonable estimate of
the effective rate for fiscal 2001 based on most recent estimates of expected
sources of revenue and expenses for the entire year.

As a result of all the above changes, net income decreased from $1,232,000 in
the second quarter of fiscal 2000 to $822,000 in the second quarter of fiscal
2001. For the six months ended December 31, 2000 net income decreased to
$1,944,000 from $2,666,000 during the same period in fiscal 2000. Diluted
earnings per share decreased from $.12 to $.08 for the second quarter and $.25
to $.18 for the six month period. Before the one time gain related to the
building sale and the one time charge related to the Compex inventory step-up,
net income was $2,462,000 of $.23 per share for the first six months of fiscal
2000.
















                                       11
<PAGE>   12


LIQUIDITY AND CAPITAL RESOURCES

During the six months ended December 31, 2000, the Company's operations provided
cash of $2,287,000, mainly from net income and a reduction in inventory and
accounts receivable of $341,000 and $277,000, respectively. These amounts were
offset by an increase in prepaid expenses of $790,000 and decreases of $187,000
in accounts payable and $771,000 in accrued liabilities.

The Company used $862,000 in investing activities in the first six months of
fiscal 2001 for net purchases of property and equipment and a net increase in
clinical and rental equipment.

The Company's financing activities used $2,171,000 of cash during the first six
months of fiscal 2001, mainly for the repayment of debt on the $20,000,000
credit facility used to finance the Compex acquisition. The Company initially
borrowed $15,000,000 under the credit facility to finance the Compex purchase
and to repay an outstanding note. At December 31, 2000, $11,697,000 is
outstanding under the facility.

Managing receivables represents one of the biggest business challenges to the
Company. The process of determining what products will be reimbursed by third
party payors and the amounts to be paid for those products is very complex and
the reimbursement environment is constantly changing. That risk is spread across
many payors throughout the United States. The determination of an appropriate
reserve for uncollectible accounts at the end of each reporting period includes
various factors including historical trends and relationships and experience
with insurance companies or other third party payors. As discussed in the Form
10-Q for the third quarter ended March 31, 2000, the Medicare whistleblower suit
disclosed in early February 2000 adversely affected morale and productivity in
the Company's patient support operations. Careful evaluation of that situation
and the nature of remaining receivables at June 30, 2000 led management to
conclude that an additional $1,000.000 should be provided for uncollectible
accounts. The Company believes that the reserve at December 31, 2000 is adequate
to cover future losses on its receivables based on collection history and
trends. The provision for uncollectible accounts recorded in the income
statement may continue to fluctuate significantly from quarter to quarter as
such trends change. The reserve was 26.7% of receivables at December 31, 2000
compared to 25.4% at June 30, 2000. The Company believes that the ratio will be
favorably impacted in the future as a result of including receivables from
Compex SA and Rehabilicare (UK) Ltd. which are more traditional trade
receivables and not dependent on third party payors.

At December 31, 2000 the Company was committed to pay $1,588,000 settlement of
the Medicare whistleblower suit and this amount was remitted in full to the
United States Government on January 29, 2001. The Company has no material
commitment for capital expenditures. The Company believes that available cash
and borrowings under its credit line will be adequate to fund cash requirements
operations for the current fiscal year.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company is exposed to market risk from changes in the interest rates
        on certain of its outstanding debt. The outstanding loan balance under
        the $20 million credit facility bears interest at a variable rate based
        on the bank's prime rate or LIBOR. Based on the average outstanding bank
        debt for the period ended December 31, 2000, a 100 basis point change in
        interest rates would not change interest expense by a material amount.





                                       12
<PAGE>   13


                           PART II - OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

        On September 11, 2000, the Company announced that it had reached an
        agreement with the United States Government to settle allegations of
        improper Medicare billing that were asserted in a lawsuit filed by a
        former employee. The Company agreed to pay $1,588,510 to settle the
        lawsuit and that amount was remitted to the United States Government on
        January 29, 2001. The Company has denied allegations that it engaged in
        fraudulent Medicare billing practices.

        Under the terms of the settlement, the Company also entered into a
        Corporate Integrity Agreement ("CIA"). The CIA has a duration of five
        years and provides for an independent audit of claims submitted to
        federal health care programs to ensure, among other things, proper
        filing of future Medicare claims. The Company previously hired a
        corporate compliance officer and implemented a corporate compliance
        program to ensure that the Company is in compliance with all applicable
        laws and regulations.

        The Company has also, from time to time, been a party to other claims,
        legal actions and complaints arising in the ordinary course of business.
        Management does not believe that the resolution of such matters has had
        or will have a material impact on the Company's results of operations or
        financial position.


ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - None


ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None























                                       13
<PAGE>   14


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

        The annual meeting of shareholders of Rehabilicare was held on December
        12, 2000. Shareholders holding 8,310,777 shares, or approximately 77.2%
        of outstanding shares, were represented at the meeting by proxy or in
        person. The only matter submitted at the meeting for vote by the
        shareholders was as follows:

              a.   Election of Directors

                   The following nominees were elected to serve as members of
                   the Board of Directors until the annual meeting of
                   shareholders in 2001 or until such time as a successor may be
                   elected:

<TABLE>
<CAPTION>
                                                                    IN FAVOR                 WITHHELD
                                                                    --------                 --------
<S>                                                                <C>                       <C>
                   Frederick H. Ayers                              8,241,847                    68,930

                   W. Bayne Gibson                                 8,173,310                   137,467

                   Richard E. Jahnke                               8,244,547                    66,230

                   David B. Kaysen                                 8,249,203                    61,574

                   John H.P. Maley                                 8,249,904                    60,873

                   Robert C. Wingrove                              8,247,680                    63,097

</TABLE>
ITEM 5. OTHER INFORMATION - None



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a) Exhibits

            None

        (b) Reports on Form 8-K

            None filed during the quarter ended December 31, 2000



















                                       14
<PAGE>   15


                                   SIGNATURES

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





                                                REHABILICARE INC.



February 14, 2001                               /s/ David B. Kaysen
----------------------------------              --------------------------------
 Date                                            David B. Kaysen
                                                 President and Chief Executive
                                                 Officer



February 14, 2001                               /s/ W. Glen Winchell
----------------------------------              --------------------------------
 Date                                            W. Glen Winchell
                                                 Vice President of Finance
                                                 (Principal Financial and
                                                 Accounting Officer)
































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