<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 March 31, 2001

                                       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)

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

                               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 May 11, 2001 was:

COMMON STOCK, $.10 PAR VALUE                                  10,732,652 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:

-    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 revenue 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 March 31, 2001 and
                        June 30, 2000

                        Consolidated Statements of Operations for the three
                        months and nine months ended March 31, 2001 and 2000

                        Consolidated Statements of Cash Flows for the nine
                        months ended March 31, 2001 and 2000

                        Notes to Consolidated Financial Statements





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


<TABLE>
<CAPTION>
                                                                                        March 31,               June 30,
                                                                                           2001                   2000
                                                                                   ---------------------    ------------------
<S>                                                                                <C>                      <C>

                                          ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                         $  1,620,445             $  2,227,352
   Receivables, less reserve for uncollectible accounts of $7,867,778                  17,595,332               19,268,252
        and $6,575,715
   Inventories -
     Raw materials                                                                      2,044,942                1,283,791
     Work in process                                                                       12,445                  334,900
     Finished goods                                                                     6,101,853                6,817,964
   Deferred tax assets                                                                  3,351,294                3,351,294
   Prepaid expenses                                                                     2,006,531                1,404,968
                                                                                     ------------             ------------
         Total current assets                                                          32,732,842               34,688,521

PROPERTY, PLANT AND EQUIPMENT:                                                         13,398,412               12,932,485
   Less accumulated depreciation                                                       (8,220,200)              (7,336,310)
                                                                                     ------------             ------------
         Net property, plant and equipment                                              5,178,212                5,596,175

  Intangible assets, net                                                               11,527,462               12,152,185
  Deferred tax assets                                                                     194,771                  223,923
  Other assets                                                                            170,953                   47,158
                                                                                     ------------             ------------
                                                                                     $ 49,804,240             $ 52,707,962
                                                                                     ============             ============
                    LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current maturities of long-term debt                                              $  2,162,276             $  2,170,468
   Note payable                                                                         1,100,000                1,200,000
   Accounts payable                                                                     2,819,364                3,108,514
   Medicare lawsuit payable                                                                    --                1,677,021
                                                                                     ------------             ------------
   Accrued liabilities -
     Payroll                                                                              326,956                  327,856
     Commissions                                                                          296,387                  350,893
     Income taxes                                                                         691,674                1,672,636
     Other                                                                              2,142,543                2,684,301
                                                                                     ------------             ------------
         Total current liabilities                                                      9,539,200               13,191,689

LONG-TERM LIABILITIES:
   Long term-debt                                                                      11,323,442               13,662,792
   Deferred tax liabilities                                                               732,894                  583,927
                                                                                     ------------             ------------

         Total liabilities                                                             21,595,536               27,438,408

STOCKHOLDERS' EQUITY
   Common stock, $.10 par value:  25,000,000 shares authorized;                         1,073,265                1,055,871
     issued and outstanding 10,732,652 and 10,558,710 shares,
     respectively
   Preferred stock, no par value; 5,000,000 shares authorized; none
     issued and outstanding                                                                    --                       --

   Additional paid-in capital                                                          21,279,693               20,873,737
   Less note receivable from officer/stockholder                                         (189,417)
                                                                                                                  (210,417)
   Accumulated other non-owner changes in equity                                         (466,156)
                                                                                                                  (154,719)
   Retained earnings                                                                    6,511,319                3,705,082
                                                                                     ------------             ------------
         Total stockholders' equity                                                    28,208,704               25,269,554
                                                                                     ------------             ------------
                                                                                     $ 49,804,240             $ 52,707,962
                                                                                     ============             ============
</TABLE>




                                       4
<PAGE>   5






                       REHABILICARE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                     Three Months Ended                             Nine Months Ended
                                                             March 31                                      March 31
                                              --------------------------------------       ---------------------------------------
                                                    2001                 2000                    2001                 2000
                                              -----------------    -----------------       -----------------    ------------------
<S>                                           <C>                  <C>                     <C>                  <C>
Net sales and rental revenue                       $ 15,171,676        $ 13,949,721        $ 45,268,040           $ 42,604,077

Cost of sales and rentals                             4,822,818           4,141,278          14,219,015             12,847,569
                                                   ------------        ------------        ------------           ------------
     Gross profit                                    10,348,858           9,808,443          31,049,025             29,756,508

Operating expenses:
   Selling, general and administrative                8,048,582           7,888,129          23,812,699             22,887,512
   Research and development                             493,643             340,244           1,333,549                947,123
                                                   ------------        ------------        ------------           ------------
     Total operating expenses                         8,542,225           8,228,373          25,146,248             23,834,635
                                                   ------------        ------------        ------------           ------------

     Income from operations                           1,806,633           1,580,070           5,902,777              5,921,873

Other income (expense):
   Interest expense                                    (313,035)           (410,628)         (1,025,755)            (1,165,330)
   Gain on sale of building                                  --                  --                  --              1,075,680
   Minority interest                                         --              (3,850)                 --                 13,948
   Other income (expense)                                14,376             (10,176)             43,215                (97,631)
                                                   ------------        ------------        ------------           ------------

    Income before income taxes                        1,507,974           1,155,416           4,920,237              5,748,540

Provision for income taxes                              646,000             486,000           2,114,000              2,413,000
                                                   ------------        ------------        ------------           ------------
     Net income                                    $    861,974        $    669,416        $  2,806,237           $  3,335,540
                                                   ============        ============        ============           ============

Net income per common and
common equivalent share

     Basic                                         $       0.08        $       0.06        $       0.26           $       0.31
                                                   ============        ============        ============           ============

     Diluted                                       $       0.08        $       0.06        $       0.26           $       0.31
                                                   ============        ============        ============           ============


Weighted average number of shares
outstanding
      Basic
                                                     10,788,277          10,569,275          10,758,451             10,548,712
                                                   ============        ============        ============           ============
      Diluted
                                                     10,844,363          10,612,967          10,786,763             10,635,278
                                                   ============        ============        ============           ============
</TABLE>




                                       5

<PAGE>   6


                       REHABILICARE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                               Nine Months Ended
                                                                                                   March 31
                                                                               --------------------------------------------------

                                                                                       2001                         2000
                                                                               ----------------------        --------------------
<S>                                                                            <C>                           <C>
OPERATING ACTIVITIES:
  Net income                                                                        $  2,806,237               $  3,335,540
      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                                                 1,708,614                  1,568,382
         Change in long-term portion of deferred taxes                                   178,119                     85,655
         Minority interest                                                                    --                    (13,948)
         Change in current assets and liabilities, excluding effects of
          business combinations
            Receivables                                                                1,672,919                    200,314
            Inventories                                                                  277,415                  2,115,807
            Prepaid expenses                                                            (647,969)                  (615,683)
            Accounts payable                                                          (1,966,171)                (1,757,582)
            Accrued liabilities                                                       (1,578,100)                (1,061,835)
                                                                                    ------------               ------------
               Net cash provided by (used in) operating activities                     2,451,064                  2,780,970

INVESTING ACTIVITIES:
  Purchases of property and equipment                                                   (265,361)                (1,314,374)
  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                                                           (477,956)                        --
                                                                                    ------------               ------------
               Net cash used in investing activities                                    (743,317)               (12,185,561)

FINANCING ACTIVITIES:
  Proceeds from new financing                                                                 --                 15,339,365
  Principal payments on long-term obligations                                         (2,326,566)                (3,403,203)
  Proceeds from (payments on) line of credit, net                                       (100,000)                   600,000
  Payment of capital lease obligation                                                         --                 (1,261,733)
  Proceeds from exercise of stock options                                                314,375                     39,059
  Proceeds from employee stock purchase plan                                             108,975                    103,290
                                                                                    ------------               ------------
               Net cash provided by (used in) financing activities                    (2,003,216)                11,416,778

  Effect of exchange rates on cash and cash equivalents                                 (311,438)                  (140,403)
                                                                                    ------------               ------------

               Net increase (decrease) in cash and cash equivalents                     (606,907)                 1,871,784


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

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                          $  1,620,445               $  2,432,991
                                                                                    ============               ============

SUPPLEMENTAL CASH FLOW INFORMATION

            Interest paid                                                           $  1,025,743               $  1,118,156
                                                                                    ============               ============

            Income taxes paid                                                       $  2,582,920               $  1,842,984
                                                                                    ============               ============
</TABLE>



                                       6

<PAGE>   7



                                REHABILICARE INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2001


1. ACCOUNTING POLICIES

The amounts set forth in the preceding financial statements are unaudited as of
and for the periods ended March 1, 2001 and 2000 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 are contingent payments of $1,777,185 and $222,815 made
during fiscal 2000 and 2001, respectively, to the former Compex shareholders.

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. There remained $11,247,000 outstanding under the term loan, bearing
interest at 7.44%, at March 31, 2001. There were borrowings of $1,100,000 under
the revolving line of credit as of March 31, 2001, with a weighted average
interest rate of 8.0%.

The Company was in compliance with all financial covenants in its credit
agreement as of March 31, 2001 and for the period then ended.

4. SEGMENT INFORMATION

Rehabilicare and its consolidated subsidiaries operate 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 Nine Months Ended March 31
                                                    -------------------------------------------------------------

                                                                 2001                            2000
                                                    -------------------------------    --------------------------

<S>                                                 <C>                                 <C>
                     United States revenue                  $     33,184,315               $     31,010,778
                     Foreign revenue                              12,083,725                     11,593,299
                                                            ----------------               ----------------
                                                            $     45,268,040               $     42,604,077
                                                            ================               ================
</TABLE>

Net revenue by product line was as follows:
<TABLE>
<CAPTION>
                                                                        For the Nine Months Ended
                                                                                March 31
                                                             -------------------------------------------------

                                                                     2001                       2000
                                                             ---------------------      ----------------------

<S>                                                          <C>                        <C>
                     Rehabilitation products                    $   9,194,245               $   8,733,829
                     Pain management                               10,571,689                  10,399,133
                     Consumer Products                              8,592,509                   8,088,928
                     Accessories and supplies                       6,909,597                  15,382,187
                                                                --------------              -------------
                                                                $  45,268,040               $  42,604,077
                                                                =============               =============
</TABLE>


During the first nine months of fiscal 2001, one customer accounted for
approximately 13% of total consolidated revenue. This customer represented
approximately 6% of total accounts receivable at March 31, 2001.



                                       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 sports 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               Nine Months Ended
                                                              March 31                         March 31
                                                     ----------------------------      -------------------------

                                                        2001              2000          2001             2000
                                                     -----------         --------      --------        ---------
<S>                                                  <C>                 <C>           <C>             <C>
Net sales and rental revenue                            100.0%            100.0%        100.0%            100.0%

Cost of sales and rentals                               (31.8)            (29.7)        (31.4)            (30.2)

Gross profit                                             68.2              70.3          68.6              69.8

Operating expenses -
   Selling, general and administrative                  (53.0)            (56.6)        (52.6)            (53.7)
   Research and development                              (3.3)             (2.4)         (2.9)             (2.2)
                                                        -----             -----         -----             -----
            Total operating expenses                    (56.3)            (59.0)        (55.5)            (55.9)
                                                        -----             -----         -----             -----

   Income from operations                                11.9              11.3          13.1              13.9

   Other income (expense), net                           (1.9)             (3.0)         (2.2)             (2.9)

   Gain on sale of building                                --                --            --               2.5

   Income tax provision                                  (4.3)             (3.5)         (4.7)             (5.7)
                                                        -----             -----         -----             -----

   Net income                                             5.7               4.8           6.2               7.8
                                                        =====             =====         =====             =====
</TABLE>


Revenue was $15,172,000 for the third quarter of fiscal 2001, a 9% increase from
$13,950,000 for the third quarter of fiscal 2000. Revenue for the nine months
ended March 31, 2001 increased 6% to $45,268,000 from $42,604,000 for the nine
months ended March 31, 2000. The increase was primarily attributable to United
States operations where revenue increased 15% in the third quarter and 7% for
the first nine 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 $3,393,000 of
revenue in the third quarter and $11,248,000 for the nine months ended March 31,
2001, compared to $3,624,000 in the third quarter and $10,643,000 for the nine
months ended March 31, 2000. Revenue from Compex was lower than expected in the
third quarter of fiscal 2001 due to the effects of a strengthening U.S. dollar
against European currencies and to slower than anticipated orders from a major
customer.

Gross profit was $10,349,000 or 68.2% of revenue for the third quarter and
$31,049,000 or 68.6% of revenue for the nine months ended March 31, 2001
compared with $9,808,000 or 70.3% of revenue for the third quarter and
$29,757,000 or 69.8% of revenue for the nine months ended March 31, 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
71.3% of revenue for the nine months. The current year reduction in gross profit
resulted primarily from increased focus on sales of Compex sport products at
wholesale prices to retail


                                       10
<PAGE>   11

store outlets, rather than direct to consumers at retail prices. The change in
strategy is expected to expand market penetration.

Selling, general and administrative expenses increased 2% to $8,048,000 in the
third quarter of fiscal 2001 from $7,888,000 in fiscal 2000. As a percent of
revenue, those expenses decreased from 57% to 53%. For the nine months ended
March 31, 2001, those expenses increased 4% to $23,813,000 from $22,888,000 in
fiscal 2000, but stayed the same as a percentage of revenue at approximately
53%. The reductions as a percent of revenue reflect lower selling expenses
related to the Compex retail sales strategy and certain economies of scale.

Research and development expense increased 45% to $494,000 in the third quarter
of fiscal 2001, compared with $340,000 in fiscal 2000. For the nine months ended
March 31, 2001, these costs increased 41% to $1,334,000 compared to $947,000 in
fiscal 2000. Those increases reflect expanded new product development activities
both in the U.S. where two new products are scheduled for introduction later in
calendar 2001 and in Europe where one new sport product was introduced in April
2001.

Interest expense decreased slightly from $1,165,000 in the nine months ended
March 31, 2000 to $1,026,000 in the current period. The decrease resulted from
slightly lower interest rates and lower outstanding borrowings under the
Company's credit facility.

Operating results for the nine months ended March 31, 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 nine months ended March 31,
2001, compared with 42% in both periods 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 activity, net income increased from $669,000 in the
third quarter of fiscal 2000 to $862,000 in the third quarter of fiscal 2001.
For the nine months ended March 31, 2001 net income decreased to $2,806,000 from
$3,336,000 during the same period in fiscal 2000. Diluted earnings per share
increased from $.06 to $.08 for the third quarter and decreased from $.31 to
$.26 for the nine 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 $3,085,000 of $.29 per share for the nine months ended March 31, 2000.




                                       11
<PAGE>   12


LIQUIDITY AND CAPITAL RESOURCES

During the nine months ended March 31, 2001, the Company's operations provided
cash of $2,451,000, mainly from net income and a reduction in inventory and
accounts receivable of $277,000 and $1,673,000, respectively. These amounts were
offset by an increase in prepaid expenses of $648,000 and decreases of
$1,966,000 in accounts payable and $1,578,000 in accrued liabilities. The
decrease in account payable was due mainly to the payment of $1,677,000 for the
settlement for the Medicare whistleblower suit.

The Company used $743,000 in investing activities in the nine months ended March
31, 2001 for net purchases of property and equipment and a net increase in
clinical and rental equipment.

The Company's financing activities used $2,003,000 of cash during the nine
months ended March 31, 2001, mainly for the repayment of borrowings under 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 March 31, 2001, $11,247,000 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. The Company believes that
the reserve at March 31, 2001 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 30.9% of receivables at March 31, 2001 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.

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 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 March 31, 2001, 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

        In late January 2001, Rehabilicare was served with documents in
        connection with a products liability case brought in the California
        Superior Court for Solano County. Until receipt of these documents,
        Rehabilicare had no record of the proceedings. The case involved a
        product liability claim for burns allegedly suffered by plaintiff
        through the use of a stimulation unit that was allegedly manufactured by
        Rehabilicare. The action alleged damages for medical expenses of
        approximately $1,000, for future medical expenses of approximately
        $270,000 and for punitive damages and pain and suffering of
        approximately $2.0 million. The action apparently progressed to the
        entry of a default judgment on January 11, 2001 against Rehabilicare for
        failing to respond to pleadings.

        In March 2001, Rehabilicare moved in Solano County court to set aside
        the default judgment on various grounds, including irregularities in the
        filings and other matters. Because the appeal period with respect to the
        default judgment would have lapsed prior to the hearing on its motion in
        Solano County, Rehabilicare also appealed the judgment to the California
        Court of Appeals. The Solano County Court, however, refused to act on
        Rehabilicare's motion because of the pendency of the appeal.
        Rehabilicare believes the judgment is void or otherwise improper, has
        obtained a stay of execution of the judgment in both California and
        Minnesota and intends to vigorously pursue available actions, including
        its appeal, to set aside the judgment.


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


ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None


ITEM 5. OTHER INFORMATION - None


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)     Exhibits

                None

        (b)     Reports on Form 8-K

                None filed during the quarter ended March 31, 2001




                                       13
<PAGE>   14


                                   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.



May 15, 2001                      /s/ David B. Kaysen
---------------------------       ----------------------------------------------
 Date                               David B. Kaysen
                                    President and Chief Executive Officer



May 15, 2001                      /s/ W. Glen Winchell
---------------------------       ----------------------------------------------
 Date                               W. Glen Winchell
                                    Vice President of Finance
                                    (Principal Financial and Accounting Officer)




                                       14