UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 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 November 30, 2001

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 For the transition period from _______________ to ______________

                        Commission File Number: 0-18105

                               VASOMEDICAL, INC.

             (Exact name of registrant as specified in its charter)

        Delaware                                      11-2871434

(State or other jurisdiction of            (IRS Employer Identification Number)
 incorporation or organization)

                   180 Linden Ave., Westbury, New York 11590

                    (Address of principal executive offices)

       Registrant's Telephone Number                  (516) 997-4600

Number of Shares Outstanding of Common Stock,
$.001 Par Value, at January 14, 2002                  57,279,120


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  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 [ ]

<PAGE>


                       Vasomedical, Inc. and Subsidiaries

                                     INDEX



                                                                        Page
                                                                        ----
PART I - FINANCIAL INFORMATION

  Item 1 - Financial Statements (unaudited)

    Consolidated Condensed Balance Sheets as of
       November 30, 2001 and May 31, 2001                                 3

    Consolidated Condensed Statements of Earnings for the
       Six Months Ended November 30, 2001 and 2000                        4

    Consolidated Condensed Statement of Changes in Stockholders'
       Equity for the Period from June 1, 2001 to
       November 30, 2001                                                  5

    Consolidated Condensed Statements of Cash Flows for the
       Six Months Ended November 30, 2001 and 2000                        6


    Notes to Consolidated Condensed Financial Statements                  7

  Item 2 - Management's Discussion and Analysis of Financial
           Condition and Results of Operations                           10

PART II - OTHER INFORMATION                                              13

                                       2

<PAGE>


                       Vasomedical, Inc. and Subsidiaries

                     CONSOLIDATED CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                          November 30,       May 31,
                                                                             2001             2001
                                                                         -------------     ----------
                                                                          (unaudited)      (audited)
<S>                                                                       <C>             <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                                               $2,634,429       $3,785,456
  Restricted cash                                                            500,000        1,141,667
  Accounts receivable, net of an allowance for doubtful accounts of
    $736,000 and $545,000 at November 30 and May 31, 2001, respectively   11,451,664        9,731,749
  Inventories                                                              5,771,594        4,367,943
  Deferred income taxes                                                    3,699,000        2,908,000
  Financing receivables, net                                                 368,953                -
  Other current assets                                                       684,574          443,887
                                                                         -----------      -----------
    Total current assets                                                  25,110,214       22,378,702

PROPERTY AND EQUIPMENT, net                                                2,750,670        2,606,037
CAPITALIZED COST IN EXCESS OF FAIR
  VALUE OF NET ASSETS ACQUIRED, net of accumulated amortization of
  $1,456,161 and $1,349,613 at November 30 and May 31, 2001, respectively     35,537          142,085
FINANCING RECEIVABLES, net                                                 2,120,482                -
DEFERRED INCOME TAXES                                                      9,290,000       11,298,000
OTHER ASSETS                                                                 122,189           94,150
                                                                         -----------      -----------
                                                                         $39,429,092      $36,518,974
                                                                         ===========      ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable and accrued expenses                                   $4,332,992       $4,573,791
  Current maturities of long-term debt and notes payable                     553,623           33,074
  Accrued warranty and customer support expenses                             708,000          567,000
  Accrued professional fees                                                  287,738          320,854
  Accrued commissions                                                        745,436          669,328
                                                                         -----------      -----------
    Total current liabilities                                              6,627,789        6,164,047

LONG-TERM DEBT                                                             1,173,990        1,108,593
ACCRUED WARRANTY COSTS                                                       302,000          488,000
OTHER LONG-TERM LIABILITIES                                                        -            6,454
DEFERRED REVENUES                                                            387,296          243,151

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Preferred stock, $.01 par value; 1,000,000 shares authorized;
     none issued and outstanding                                                   -                -
   Common stock, $.001 par value; 110,000,000 shares authorized; 57,268,620
     and 57,195,453 shares at November 30, 2001 and May 31, 2001,
     respectively, issued and outstanding                                     57,269           57,195
   Additional paid-in capital                                             49,989,891       49,808,493
   Accumulated deficit                                                   (19,109,143)     (21,356,959)
                                                                         -----------      -----------
    Total stockholders' equity                                            30,938,017       28,508,729
                                                                         -----------      -----------
                                                                         $39,429,092      $36,518,974
                                                                         ===========      ===========
<FN>
   The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>

                                       3
<PAGE>

                       Vasomedical, Inc. and Subsidiaries

                 CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
                                  (unaudited)

<TABLE>
<CAPTION>
                                                       Six months ended                        Three months ended
                                                         November 30,                             November 30,
                                                       ----------------                        -------------------

                                                   2001               2000                 2001           2000
                                                   ----               ----                 ----           ----
<S>                                             <C>                <C>                 <C>              <C>
Revenues
  Equipment sales                               $14,912,669        $11,524,944         $ 7,481,133      $6,331,035
  Equipment rentals and services                    673,202            173,677             308,062         122,927
  Equipment sold under sales-type leases          2,583,924                  -             754,363               -
                                                -----------        -----------         -----------      ----------

                                                 18,169,795         11,698,621           8,543,558       6,453,962
Cost of sales and services                        5,342,718          3,050,655           2,563,610       1,688,388
                                                -----------        -----------         -----------      ----------
  Gross Profit                                   12,827,077          8,647,966           5,979,948       4,765,574

Expenses
  Selling, general and administrative             6,774,863          5,412,434           3,139,911       3,017,940
  Research and development                        2,313,575            936,606           1,163,695         493,208
  Provision for doubtful accounts                   198,000            102,000              99,000          51,000
  Interest and financing costs                       47,789              4,546              27,560           2,119
  Interest and other income - net                   (87,015)          (116,695)            (60,523)        (65,449)
                                                -----------        -----------         -----------      ----------
                                                  9,247,212          6,338,891           4,369,643       3,498,818
                                                -----------        -----------         -----------      ----------
 EARNINGS BEFORE INCOME TAXES                     3,579,865          2,309,075           1,610,305       1,266,756
  Income tax (expense) benefit                   (1,332,049)           786,000            (605,247)        428,000
                                                -----------        -----------         -----------      ----------
  NET EARNINGS                                   $2,247,816         $3,095,075          $1,005,058      $1,694,756
                                                ===========        ===========         ===========      ==========
Earnings per common share
  Basic and diluted                                    $.04               $.05                $.02            $.03
                                                       ====               ====                ====            ====
Weighted average common shares
 outstanding
  Basic                                          57,832,039         56,255,508          57,206,922      56,383,350
                                                ===========        ===========         ===========      ==========
  Diluted                                        60,199,161         59,772,176          59,364,254      59,851,517
                                                ===========        ===========         ===========      ==========
<FN>
The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>

                                       4

<PAGE>

                       Vasomedical, Inc. and Subsidiaries

      CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                                   Total
                                                                   Additional                      stock-
                                         Common Stock               paid-in       Accumulated      holders'
                                            Shares      Amount       capital        deficit        equity
                                         ------------   ------     ----------    ------------     ---------
<S>                                      <C>           <C>        <C>            <C>             <C>
Balance at June 1, 2001                  57,195,453    $57,195    $49,808,493    $(21,356,959)   $28,508,729
Exercise of options and warrants             73,167         74        156,398                        156,472
Stock options granted for services                                     25,000                         25,000
Net earnings                                                                        2,247,816      2,247,816
                                         ----------    -------    -----------    ------------   ------------
Balance at November 30, 2001             57,268,620    $57,269    $49,989,891    $(19,109,143)   $30,938,017
                                         ==========    =======    ===========    ============   ============

<FN>
The accompanying notes are an integral part of this condensed statement.
</FN>
</TABLE>

                                       5
<PAGE>


                       Vasomedical, Inc. and Subsidiaries

                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                              Six months ended
                                                                                 November 30,
                                                                              -----------------

                                                                            2001             2000
                                                                            ----             ----
<S>                                                                      <C>              <C>
Cash flows from operating activities
    Net earnings                                                         $2,247,816       $3,095,075
                                                                         ----------       ----------
  Adjustments to reconcile net earnings
    to net cash used in operating activities
      Depreciation and amortization                                         465,670          226,230
      Provision for bad debts                                               198,000          102,000
      Deferred income taxes                                               1,217,000         (786,000)
      Stock options granted for services                                     25,000                -
      Changes in operating assets and liabilities
        Accounts receivable                                              (1,917,915)      (2,496,520)
        Financing receivables, net                                       (2,489,435)          -
        Inventories                                                      (1,773,129)      (1,002,730)
        Other current assets                                               (240,687)        (164,655)
        Other assets                                                        (28,039)         (36,047)
        Accounts payable, accrued expenses and other current liabilities     29,139        1,008,150
        Other liabilities                                                   (48,309)          (1,486)
                                                                        -----------      -----------
                                                                         (4,562,705)      (3,151,058)
                                                                        -----------      -----------
    Net cash used in operating activities                                (2,314,889)         (55,983)
                                                                        -----------      -----------
Cash flows from investing activities
  Purchase of property and equipment                                       (134,277)      (1,295,984)
                                                                        -----------      -----------
    Net cash used in investing activities                                  (134,277)      (1,295,984)
                                                                        -----------      -----------
Cash flows from financing activities
  Proceeds from notes                                                     1,141,667        1,141,667
  Payment of notes                                                         (641,667)          -
  Restricted cash                                                           641,667       (1,141,667)
  Proceeds from exercise of options and warrants                            156,472          953,896
                                                                        -----------      -----------
    Net cash provided by financing activities                             1,298,139          953,896
                                                                        -----------      -----------
    NET DECREASE IN CASH AND CASH EQUIVALENTS                            (1,151,027)        (398,071)
Cash and cash equivalents - beginning of period                           3,785,456        3,058,367
                                                                        -----------      -----------
Cash and cash equivalents - end of period                                $2,634,429       $2,660,296
                                                                        ===========      ===========

Non-cash investing and financing activities were as follows:
Inventories transferred to property and equipment,
  attributable to operating leases - net                                   $369,478          $97,612

<FN>
The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>

                                       6
<PAGE>

                       Vasomedical, Inc. and Subsidiaries
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                               November 30, 2001
                                  (unaudited)

NOTE A - BASIS OF PRESENTATION

     The  consolidated  condensed  balance sheet as of November 30, 2001 and the
related consolidated  condensed statements of earnings for the six-month periods
ended  November  30,  2001 and 2000,  changes  in  stockholders'  equity for the
six-month  period  ended  November  30,  2001 and cash  flows for the  six-month
periods ended November 30, 2001 and 2000 have been prepared by Vasomedical, Inc.
and  Subsidiaries  (the "Company")  without audit. In the opinion of management,
all  adjustments  (which  include only normal,  recurring  accrual  adjustments)
necessary to present fairly the financial  position and results of operations as
of November 30, 2001 and for all periods presented have been made.

     Certain  information  and  footnote   disclosures,   normally  included  in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America, have been condensed or omitted.  These
financial statements should be read in conjunction with the financial statements
and notes thereto  included in the Annual Report on Form 10-K for the year ended
May 31, 2001.  Results of operations for the periods ended November 30, 2001 and
2000  are not  necessarily  indicative  of the  operating  results  expected  or
reported for the full year.

NOTE B - INVENTORIES

<TABLE>
<CAPTION>
                                                       November 30,      May 31,
                                                          2001            2001
                                                       ------------      -------
         <S>                                           <C>            <C>
         Inventories consist of the following:
                  Raw materials                        $3,844,647     $3,364,276
                  Work in progress                        946,947        497,667
                  Finished goods                          980,000        506,000
                                                       ----------     ----------
                                                       $5,771,594     $4,367,943
                                                       ==========     ==========
</TABLE>

NOTE C - FINANCING RECEIVABLES

     In fiscal 2002, the Company  entered into sales-type  lease  agreements for
certain  EECP units with two  customers.  The  following  table shows the future
minimum  rentals  receivable  under  sales-type  leases and future minimum lease
payment and  obligations  under  capital  leases in effect for the twelve months
ended November 30:
<TABLE>
<CAPTION>
                                                     Financing receivables
                                                     ---------------------
          <S>                                              <C>
          2002                                             $532,680
          2003                                              532,680
          2004                                            1,095,408
          2005                                              386,880
          2006                                              386,880
          Thereafter                                        964,072
                                                         ----------
          Total minimum lease payments                    3,898,600
          Less estimated executory costs                   (379,000)
                                                         ----------
          Net minimum lease payments                      3,519,600
          Less interest                                    (804,261)
                                                         ----------
          Present value of minimum lease payments         2,715,339
          Less valuation allowance                         (225,904)
                                                         ----------
          Net financing receivables                       2,489,435
          Less current portion                             (368,953)
                                                         ----------
          Long-term portion                              $2,120,482
                                                         ==========
</TABLE>

     The annual minimum lease  payments are subject to increases  based on usage
of the leased units in accordance with the provisions of the lease agreements.

                                       7
<PAGE>

                       Vasomedical, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
                               November 30, 2001
                                  (unaudited)

NOTE D - LONG-TERM DEBT AND LINE OF CREDIT AGREEMENT

     In November  2000,  the Company  purchased its  headquarters  and warehouse
facility and secured two notes payable from a financial institution for $641,667
and $500,000, respectively, which bore interest at the Libor Rate plus 150 basis
points (3.63% at November 30, 2001) and were payable in monthly  installments of
interest payments only.  Concurrent with the building purchase,  the Company had
received  long-term  financing  commitments under two programs  sponsored by New
York State.  In September  2001,  the Company  refinanced  $641,667 of the notes
under the first New York State  sponsored  program at a fixed  interest  rate of
7.8% over a fifteen-year term. In January 2002, the second note for $500,000 was
refinanced  under  the other  program  with a fixed  interest  rate of 6% over a
fifteen-year term. These notes are payable in monthly installments consisting of
principal and interest  payments and are secured by the  building.  Prior to the
closing  of the  refinancing  of the  second  note,  the  Company  maintained  a
restricted  cash  balance  with  the  financial  institution  in the  amount  of
$500,000.  As  such,  the  Company  has  classified  the  notes  payable  in the
accompanying  consolidated  balance  sheet  in  accordance  with  the  estimated
amortization schedules of principal and interest payments.

     In February 2001, the Company  established a secured  revolving credit line
with  its  existing  bank.  The  credit  line  provided  for  borrowings  up  to
$5,000,000,  based upon eligible accounts receivable, as defined therein, at the
Libor Rate plus 150 basis points (3.62% at November 30,  2001).  At November 30,
2001,  the entire line was  available and there were  outstanding  borrowings of
$500,000. In January 2002, the Company has received a commitment letter from its
bank to provide for borrowings up to $15,000,000,  based upon eligible  accounts
receivable and raw materials  inventory,  as defined therein,  at the Libor Rate
plus 150 basis points. Under the terms of the agreement, the Company is required
to meet certain  covenants,  including,  among  others,  maintenance  of minimum
tangible  net worth and  current  ratio.  In  addition,  the line is  secured by
substantially all the tangible assets of the Company.

NOTE E - STOCKHOLDERS' EQUITY

     In the first half of fiscal  2002,  the Board of  Directors  granted  stock
options  under the 1999 Stock  Option Plan (the "1999  Plan") to  directors  and
employees  to  purchase  an  aggregate  of 960,500  shares of common  stock,  at
exercise  prices  ranging from $2.89 to $4.02 per share (which  represented  the
fair market value of the  underlying  common stock at the time of the respective
grants).  Subsequent to November 30, 2001, the Board of Directors  granted stock
options  under the 1999 Plan,  vesting  over a three-year  period,  to its newly
appointed  Executive  Vice  President  and Chief  Operating  Officer to purchase
400,000 shares of common stock at an exercise price of $2.95 (which  represented
the  fair  market  value  of the  underlying  common  stock  at the  time of the
respective  grants) and to an outside consultant to purchase 25,000 shares at an
exercise price of $2.95.

     In the first half of fiscal 2002,  options and warrants to purchase  73,167
shares of common stock were exercised,  aggregating  $156,472 in proceeds to the
Company.

     In December  2001,  the Board of  Directors  of the Company  increased  the
number of shares authorized for issuance under the 1999 Plan by 2,000,000 shares
to 5,000,000 shares.

NOTE F - EARNINGS PER COMMON SHARE

     Basic earnings per share are based on the weighted average number of common
shares  outstanding  without  consideration of potential  common stock.  Diluted
earnings  per share are based on the  weighted  number of common  and  potential
common shares  outstanding.  The calculation  takes into account the shares that
may be issued upon the exercise of stock  options and  warrants,  reduced by the
shares that may be repurchased with the funds received from the exercise,  based
on the  average  price  during the  period.  Options  and  warrants  to purchase
2,399,000 and 303,000 shares of common stock were excluded from the  computation
of diluted  earnings per share as of November  30, 2001 and 2000,  respectively,
because the effect of their inclusion would be antidilutive.


                                       8
<PAGE>

                       Vasomedical, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
                               November 30, 2001
                                  (unaudited)

NOTE F - EARNINGS PER COMMON SHARE (continued)

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share:

<TABLE>
<CAPTION>
                                                        Six months ended Nov. 30,         Three months ended Nov. 30,
                                                        2001                2000             2001             2000
                                                        ----                ----             ----             ----
<S>                                                 <C>                 <C>              <C>              <C>
Numerator:
   Basic and diluted earnings                       $ 2,247,816         $ 3,095,075      $ 1,005,058      $ 1,694,756
                                                    ===========         ===========      ===========      ===========
Denominator:
   Basic - weighted average shares                   57,832,039          56,255,508       57,206,922       56,383,350
         Stock options                                1,801,809           2,391,063        1,684,780        2,308,485
         Warrants                                       565,313           1,125,605          472,552        1,159,682
                                                    -----------         -----------      -----------      -----------
   Diluted - weighted average shares                 60,199,161          59,772,176       59,364,254       59,851,517
                                                    ===========         ===========      ===========      ===========
Basic and diluted earnings per share                       $.04                $.05             $.02             $.03
                                                           ====                ====             ====             ====
</TABLE>

NOTE G - COMMITMENTS AND CONTINGENCIES

Litigation
----------
     In June 2001, an action was commenced in the New York Supreme Court, Nassau
County,  against the Company.  The action seeks undefined damages based upon the
alleged  breach of an agreement  to register the  Company's  common  stock.  The
Company believes that the complaint is without merit and is vigorously defending
the claims.  This matter is in its preliminary  stages and the Company is unable
to establish the likelihood of an unfavorable outcome or the existence or amount
of any potential loss.

     In February  1999,  an action was commenced in the  Massachusetts  Superior
Court, Essex County, against the Company. The action seeks damages in the sum of
$1,000,000  based  upon an  alleged  breach  of a sales  contract.  The  Company
believes that the  complaint is without  merit and is  vigorously  defending the
claims.  This matter is in its  preliminary  stages and the Company is unable to
establish the likelihood of an unfavorable outcome or the existence or amount of
any potential loss.

Purchase Commitments
--------------------
     At November 30, 2001, the Company had outstanding  purchase  commitments of
$810,000  with  VAMED  Medical  Instrument  Company  Ltd.  ("VAMED"),  a Chinese
company,  for the contract manufacture of its EECP Model MC2 system. The Company
believes  that VAMED will be able to meet the  Company's  future needs for these
systems.

                                       9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Results of Operations

Six Months and Three Months Ended November 30, 2001 and 2000
------------------------------------------------------------
     The Company  generated  revenues from the sale and lease of EECP(R) systems
of $18,170,000 and $11,699,000 for the six-month periods ended November 30, 2001
and  2000,  respectively,  representing  a  55%  increase,  and  $8,544,000  and
$6,454,000  for the  three-month  periods  ended  November  30,  2001 and  2000,
respectively, representing a 32% increase. The Company generated earnings before
income taxes of  $3,580,000  and  $2,309,000  for the  six-month  periods  ended
November 30, 2001 and 2000, respectively,  and $1,610,000 and $1,267,000 for the
three-month periods ended November 30, 2001 and 2000, respectively.  The Company
reported net earnings of $2,248,000 and  $3,095,000  for the six-months  periods
ended November 30, 2001 and 2000,  respectively,  after recognition of an income
tax provision (benefit) of $1,332,000 and $(786,000),  respectively. The Company
reported net earnings of $1,005,000 and $1,695,000 for the  three-month  periods
ended November 30, 2001 and 2000,  respectively,  after recognition of an income
tax provision (benefit) of $605,000 and $(428,000), respectively.

     The number of cardiology  practices  and  hospitals  interested in becoming
providers  of EECP  therapy has  increased  following  the  announcement  by the
Centers for Medicare  and  Medicaid  Services  (CMS)  (formerly  the Health Care
Financing  Administration  (HCFA)) in  February  1999 of its  decision to extend
Medicare coverage nationally to the Company's noninvasive,  outpatient treatment
for coronary  artery  disease.  CMS is the federal agency that  administers  the
Medicare program for approximately 39 million  beneficiaries.  In addition,  the
results  of  the  Company's  multicenter,   prospective,   randomized,  blinded,
controlled  clinical study of EECP  (MUST-EECP)  were published in the June 1999
issue of the Journal of the  American  College of  Cardiology.  Interest in EECP
therapy has also been spurred by the  announcement  of the results of six-month,
twelve-month  and  twenty-four  month  post-treatment  outcomes  reported by the
International EECP Patient Registry and presented at major scientific  meetings,
including  the American  Heart  Association  (AHA) and the  American  College of
Cardiology (ACC) annual meetings.

     Beginning  August 1, 2000,  Medicare  coverage was extended to include EECP
treatment  received on an outpatient  basis at hospitals and outpatient  clinics
under the new APC  (Ambulatory  Payment  Classification)  system.  The  national
average payment rate approximates  $150 per session.  Effective January 1, 2001,
CMS approved an 11% increase in the  reimbursement  rate for EECP therapy  which
raised the average  Medicare  payment from $130 to $144 per hourly  session,  or
$5,040 for a full course of therapy. Effective January 1, 2002, CMS has approved
an additional  increase of 6%, raising the average  Medicare payment to $153 per
hourly session,  or $5,355 for a full course of therapy.  These events led to an
increased  demand for EECP  therapy and EECP  equipment  and,  consequently,  to
revenue  growth  overall.   Pursuant  to  contractual   arrangements  with  some
customers,  the Company has sold equipment under sales-type  leases. For the six
and three month periods  ended  November 30, 2001,  revenues of  $2,584,000  and
$754,000,  respectively,  were reported  from  equipment  sold under  sales-type
leases.

     Gross profits are dependent on a number of factors, particularly the mix of
EECP units  sold,  rented or placed  during the  period,  the  ongoing  costs of
servicing  such units,  and certain  fixed period costs,  including  facilities,
payroll and insurance. Gross margins are furthermore affected by the location of
the Company's  customers  (including non- domestic  business or  distributorship
arrangements  which,  for discounted  equipment  purchase  prices,  co-invest in
establishing a market for EECP  equipment) and the amount and nature of training
and other  initial  costs  required  to place the EECP  system  in  service  for
customer use. Consequently,  the gross profit realized during the current period
may not be indicative of future margins. The decrease in gross profit percentage
for the second  quarter  ended  November  30, 2001  compared  to the  comparable
prior-year  period  (from  73.8% to 70.0%)  was  primarily  attributable  to the
increased materials and production costs of its Model TS3 system manufactured in
Westbury,  NY. Management  believes that these increased costs will be offset in
the future by manufacturing efficiencies and the Company is presently engaged in
a product cost reduction program. In addition,  gross profit was affected by the
Company's  increase in revenues from non-domestic  business in the first half of
fiscal 2002 which,  as described  above,  is less  profitable  than its domestic
business.

                                       10
<PAGE>

     Selling,  general and  administrative  (SG&A)  expenses  for the six months
ended  November  30,  2001  and  2000  were  $6,775,000  (37% of  revenues)  and
$5,412,000 (46% of revenues),  respectively. For the three months ended November
30,  2001  and  2000,  SG&A  expenses  were  $3,140,000  (37% of  revenues)  and
$3,018,000  (47% of revenues),  respectively.  The Company has been  effectively
leveraging  its SG&A expenses as a percentage of sales,  decreasing  nearly 20%.
The  increases  in SG&A  expenses,  on an absolute  basis,  from the  comparable
prior-year  fiscal  periods  resulted  primarily  from increases in personnel in
sales and  marketing  functions,  increases  in selling and  marketing  expenses
(including  commissions) related to increased revenues,  as well as increases in
insurance and other administrative expenses.

     Research and development (R&D) expenses of $2,314,000 (13% of revenues) for
the six  months  ended  November  30,  2001  increased  by  $1,377,000  from the
comparable  prior-year  period  of  $937,000  (8%  of  revenues).  Research  and
development  (R&D) expenses of $1,164,000 (14% of revenues) for the three months
ended  November 30, 2001  increased by $671,000 from the  comparable  prior-year
period of $493,000  (8% of  revenues).  The increase in both six and three month
comparable periods relates primarily to expenses incurred for the PEECH clinical
trial in heart  failure  (which  received  FDA  approval  in July 2000 and began
treating  patients in March 2001),  the initiation of other clinical studies and
initiatives,   as  well  as  continued  product  design  and  development  costs
(including an increase in engineering and other personnel).  The Company's newly
developed  EECP system,  Model TS3,  received FDA 510(k)  clearance to market in
December 2000 and was  commercially  available for sale in the fourth quarter of
fiscal 2001. The Company intends to aggressively  invest in product  development
and  clinical   trials  in  future   periods  to  further  expand  the  clinical
applications  of EECP,  including,  but not limited to, heart failure,  diabetes
disease management and acute coronary syndromes.

     In the first half of fiscal  2002,  the Company  recorded a  provision  for
income  taxes of  $1,332,000,  inclusive  of  $115,000  in current  tax  expense
principally  resulting  from the federal  alternative  minimum  tax.  This is in
contrast  to a  deferred  tax  benefit  reported  in the  prior-year  period  of
$786,000.

     The  decreases  in  interest  income  for the six and  three  months  ended
November  30,  2001 is the result of a decrease  in the  average  cash  balances
invested during the respective periods, as well as declining interest rates over
those periods, offset by interest income reported from financing receivables.

     The increase in interest  expense  over the  prior-year  comparable  fiscal
periods are primarily due to interest payments on loans secured for the purchase
of the Company's  headquarters and operating  facility in November 2000, as well
as working  capital  borrowings  under the Company's  revolving  secured  credit
facility.

Liquidity and Capital Resources
-------------------------------
     The Company has financed its fiscal 2002 and 2001 operations primarily from
working capital and operating  results.  At November 30, 2001, the Company had a
cash balance of $2,634,000  and working  capital of  $18,482,000,  compared to a
cash balance of $3,785,000  and working  capital of $16,215,000 at May 31, 2001.
The Company's  operating  activities used cash of $2,315,000 and $56,000 for the
six months  ended  November  30, 2001 and 2000,  respectively.  Net cash used in
operations  during the six months ended  November 30, 2001  consisted  primarily
from increases in accounts  receivable,  financing  receivables and inventories,
offset by increases in accounts  payable and accrued  expenses.  The increase in
financing  receivables resulted from sales of equipment under sales-type leases,
the first such commercial  contracts entered into by the Company in fiscal 2002.
Cash receipts under  sales-type  leases are expected over terms ranging  between
three and six years.  The increase in inventories,  particularly  raw materials,
and the  increase  in  accounts  payable  are  attributable  to the  purchase of
components and assemblies for the production of the new Model TS3 system,  which
began commercial shipments in the fourth quarter of fiscal 2001. The increase in
accounts receivable has resulted primarily from extended credit terms offered to
customers,  particularly  non-domestic  customers,  in  the  current  and  prior
quarters.  The Company's  management  provides routine oversight with respect to
its  accounts   receivable  credit  and  collection  efforts,  as  well  as  the
procurement of its raw materials  inventory.  Cash used in operations during the
quarter  ended  November  30,  2001,  particularly  as they relate to  financing
receivables,  are not necessarily  indicative of the results  expected in future
quarters.

                                       11
<PAGE>

     Investing  activities  used net cash of $134,000 and $1,296,000  during the
six months ended  November 30, 2001 and 2000,  respectively.  The principal uses
were for the purchase of property and equipment.

     Financing  activities  provided cash of $1,298,000 and $954,000  during the
six months ended November 30, 2001 and 2000,  respectively.  In September  2001,
the Company  refinanced a $641,667  outstanding  short-term  note payable (which
arose  in   connection   with  the  November  2000  purchase  of  the  Company's
headquarters  and warehouse  facility)  with the New York  Business  Development
Corporation. This transaction released $641,667 of cash previously restricted as
collateral  under the original  note.  The cash  restricted as collateral on the
second  outstanding  note for  $500,000  was  released in January  2002 upon its
refinancing.  In September 2001, the Company borrowed  $500,000 under its credit
facility.  The balance of the financing  activities  during fiscal 2002 and 2001
consisted  primarily  from the sale of common stock and receipt of cash proceeds
upon the  exercise of Company  common  stock  warrants by  officers,  directors,
employees and  consultants.  In January 2002, the Company  received a commitment
letter from its bank to increase  its  existing  credit  facility to provide for
borrowings up to $15,000,000,  based upon eligible  accounts  receivable and raw
materials  inventory,  as  defined  therein,  at the  Libor  Rate plus 150 basis
points.

     Management believes that its working capital position at November 30, 2001,
the availability of its credit facility,  and the ongoing  commercialization  of
the EECP system will make it possible  for the Company to support its  operating
expenses  and to  implement  its  business  plans for at least  the next  twelve
months.

Recently Issued Accounting Standards
------------------------------------

     In August 2001, the FASB issued Statement of Financial  Accounting Standard
No. 144 "Accounting for the Impairment or Disposal of Long Lived Assets," ("SFAS
144"). This statement is effective for fiscal years beginning after December 15,
2001.  This  supercedes  SFAS 121,  "Accounting for the Impairment of Long-lived
Assets and for Long-lived Assets to be Disposed of", while retaining many of the
requirements of such statement.  The Company is currently  evaluating the impact
of the statement.

     Except for historical  information  contained herein, the matters discussed
are forward-looking  statements that involve risks and uncertainties.  When used
in this report, words such as "anticipate",  "believe", "estimate", "expect" and
"intend"  and  similar  expressions,  as  they  relate  to  the  Company  or its
management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of the  Company's  management,  as well as  assumptions
made by and information currently available to the Company's  management.  Among
the  factors  that  could  cause  actual  results to differ  materially  are the
following:  the effect of the dramatic  changes  taking place in the  healthcare
environment;  the  impact  of  competitive  procedures  and  products  and their
pricing;  unexpected  manufacturing  problems  in foreign  supplier  facilities;
unforeseen  difficulties  and delays in the conduct of clinical trials and other
product  development  programs;   the  actions  of  regulatory  authorities  and
third-party  payers in the United States and overseas;  uncertainties  about the
acceptance of a novel  therapeutic  modality by the medical  community;  and the
risk  factors  reported  from time to time in the  Company's  SEC  reports.  The
Company  undertakes  no  obligation  to update  forward-looking  statements as a
result of future events or developments.

                                       12
<PAGE>


                       VASOMEDICAL, INC. AND SUBSIDIARIES

                          PART II - OTHER INFORMATION
                          ---------------------------

ITEM 1 - LEGAL PROCEEDINGS:

        Previously reported.

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

        A. The registrant held its Annual Meeting of Stockholders on
           October 10, 2001.

        B. Not applicable.

        C. Four directors, namely Alexander G. Bearn, David S. Blumenthal,
           D. Michael Deignan and Kenneth W. Rind, were elected at the Annual
           Meeting to serve in Class III until the Annual Meeting of
           Stockholders for fiscal 2004. The minimum number of votes cast in
           favor of their elections was 51,467,837.

          The other matter voted upon was the ratification of the appointment of
     Grant  Thornton  LLP  as  the  Company's   independent   certified   public
     accountants  for the fiscal year ended May 31, 2002. The votes cast were as
     follows:

    Votes For: 52,177,876;   Votes Against: 118,897;   Votes Abstained: 113,211

ITEM 5 - OTHER INFORMATION:

        None

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K:

        None

                                       13
<PAGE>


     In accordance with to the  requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                            VASOMEDICAL, INC.

                                            By: /s/ D. Michael Deignan
                                                ------------------------
                                                D. Michael Deignan
                                                President, Chief Executive
                                                Officer and Director (Principal
                                                Executive Officer)

                                                /s/ Joseph A. Giacalone
                                                ------------------------
                                                Joseph A. Giacalone
                                                Chief Financial Officer
                                                (Principal Financial and
                                                Accounting Officer)

Date:  January 14, 2002