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 February 28, 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 March 27, 2001                      56,945,453


     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



PART I - FINANCIAL INFORMATION

     Item 1 - Financial Statements (unaudited)                              Page
                                                                            ----
              Consolidated Condensed Balance Sheets as of
                     February 28, 2001 and May 31, 2000                       3

              Consolidated Condensed Statements of Earnings for the
                     Nine and Three Months Ended February 28, 2001 and
                     February 29, 2000                                        4

              Consolidated Condensed Statement of Changes in Stockholders'
                     Equity for the Period from June 1, 2000 to
                     February 28, 2001                                        5

              Consolidated Condensed Statements of Cash Flows for the
                     Nine Months Ended February 28, 2001 and
                     February 29, 2000                                        6


              Notes to Consolidated Condensed Financial Statements            7

     Item 2 - Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                       9

PART II - OTHER INFORMATION                                                   11

                                       2
<PAGE>

                       Vasomedical, Inc. and Subsidiaries

                     CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                      February 28,     May 31,
                                                                         2001           2000
                                                                       (unaudited)    (audited)
                                                                       -----------   -----------
<S>                                                                    <C>           <C>
ASSETS
CURRENT ASSETS
     Cash and cash equivalents                                         $ 4,655,317   $ 3,058,367
     Accounts receivable, net of allowance for doubtful accounts of
           $425,000 at February 28, 2001 and $400,000 at May 31, 2000    8,092,288     4,832,810
     Inventories                                                         2,573,454       906,984
     Deferred income taxes                                               1,638,000       400,000
     Other current assets                                                  463,243       479,267
                                                                       -----------   -----------
            Total current assets                                        17,422,302     9,677,428

PROPERTY AND EQUIPMENT, net                                              2,049,842       548,316
CAPITALIZED COST IN EXCESS OF FAIR VALUE OF NET ASSETS
      ACQUIRED, net of accumulated amortization of $1,296,339 and
      $1,136,517 at February 28, 2001 and May 31, 2000, respectively       195,359       355,181
OTHER ASSETS                                                                98,433         8,037
                                                                       -----------   -----------
                                                                       $19,765,936   $10,588,962
                                                                       ===========   ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable and accrued expenses                              $2,402,564    $1,219,803
     Accrued warranty and customer support expenses                        436,000       258,000
     Accrued professional fees                                             226,614       276,000
     Accrued commissions                                                   565,747       543,389
     Note Payable                                                        1,141,667             -
                                                                       -----------   -----------
            Total current liabilities                                    4,772,592     2,297,192

ACCRUED WARRANTY COSTS                                                     402,000       129,000
OTHER LONG-TERM LIABILITIES                                                  8,021        16,000
DEFERRED REVENUES                                                          225,139       203,000

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;
      56,945,453 and 55,921,330 shares at February 28, 2001 and
      May 31, 2000, respectively, issued and outstanding                    56,945        55,921
     Additional paid-in capital                                         42,472,243    40,939,158
     Accumulated deficit                                               (28,171,004)  (33,051,309)
                                                                       -----------   -----------
        Total stockholders' equity                                      14,358,184     7,943,770
                                                                       -----------   -----------
                                                                       $19,765,936   $10,588,962
                                                                       ===========   ===========
<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>

                                         Nine months ended               Three months ended
                                         -----------------               ------------------
                                     February 28,    February 29,    February 28,    February 29,
                                     -----------     -----------     -----------     -----------
                                        2001           2000              2001           2000
                                        ----           ----              ----           ----
<S>                                  <C>             <C>             <C>             <C>
Revenues
 Equipment sales                     $18,416,424     $8,718,175      $6,891,480      $3,049,000
 Equipment rentals and services          350,145        435,538         176,468         129,138
                                     -----------     ----------      ----------      ----------
                                      18,766,569      9,153,713       7,067,948       3,178,138
                                     -----------     ----------      ----------      ----------
Costs and expenses
 Cost of sales and services            5,103,937      2,157,634       2,143,441         788,347
 Selling, general and administrative   7,912,087      4,952,387       2,750,718       1,603,649
 Research and development              1,643,846      1,063,295         592,246         416,443
 Depreciation and amortization           390,527        367,400         164,297         116,692
 Provision for doubtful accounts         205,000           -            103,000            -
 Interest and financing costs             29,002          5,207          24,456           1,645
 Interest and other income - net        (160,135)       (59,945)        (43,440)        (18,498)
                                     -----------     ----------      ----------      ----------
                                      15,124,264      8,485,978       5,734,718       2,908,278
                                     -----------     ----------      ----------      ----------
 NET EARNINGS BEFORE
    INCOME TAXES                       3,642,305        667,735       1,333,230         269,860
  Deferred income tax benefit          1,238,000           -            452,000            -
                                     -----------     ----------      ----------      ----------
 NET EARNINGS                          4,880,305        667,735       1,785,230         269,860

 Preferred stock dividend requirement       -           (94,122)           -            (19,879)
                                     -----------     ----------      ----------      ----------
 EARNINGS APPLICABLE TO
  COMMON STOCK                       $4,880,305        $573,613      $1,785,230        $249,981
                                     ==========      ==========      ==========      ==========
Earnings per common share
   Basic                                   $.09            $.01            $.03            $.00
                                           ====            ====            ====            ====
   Diluted                                 $.08            $.01            $.03            $.00
                                           ====            ====            ====            ====
Weighted average common shares
 outstanding
   Basic                             56,405,653      51,543,519      56,710,946      52,687,156
                                     ==========      ==========      ==========      ==========
   Diluted                           59,810,181      55,719,121      59,891,195      55,270,913
                                     ==========      ==========      ==========      ==========
<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>

                                                                  Additional                        Total
                                            Common Stock            paid-in       Accumulated    stockholders'
                                         Shares         Amount      capital         deficit         equity
                                         ------         ------    ----------      -----------    ------------
<S>                                     <C>             <C>       <C>             <C>             <C>
Balance at June 1, 2000                 55,921,330      $55,921   $40,939,158     $(33,051,309)   $7,943,770
Exercise of options and warrants         1,024,123       1,024      1,513,085                      1,514,109
Stock options granted for services                                     20,000                         20,000
Net earnings                                                                         4,880,305     4,880,305
                                        ----------      -------   -----------     ------------   -----------
Balance at February 28, 2001            56,945,453      $56,945   $42,472,243     $(28,171,004)  $14,358,184
                                        ==========      =======   ===========     ============   ===========

<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>

                                                                   Nine months ended
                                                                   -----------------
                                                               February 28,   February 29,
                                                               -----------    -----------
                                                                   2001          2000
                                                                   ----          ----
<S>                                                             <C>             <C>
Cash flows from operating activities
   Net earnings                                                 $4,880,305      $667,735
                                                                ----------    ----------
   Adjustments to reconcile net earnings
      to net cash provided by operating activities
   Depreciation and amortization                                   390,527       367,400
   Provision for bad debts                                         205,000
   Deferred income taxes                                        (1,238,000)
   Stock options granted for services                               20,000        87,000
   Changes in operating assets and liabilities
      Accounts receivable                                       (3,464,478)   (1,970,655)
      Inventories                                               (2,000,545)      (50,282)
      Other current assets                                          16,025      (150,128)
      Other assets                                                 (90,396)       22,076
      Accounts payable, accrued expenses
         and other current liabilities                           1,333,732      (113,575)
      Other liabilities                                            287,160        72,317
                                                                ----------    ----------
                                                                (4,540,975)   (1,735,847)
                                                                ----------    ----------
   Net cash provided by (used in) operating activities             339,330    (1,068,112)
                                                                ----------    ----------
Cash flows from investing activities
   Purchase of property and equipment                           (1,398,156)      (78,216)
                                                                ----------    ----------
      Net cash used in investing activities                     (1,398,156)      (78,216)
                                                                ----------    ----------
Cash flows from financing activities
   Proceeds from notes                                           1,141,667
   Proceeds from exercise of options and warrants                1,514,109       207,136
                                                                ----------    ----------
      Net cash provided by financing activities                  2,655,776       207,136
                                                                ----------    ----------
      NET INCREASE (DECREASE) IN
         CASH AND CASH EQUIVALENTS                               1,596,950      (939,192)
Cash and cash equivalents - beginning of period                  3,058,367     1,678,175
                                                                ----------    ----------
Cash and cash equivalents - end of period                       $4,655,317      $738,983
                                                                ==========    ==========

Non-cash investing and financing activities were as follows:
Issuance of common stock in lieu of preferred dividends                         $287,732
Inventories transferred to (from) property and equipment,
    attributable to operating leases - net                       $334,075         56,000

<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
                               February 28, 2001
                                  (Unaudited)

NOTE A - BASIS OF PRESENTATION

     The  consolidated  condensed  balance sheet as of February 28, 2001 and the
related consolidated condensed statements of earnings for the nine-month periods
ended February 28, 2001 and February 29, 2000,  changes in stockholders'  equity
for the  nine-month  period  ended  February  28,  2001 and cash  flows  for the
nine-month  periods  ended  February  28, 2001 and  February  29, 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 February 28, 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, 2000.  Results of operations for the periods ended February 28, 2001 and
February  29,  2000 are not  necessarily  indicative  of the  operating  results
expected or reported for the full year.

NOTE B - INVENTORIES
<TABLE>
<CAPTION>
                                                        February 28,     May 31,
                                                        -----------      ------
                                                            2001          2000
                                                            ----          ----
Inventories consist of the following:
<S>                                                     <C>             <C>
Raw materials                                           $2,205,954      $545,924
Finished goods                                             367,500       361,060
                                                        ----------      --------
                                                        $2,573,454      $906,984
                                                        ==========      ========
</TABLE>

NOTE C - NOTE PAYABLE AND LINE OF CREDIT AGREEMENT

     In November 2000, the Company  purchased its present  operating  facilities
and secured a note payable from a financial institution for $1,141,667. The note
bears  interest at the Libor Rate plus 150 basis points  (approximately  6.7% at
February  28,  2001) and is due in monthly  payments  of interest  only,  with a
balloon  payment due in May 2001.  The note is secured by the building,  and the
Company  maintains a restricted cash balance with the financial  institution for
the amount of the note  during its term.  The  Company  has  received  long-term
financing  commitments  under  two  programs  sponsored  by New  York  State  at
favorable fixed interest  rates.  The existing note is expected to be refinanced
under these commitments by May 2001.

     On February 28, 2001, the Company  established a secured  revolving  credit
line with Fleet Bank.  The credit line provides for borrowings up to $5,000,000,
based upon eligible accounts  receivable,  as defined therein, at the Libor Rate
plus 150 basis points (approximately 6.7% at February 28, 2001). 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.  At February 28, 2001, there were no outstanding  borrowings under this
line.

NOTE D - STOCKHOLDERS' EQUITY

     In the first three quarters of fiscal 2001, the Board of Directors  granted
stock  options  under the 1999 Stock  Option  Plan to  employees  to purchase an
aggregate  of 713,000  shares of common  stock at exercise  prices  ranging from
$2.66 to $5.00  per  share  (which  represented  the  fair  market  value of the
underlying common stock at the time of the respective grants).

     In the first  three  quarters  of fiscal  2001,  options  and  warrants  to
purchase 1,024,123 shares of common stock were exercised, aggregating $1,514,109
in proceeds to the Company.

                                       7
<PAGE>

                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
                               February 28, 2001
                                  (Unaudited)

NOTE E - 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,  and  convertible  preferred  stock,
assuming conversion at the beginning of the period.

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share:
<TABLE>
<CAPTION>
                                             Nine months ended             Three months ended
                                 February 28, 2001 February 29, 2000 February 28, 2001 February 29, 2000
                                 ----------------- ----------------- ----------------- -----------------
<S>                                   <C>               <C>             <C>             <C>
Numerator:
 Basic earnings                       $4,880,305          $667,735      $1,785,230       $269,860
  Preferred stock dividends                 -               94,122            -            19,879
                                      ----------        ----------      ----------      ---------
 Diluted earnings                     $4,880,305          $573,613      $1,785,230       $249,981
                                      ==========        ==========      ==========      =========
Denominator:
 Basic - weighted average shares      56,405,653        51,543,519      56,710,946      52,687,156
       Stock options                   1,109,133           757,887       1,076,190       1,031,644
       Warrants                        2,295,395         1,093,660       2,104,059         923,716
       Convertible preferred stock          -            2,324,055            -            628,397
                                      ----------        ----------      ----------      ---------
 Diluted - weighted average shares    59,810,181        55,719,121      59,891,195      55,270,913
                                      ==========        ==========      ==========      ==========
</TABLE>

NOTE F - COMMITMENTS AND CONTINGENCIES

Litigation
----------

     In May 1996,  an action was  commenced in the Supreme Court of the State of
New York, Nassau County,  against the Company,  its directors and certain of its
officers  and  employees  for the alleged  breach of an  agreement  to appoint a
non-affiliated party as its exclusive  distributor of EECP(R) systems. In August
1999, a motion for summary judgment to dismiss the complaint in its entirety was
granted. In November 2000, this dismissal was affirmed on appeal.

     In May 1998, an action was commenced in the New York Supreme Court, Suffolk
County,  against the Company and other parties. The action-sought damages in the
sum of  $5,000,000  based  upon  alleged  injuries  resulting  from the  alleged
negligence of the  defendants in the use of the  Company's  product.  In October
2000, the court dismissed the plaintiff's complaint in its entirety.

     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 frivolous  and 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.

Agreement with VAMED
--------------------

     In connection with an acquisition in 1995, the Company assumed  commitments
under an  agreement,  expiring  November  2008,  with VAMED  Medical  Instrument
Company Ltd. ("VAMED"),  a Chinese company,  for the contract manufacture of its
EECP(R) Model MC2 system, subject to certain performance standards,  as defined.
At February  28,  2001,  the Company had  outstanding  purchase  commitments  of
$810,000.  The Company  believes  that VAMED will be able to meet the  Company's
needs for EECP(R) systems.
                                       8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
--------------------------------------------------------------------------
OPERATIONS
----------

Results of Operations
---------------------

Nine Months and Three Months Ended February 28, 2001 and February 29, 2000
--------------------------------------------------------------------------

     The Company  generated  revenues from the sale and lease of EECP(R) systems
of $18,767,000 and $9,154,000 for the nine-month periods ended February 28, 2001
and  February 29, 2000,  respectively  and  $7,068,000  and  $3,178,000  for the
three-month periods ended February 28, 2001 and February 29, 2000, respectively.
The Company generated earnings of $4,880,000 and $668,000,  respectively (before
deducting  $94,000 in preferred stock dividend  requirements for the nine months
ended  February  29,  2000),  for the nine months  ended  February  28, 2001 and
February 29, 2000 and earnings of $1,785,000 and $270,000  respectively  (before
deducting $20,000 in preferred stock dividend  requirements for the three months
ended  February 29,  2000),  for the three  months  ended  February 28, 2001 and
February 29, 2000.

     The number of  cardiology  practices,  hospitals  and  independent  centers
interested in becoming  providers of EECP(R) external  counterpulsation  therapy
increased following the announcement by 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.
HCFA  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(R)  (MUST-EECP)  were  published  in the June  1999  issue of the
Journal of the American  College of Cardiology.  Interest in EECP(R) therapy has
also  been  spurred  by  the  announcements  of the  results  of  six-month  and
twelve-month  post-treatment  outcomes  reported  by the  International  EECP(R)
Patient  Registry and  presented at major  scientific  meetings,  including  the
American Heart  Association  (AHA) and the American  College of Cardiology (ACC)
annual meetings.

     Revenue  growth in the prior  fiscal  period  (fiscal  2000) was  initially
hindered because local Medicare contractors  established  inappropriate  payment
levels  that did not take into  account the full value of the  resources  health
care providers must deploy to deliver EECP(R) therapy. Consequently, in November
1999,  HCFA created a specific  code for external  counterpulsation  therapy and
established a nationally  applicable allowable charge, which became effective on
January  1,  2000.  The  allowable  charge  under the new code was based  upon a
preliminary determination of Relative Value Units (RVUs) assigned by HCFA to the
resources  needed for the  administration  of the therapy.  Certain patients may
require  additional  services,  such as evaluation and management,  which may be
billed  separately.  This  resulted  in a  standard  charge of $4,550 for a full
course of therapy, which typically involves 35 one-hour outpatient sessions. The
assigned  code now allows  EECP(R)  providers to bill  Medicare  electronically,
substantially  reducing the process for receiving  reimbursement.  Moreover,  in
light of the new payment instructions, local Medicare contractors no longer have
the  responsibility  of establishing  reimbursement  rates.  Beginning August 1,
2000, Medicare coverage was extended to include EECP(R) 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.  These  events led to an  increased  demand for
EECP(R)  therapy and EECP(R)  equipment  and,  consequently,  to revenue  growth
overall,  as  well  as an  increase  in  the  number  of  systems  placed  under
fee-per-use arrangements with certain providers. Effective January 1, 2001, HCFA
approved an 11% increase in the  reimbursement  rate for EECP(R)  therapy  which
raised the average Medicare payment from $130 to $144 per hourly session.

     Gross margins are dependent on a number of factors, particularly the mix of
EECP(R) units sold and rented 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(R)  equipment)  and the  amount  and nature of
training and other initial costs required to place the EECP(R) system in service
for customer use.  Consequently,  the gross margin  realized  during the current
period may not be indicative of future margins.

     Selling,  general and  administrative  (SG&A)  expenses for the nine months
ended February 28, 2001 and February 29, 2000 were  $7,912,000  and  $4,952,000,
respectively, and $2,751,000 and $1,604,000,  respectively, for the three months
ended February 28, 2001 and February 29, 2000. The increases in SG&A expenses of
$2,960,000 and $1,147,000 from the comparable prior-year fiscal periods resulted
primarily  from  increases in personnel in  administrative,  sales and marketing

                                       9
<PAGE>

functions,  increases in selling  expenses,  including  commissions,  related to
increased  revenues,  as well as  increases  in  insurance  expenses and certain
professional fees.

     Research and development  (R&D) expenses in the nine and three months ended
February  28,  2001  increased  by $581,000  and  $176,000  from the  comparable
prior-year  periods.  The increases relate primarily to continued product design
and  development  costs  (including  an increase in  personnel),  as well as the
initiation of the pivotal study in heart failure (which received FDA approval in
July 2000 and began  treating  patients  in March  2001).  The  Company's  newly
developed EECP(R) system,  Model TS3, received FDA 510(k) clearance to market in
December 2000.


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

     The Company has financed its fiscal 2001 and 2000 operations primarily from
working capital and operating  results.  At February 28, 2001, the Company had a
cash balance of $4,655,000 and working capital of $12,650,000 compared to a cash
balance of $3,058,000  and working  capital of  $7,380,000 at May 31, 2000.  The
Company's operating activities provided (used) cash of $339,000 and $(1,068,000)
for the nine months ended February 28, 2001 and February 29, 2000, respectively.
Net cash provided from operations during the nine months ended February 28, 2001
consisted  primarily  of earnings  from  operations  and  increases  in accounts
payable and accrued  expenses,  offset by increases in accounts  receivable  and
inventories.  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 was recently
cleared for marketing by the FDA.

     Investing  activities  used net cash of $1,398,000  and $78,000  during the
nine months ended  February 28, 2001 and  February 29, 2000,  respectively.  The
principal  uses were for the purchase of property and  equipment,  including the
purchase of the Company's present operating facilities in mid-November 2000. The
purchase price, including planned improvements,  is estimated at $1,400,000. The
Company has secured long-term  financing at favorable interest rates through two
financing  programs  sponsored by New York State, which are expected to close in
May 2001 upon the completion of building renovations. In the interim period, the
Company has secured bridge  financing with a financial  institution for a period
of nine months, for which $1,141,667 cash has been restricted as collateral.

     Financing  activities  provided cash of $2,656,000 and $207,000  during the
nine  months  ended  February  28, 2001 and  February  29,  2000,  respectively.
Financing  activities  during  fiscal 2001 and 2000 were from the November  2000
transaction to finance the purchase of the Company's  operating  facilities,  as
well as  $1,514,000  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.

     Management  believes that its working capital position at February 28, 2001
and the ongoing  commercialization  of the EECP(R)  system will make it possible
for the Company to support its internal  overhead  expenses and to implement its
business plans for at least the next twelve months.

     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.

                                       10
<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

        None

ITEM 5 - OTHER INFORMATION:

        None

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

        None


                                       11
<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: March 27, 2001