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 August 31, 1998

[ ] 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 October 2, 1998                      48,733,812
                                                         ----------

     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 Subsidiary



                                     INDEX



PART I - FINANCIAL INFORMATION

    Item 1 - Financial Statements:
                                                                           Page
                                                                           ----
         Consolidated Condensed Balance Sheets as of
              August 31, 1998 and May 31, 1998 (Unaudited)                   3

         Consolidated Condensed Statements of Operations for
              the Three Months Ended August 31, 1998 and 1997 (Unaudited)    4

         Consolidated Condensed Statement of Changes in Stockholders'
              Equity for the Three Months Ended August 31, 1998 (Unaudited)  5

         Consolidated Condensed Statements of Cash Flows for the
              Three Months Ended August 31, 1998 and 1997 (Unaudited)        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
<PAGE>


                        Vasomedical, Inc. and Subsidiary

                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                August 31,      May 31,
                                                                   1998          1998
                                                                   ----          ----
<S>                                                            <C>             <C>
          ASSETS
CURRENT ASSETS
    Cash and cash equivalents                                   $3,151,647     $4,367,986
    Accounts receivable                                            234,928        976,341
    Inventories                                                    658,051        678,302
    Other current assets                                           309,166        164,826
                                                                ----------     ---------- 
        Total current assets                                     4,353,792      6,187,455

PROPERTY AND EQUIPMENT, net                                        481,889        352,902
CAPITALIZED COST IN EXCESS OF FAIR
     VALUE OF NET ASSETS ACQUIRED, net                             728,099        781,373
OTHER ASSETS                                                        23,114         23,516
                                                                ----------     ----------
                                                                $5,586,894     $7,345,246
                                                                ----------     ---------- 
    LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
    Accounts payable and accrued expenses                         $262,250       $436,730
    Accrued warranty and customer support expenses                 231,000        240,000
    Accrued professional fees                                      126,862        225,833
    Accrued commissions                                             66,825        176,553
    Dividends payable                                              107,648         62,137
                                                                 ---------      ---------
        Total current liabilities                                  794,585      1,141,253

ACCRUED WARRANTY COSTS                                             339,500        334,000
OTHER LONG-TERM LIABILITIES                                        154,000        117,000

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
    Preferred stock, $.01 par value; 1,000,000
      shares authorized; 216,500 and 225,750 shares at August 31,
      1998 and May 31, 1998, respectively, issued and outstanding    2,165          2,258
    Common stock, $.001 par value; 110,000,000 shares authorized;
      48,707,301 and 48,531,278 shares at August 31, 1998 and
      May 31, 1998, respectively, issued and outstanding            48,707         48,531
    Additional paid-in capital                                  37,128,318     36,458,155
    Accumulated deficit                                        (32,880,381)   (30,755,951)
                                                                ----------     ---------- 
                                                                 4,298,809      5,752,993
                                                                ----------     ---------- 
                                                                $5,586,894     $7,345,246
                                                                ----------     ---------- 
<FN>
The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>
<PAGE>
                        Vasomedical, Inc. and Subsidiary

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (unaudited)

<TABLE>
<CAPTION>

                                                      Three months ended August 31,
                                                      ---------------------------- 
                                                           1998           1997
                                                           ----           ---- 
<S>                                                      <C>            <C>
Revenues
  Equipment sales                                        $350,000       $952,537
  Equipment rentals and services                           78,100         89,219
                                                         --------      ---------
                                                          428,100      1,041,756
                                                         --------      ---------
Costs and expenses
  Cost of sales and services                              330,368        374,840
  Selling, general and administrative                   1,270,664      1,021,039
  Research and development                                189,664        598,724
  Depreciation and amortization                            93,083         90,767
  Interest and financing costs                              5,209          1,024
  Interest and other income - net                         (52,214)       (46,890)
                                                        ---------      ---------
                                                        1,836,774      2,039,504
                                                        ---------      ---------
  NET LOSS                                             (1,408,674)      (997,748)

     Deemed dividend on preferred stock                  (661,000)      (857,000)
     Preferred stock dividend requirement                 (54,756)       (27,534)
                                                        ---------      ---------
  LOSS APPLICABLE TO
   COMMON STOCK                                       $(2,124,430)   $(1,882,282)
                                                      -----------    -----------

Net loss per common share (basic and diluted)               $(.04)         $(.04)
                                                            -----          -----

Weighted average common shares
 outstanding (basic and diluted)                       48,659,766     47,022,520
                                                       ----------     ----------






<FN>
The accompanying notes are an integral part of these condensed statements.
</FN>
</TABLE>
<PAGE>
                        Vasomedical, Inc. and Subsidiary

      CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                                                 Total
                                                                               Additional         Accum-         stock-
                                     Preferred Stock         Common stock        paid-in          ulated         holders'
                                     Shares    Amount      Shares      Amount    capital          deficit        equity
                                     ------    ------      ------      ------------------         -------       ---------
<S>                                  <C>       <C>       <C>          <C>       <C>            <C>              <C>       
Balance at June 1, 1998              225,750   $2,258    48,531,278   $48,531   $36,458,155    $(30,755,951)    $5,752,993
Conversion of preferred stock         (9,250)     (93)      167,636       168           (75)                             -
Deemed dividend on preferred stock                                                  661,000        (661,000)             -
Preferred stock dividend requirement                                                                (54,756)       (54,756)
Common stock issued in lieu of
   preferred stock dividends                                  8,387         8         9,238                          9,246
Net loss                                                                                         (1,408,674)    (1,408,674)
                                     -------   ------    ----------   -------   -----------    ------------     ----------        
Balance at August 31, 1998           216,500   $2,165    48,707,301   $48,707   $37,128,318    $(32,880,381)    $4,298,809
                                     -------   ------    ----------   -------   -----------    ------------     ----------















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


                        Vasomedical, Inc. and Subsidiary

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<TABLE>
<CAPTION>
                                                        Three months ended August 31,
                                                            1998          1997
                                                            ----          ----
<S>                                                      <C>             <C>
Cash flows from operating activities
      Net loss                                           $(1,408,674)     $(997,748)
  Adjustments to reconcile net loss                      -----------      ---------
    to net cash used in operating activities
      Depreciation and amortization                           93,083         90,767
      Changes in operating assets and liabilities
        Accounts receivable                                  741,413       (184,432)
        Inventories                                         (139,749)        70,302
        Other current assets                                (144,340)          (565)
        Other assets                                             402
        Accounts payable, accrued expenses and other 
         current liabilities                                (392,178)       217,269
        Other liabilities                                     42,500         62,370
                                                           ---------       --------
                                                             201,131        255,711
                                                           ---------       --------
      Net cash used in operating activities               (1,207,543)      (742,037)
                                                           ---------       --------
Cash flows from investing activities
  Purchase of property and equipment                          (8,796)          (965)
                                                            --------       --------
      Net cash used in investing activities                   (8,796)          (965)
                                                            --------       --------
Cash flows from financing activities
  Proceeds from exercise of options and warrants                            240,518
  Proceeds from issuance of preferred stock, net                          2,817,900
                                                            --------      ---------
      Net cash provided by financing activities                    -      3,058,418
                                                            --------      ---------
      NET (DECREASE) INCREASE IN
        CASH AND CASH EQUIVALENTS                         (1,216,339)     2,315,416
Cash and cash equivalents - beginning of period            4,367,986      1,753,004
                                                          ----------     ----------
Cash and cash equivalents - end of period                 $3,151,647     $4,068,420
                                                          ---------      ----------


Non-cash investing and financing activities were 
 as follows:
Deemed dividend on preferred stock                          $661,000       $857,000
Issuance of common stock in lieu of preferred dividends        9,246             86
Inventories transferred to property and equipment,
   attributable to operating leases                          160,000         30,000






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


                        Vasomedical, Inc. and Subsidiary

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                 August 31, 1998
                                   (unaudited)

NOTE A - BASIS OF PRESENTATION
    The  consolidated  condensed  balance  sheet as of August  31,  1998 and the
related  consolidated  condensed  statements of operations  for the  three-month
periods ended August 31, 1998 and 1997, changes in stockholders'  equity for the
three-month  period  ended  August 31,  1998 and cash flows for the  three-month
periods ended August 31, 1998 and 1997 have been prepared by  Vasomedical,  Inc.
and Subsidiary (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  as of August 31,  1998 and for all
periods presented have been made.
    Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
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,  1998.  Results  of
operations  for the periods  ended August 31, 1998 and 1997 are not  necessarily
indicative of the operating results expected for the full year.

NOTE B - STOCKHOLDERS' EQUITY
    On April 30, 1998, the Company  completed a second tranche of financing with
an accredited  investor and issued  175,000  shares of newly created 5% Series C
Cumulative Convertible Preferred Stock, $.01 par value, pursuant to Regulation D
under  the  Securities  Act of 1933 at a price  of $20 per  share,  for net cash
proceeds of $3,294,000. The convertible preferred stock has no voting rights and
is convertible into common stock of the Company at an effective conversion price
of the  lower  of (i)  $2.08  or  (ii)  85% of the  average  closing  bid of the
Company's common stock for the five (5) trading days  immediately  preceding the
conversion date, as defined in the Certificate of Designation of the convertible
preferred  stock. In addition,  the investor was granted  five-year  warrants to
purchase 413,712 shares of common stock at an exercise price of $2.08 per share.
The Company has estimated  the value of the deemed  dividend,  representing  the
discount resulting from the allocation of proceeds to the beneficial  conversion
feature and the fair value of the underlying warrants,  to approximate $936,000.
Such deemed dividend has been  recognized from the date of issuance  through the
date such preferred  stock was first  convertible (on or about August 15, 1998).
Accordingly,  the Company recognized a deemed dividend of $275,000 in the fourth
quarter of fiscal 1998 and has  recognized  the remaining  portion of the deemed
dividend of $661,000 in the first quarter of fiscal 1999.
    In the first  quarter of fiscal 1999,  9,250 shares of preferred  stock were
converted into 167,636 shares of common stock. (Subsequent to the first quarter,
1,000  shares of preferred  stock were  converted  into 26,511  shares of common
stock.)
<PAGE>
                        Vasomedical, Inc. and Subsidiary

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
                                 August 31, 1998
                                   (unaudited)

NOTE C - COMMITMENTS AND CONTINGENCIES
Employment Agreements
    Approximate  aggregate minimum annual compensation  obligations under active
employment agreements at August 31, 1998 are summarized as follows:

<TABLE>
<CAPTION>
         Twelve months ended August 31,         Amount
         ------------------------------         ------      
                              <S>             <C>          
                              1999            $569,000
                              2000             569,000
                              2001             283,000
                              2002              58,000
                                            ---------- 
                                            $1,479,000
                                            ----------
</TABLE>
SEC Investigation
-----------------
    In  February  1995,  the  Company  received  a subpoena  duces  tecum by the
broker-dealer  branch of the Northeast  Regional  Office of the  Securities  and
Exchange  Commission  ("SEC")  requesting  certain  documents  from the  Company
pursuant to a formal order of private  investigation in connection with possible
registration and reporting violations. The Company complied with the request for
such  documents.  Whatever the  ultimate  objectives  of the SEC's  fact-finding
inquiry may be, the Company intends to cooperate as the investigation  proceeds.
As stated in the subpoena,  the "investigation is confidential and should not be
construed as an  indication  by the SEC or its staff that any  violations of law
have  occurred,  nor should it be  interpreted  as an adverse  reflection on any
person,  entity or security." This  investigation is in its early stages and the
Company is unable to determine the likelihood of an  unfavorable  outcome or the
existence or amount of any potential loss.

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 . The complaint seeks
damages in the approximate sum of $50,000,000,  declaratory  relief and punitive
damages.  The Company denies the existence of any  agreement,  believes that the
complaint is frivolous and without merit and is vigorously  defending the claims
as  well  as  asserting  substantial  counterclaims.   This  matter  is  in  its
preliminary  stages and the Company is unable to determine the  likelihood of an
unfavorable outcome or the existence or amount of any potential loss.
    In May 1998, an action was commenced in the New York Supreme Court,  Suffolk
County,  against the Company and other parties.  The action seeks 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.  Management
believes that this action is fully  covered by insurance.  This matter is in its
preliminary  stages and the Company is unable to determine the  likelihood of an
unfavorable outcome or the existence or amount of any potential loss.

Purchase Commitments
--------------------
    At August 31, 1998,  the Company had  outstanding  purchase  commitments  of
$378,600 for the purchase of EECP systems from its contract manufacturer.
<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
-------------
Results of Operations
---------------------
Three Months Ended August 31, 1998 and 1997
-------------------------------------------
    The Company generated revenues from the sale and lease of its EECP system of
$428,000 and  $1,042,000 for the  three-month  periods ended August 31, 1998 and
1997, respectively.  The Company incurred a net loss of $1,409,000 for the three
months  ended August 31, 1998 (before  deducting a $661,000  deemed  dividend on
preferred stock which represented the discount  resulting from the allocation of
proceeds  to the  beneficial  conversion  feature  and  the  fair  value  of the
underlying warrants,  and $55,000 in dividend  requirements,  in connection with
the Company's April 1998 financing). The Company incurred a net loss of $997,000
for the three months ended August 31, 1997 (before  deducting an $857,000 deemed
dividend on preferred stock which  represented  the discount  resulting from the
allocation of proceeds to the beneficial  conversion  feature and the fair value
of the underlying warrants,  and $28,000 in dividend  requirements in connection
with the Company's June 1997 financing).  Management believes that the number of
cardiology  practices  and hospitals  interested  in becoming  providers of EECP
therapy has increased following the announcement of the results of the Company's
multicenter clinical study at the American Heart Association meeting in November
1997 and  additional  reports  presented at the American  College of  Cardiology
meeting in March 1998. Furthermore,  new reports, including a one-year follow-up
quality-of-life  outcomes  study,  are to be  presented  at the  American  Heart
Association  meeting in November 1998.  Although there can be no assurances that
EECP devices will become a commercial  success,  the Company expects fiscal 1999
revenues to  ultimately  exceed those  achieved in fiscal 1998.  Revenues in the
first quarter of 1999 were  adversely  affected by the nature of the  commercial
arrangements  under  which those  units were  placed,  even though the number of
units placed in the quarter exceeded that of the prior-year  quarter.  It is the
Company's  expectation that many of the placements currently under rental or use
arrangements will become outright sales or financed leases in the latter part of
fiscal 1999.
    Gross margins are dependent on a number of factors,  particularly the mix of
EECP units sold and rented  during the period,  the ongoing  costs of  servicing
such units, and by certain fixed period costs, including facilities, payroll and
insurance.  Gross  margins  are  furthermore  affected  by the  location  of the
Company's  customers  and the amount and nature of  training  and other  initial
costs   required  to  place  the  EECP  system  in  service  for  customer  use.
Accordingly,  the gross  margin  realized  during the current  period may not be
indicative of future margins.
    Selling,  general and  administrative  (SGA)  expenses  for the  three-month
periods  ended  August  31,  1998 and 1997  were  approximately  $1,271,000  and
$1,021,000.  The $250,000  increase in SGA expenses compared to the prior period
resulted  primarily  from the expansion of the Company's  direct sales force and
customer  support  personnel and marketing  expenses related to customer support
activities and programs for the dissemination of the aforementioned  multicenter
study's  results  and  for  promotional  materials,  offset  by  a  decrease  in
commissions  and  other  related  selling  expenses  as a  result  of  decreased
revenues.
    Research and  development  (R&D) expenses  decreased  $409,000 for the three
months ended August 31, 1998  compared to the prior  period.  The decrease was a
result of  significant  prior  period  expenses  related the  completion  of the
Company's  multicenter  clinical study of EECP  (completed in July 1997) and the
initiation of the development of a new model of the EECP system.  Current period
expenses relate to the long-term  follow-up  phase of the  multicenter  clinical
study, the  quality-of-life  and resource  utilization  study (completed in July
1998)  which  started in  parallel  with the  multicenter  clinical  study,  the
expansion  of the  International  EECP  Patient  Registry at the  University  of
Pittsburgh,  and the ongoing feasibility study in congestive heart failure,  all
of which, to some extent,  are expected to further affect  operating  results in
fiscal 1999.
<PAGE>
Liquidity and Capital Resources
-------------------------------
    Working  capital  decreased by $1,487,000 from $5,046,000 at May 31, 1998 to
$3,559,000 at August 31, 1998,  principally as a result of continuing  operating
losses.
    In Fiscal 1998,  the Company  issued an aggregate of 325,000 shares of newly
created 5% Series B and Series C Convertible  Preferred  Stock to one accredited
investor at a price of $20 per share, realizing net cash proceeds of $6,112,000.
Dividends due on such preferred stock have been, and are expected to be, paid in
shares of the Company's common stock. At August 31, 1998,  approximately  72% of
Series B preferred stock and no Series C preferred stock had been converted into
common stock.
    Management  believes that its present working capital position at August 31,
1998,  along with the ongoing  commercialization  of the EECP system in domestic
markets,  will make it possible for the Company to support its internal overhead
expenses  and to  implement  its  business  plans  for the next  twelve  months.
Management  will  revise its  business  plans  accordingly  in the event  actual
revenues deviate from current projections.

Impact of the Year 2000 on Information Systems
    The Year 2000 issue  arises as the result of computer  programs  having been
written, and systems having been designed,  using two digits rather than four to
define the  applicable  year.  Consequently,  such software has the potential to
recognize  a date using "00" as the year 1900  rather  than the year 2000.  This
could  result in a system  failure or  miscalculations  causing  disruptions  of
operations,  including,  among other  things,  a temporary  inability to process
transactions, send invoices, or engage in similar normal business activities.
    The Company's sole product is not expected to be affected by Year 2000 as it
does not rely on  date-sensitive  software or affected  hardware.  The Company's
current accounting and other systems were purchased "off-the-shelf". The Company
intends to timely update its  accounting  and other systems which are determined
to be affected  by Year 2000 by  purchasing  Year 2000  compliant  software  and
hardware available from retail vendors at reasonable costs.
    The Company has not yet  contacted  other  companies  on whose  services the
Company  depends to  determine  whether  such  companies'  systems are year 2000
compliant.  If the systems of the Company or other  companies on whose  services
the  Company  depends,  including  the  Company's  customers,  are not year 2000
compliant,  there could be a material adverse effect on the Company's  financial
condition or results of operations.



    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.
<PAGE>
                                VASOMEDICAL, INC.
                                 AND SUBSIDIARY
                                 --------------
                           PART II - OTHER INFORMATION
                           ---------------------------  
ITEM 1 - LEGAL PROCEEDINGS:

    Previously reported.

ITEM 2 - CHANGES IN SECURITIES:

    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:

    Exhibits:
         (27) Financial Data Schedule

    Reports on Form 8-K:
         None
<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/ Anthony Viscusi
                          ------------------- 
                          President and CEO (Principal Executive Officer)


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


Date:  October 6, 1998