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, 2002

[ ] 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 April 10, 2002                      57,309,120



     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



PART I - FINANCIAL INFORMATION

    Item 1 - Financial Statements (unaudited)                               Page
                                                                            ----
            Consolidated Condensed Balance Sheets as of
                  February 28, 2002 and May 31, 2001                           3

            Consolidated Condensed Statements of Earnings for the Nine and
                  Three Months Ended February 28, 2002 and 2001                4

            Consolidated Condensed Statement of Changes in Stockholders'
                  Equity for the Period from June 1, 2001 to February 28, 2002 5

            Consolidated Condensed Statements of Cash Flows for the
                  Nine Months Ended February 28, 2002 and 2001                 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

                                       1
<PAGE>


                       Vasomedical, Inc. and Subsidiaries

                     CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                              February 28,      May 31,
                                                                                 2002            2001
                                                                                 ----            ----
<S>                                                                           <C>              <C>
ASSETS                                                                        (unaudited)      (audited)
CURRENT ASSETS
          Cash and cash equivalents                                             $3,221,098     $3,785,456
          Restricted cash                                                              -        1,141,667
          Accounts receivable, net of an allowance for doubtful accounts of
            $1,139,625 and $545,000 at February 28, 2002 and May 31, 2001,
            respectively                                                        12,100,829      9,731,749
          Inventories                                                            5,496,193      4,367,943
          Deferred income taxes                                                  3,168,000      2,908,000
          Financing receivables, net                                               403,443              -
          Other current assets                                                     467,845        443,887
                                                                               -----------    -----------
                  Total current assets                                          24,857,408     22,378,702

PROPERTY AND EQUIPMENT, net                                                      2,774,229      2,606,037
CAPITALIZED COST IN EXCESS OF FAIR VALUE OF NET ASSETS
      ACQUIRED, net of accumulated amortization of $1,349,613 at May 31, 2001            -        142,085
FINANCING RECEIVABLES, net                                                       2,876,093              -
DEFERRED INCOME TAXES                                                            9,738,000     11,298,000
OTHER ASSETS                                                                       195,401         94,150
                                                                               -----------    -----------
                                                                               $40,441,131    $36,518,974
                                                                               ===========    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
          Accounts payable and accrued expenses                                 $4,848,756     $4,573,791
          Current maturities of long-term debt and notes payable                   545,646         33,074
          Accrued warranty and customer support expenses                           722,000        567,000
          Accrued professional fees                                                311,111        320,854
          Accrued commissions                                                      809,968        669,328
                                                                               -----------    -----------
                  Total current liabilities                                      7,237,481      6,164,047

LONG-TERM DEBT                                                                   1,084,631      1,108,593
ACCRUED WARRANTY COSTS                                                             319,000        488,000
DEFERRED REVENUES                                                                  708,000        243,151
OTHER LONG-TERM LIABILITIES                                                              -          6,454

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;
            57,309,120 and 57,195,453 shares issued and outstanding
            at February 28, 2002 and May 31, 2001, respectively                     57,309         57,195
          Additional paid-in capital                                            50,045,585     49,808,493
          Accumulated deficit                                                  (19,010,875)   (21,356,959)
                                                                               -----------    -----------
                  Total stockholders' equity                                    31,092,019     28,508,729
                                                                               -----------    -----------
                                                                               $40,441,131    $36,518,974
                                                                               ===========    ===========
<FN>
The accompanying notes are an integral part of these condensed financial 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 28,
                                                    ------------                           ------------
                                              2002               2001                 2002            2001
                                              ----               ----                 ----            ----
<S>                                        <C>                <C>                  <C>             <C>
Revenues
  Equipment sales                          $21,744,400        $18,416,424          $6,831,731      $6,891,480
  Equipment rentals and services               980,387            350,145             307,185         176,468
  Equipment sold under sales-type leases     3,464,014                 -              880,090               -
                                           -----------        -----------          ----------      ----------
                                            26,188,801         18,766,569           8,019,006       7,067,948
Cost of sales and services                   7,979,459          5,283,100           2,636,741       2,232,445
                                           -----------        -----------          ----------      ----------
  Gross Profit                              18,209,342         13,483,469           5,382,265       4,835,503

Expenses
  Selling, general and administrative        9,879,612          8,115,318           3,104,749       2,820,884
  Research and development                   3,993,921          1,651,979           1,680,346         597,373
  Provision for doubtful accounts              605,000            205,000             407,000         103,000
  Interest and financing costs                  68,502             29,002              20,713          24,456
  Interest and other income - net             (160,190)          (160,135)            (73,175)        (43,440)
                                           -----------        -----------          ----------      ----------
                                            14,386,845          9,841,164           5,139,633       3,502,273
                                           -----------        -----------          ----------      ----------
  EARNINGS BEFORE INCOME TAXES               3,822,497          3,642,305             242,632       1,333,230
    Income tax (expense) benefit            (1,476,413)         1,238,000            (144,364)        452,000
                                           -----------        -----------          ----------      ----------
  NET EARNINGS                              $2,346,084         $4,880,305          $   98,268      $1,785,230
                                           ===========        ===========          ==========      ==========

Earnings per common share
      Basic                                      $.04               $.09                 $.00           $.03
                                                 ====               ====                 ====           ====
      Diluted                                    $.04               $.08                 $.00           $.03
                                                 ====               ====                 ====           ====
Weighted average common shares
  outstanding
      Basic                                 57,231,460         56,405,653          57,281,353      56,710,946
                                           ===========        ===========          ==========      ==========
      Diluted                               60,692,213         59,810,181          59,468,615      59,891,195
                                           ===========        ===========          ==========      ==========
<FN>
The accompanying notes are an integral part of these condensed financial statements.
</FN>
</TABLE>
                                       4
<PAGE>

                       Vasomedical, Inc. and Subsidiaries

       CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                                          Total
                                                          Additional      Accum-          stock
                                        Common Stock       paid-in        ulated         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      113,667       114       199,529                       199,643
Stock options granted for services                             37,563                        37,563
Net earnings                                                               2,346,084      2,346,084
                                   ----------   -------   -----------   ------------    -----------
Balance at February 28, 2002       57,309,120   $57,309   $50,045,585   $(19,010,875)   $31,092,019
                                   ==========   =======   ===========   ============    ===========


<FN>
The accompanying notes are an integral part of this condensed financial statement.
</FN>
</TABLE>
                                       5
<PAGE>

                       Vasomedical, Inc. and Subsidiaries

                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (unaudited)
<TABLE>
<CAPTION>
                                                                           Nine months ended
                                                                           -----------------
                                                                              February 28,
                                                                              ------------
                                                                         2002            2001
                                                                         ----            ----
<S>                                                                   <C>              <C>
Cash flows from operating activities
  Net earnings                                                        $2,346,084       $4,880,305
                                                                      ----------       ----------
  Adjustments to reconcile net earnings
    to net cash provided by (used in) operating activities
    Depreciation and amortization                                        694,825          390,527
    Provision for bad debts                                              605,000          205,000
    Deferred income taxes                                              1,300,000       (1,238,000)
    Stock options granted for services                                    37,563           20,000
    Changes in operating assets and liabilities
        Accounts receivable                                           (2,974,080)      (3,464,478)
        Financing receivables, net                                    (3,279,536)          -
        Inventories                                                   (1,601,099)      (2,000,545)
        Other current assets                                             (23,958)          16,025
        Other assets                                                    (101,251)         (90,396)
        Accounts payable, accrued expenses and other current
         liabilities                                                     560,862        1,333,732
        Other liabilities                                                289,395          287,160
                                                                      ----------       ----------
                                                                      (4,492,279)      (4,540,975)
                                                                      ----------       ----------
     Net cash provided by (used in) operating activities              (2,146,195)         339,330
                                                                      ----------       ----------
Cash flows from investing activities
  Purchase of property and equipment                                    (248,083)      (1,398,156)
                                                                      ----------       ----------
     Net cash used in investing activities                              (248,083)      (1,398,156)
                                                                      ----------       ----------
Cash flows from financing activities
  Proceeds from notes                                                  1,641,667        1,141,667
  Payment of notes                                                    (1,153,057)          -
  Restricted cash                                                      1,141,667           -
  Proceeds from exercise of options and warrants                         199,643        1,514,109
                                                                      ----------       ----------
     Net cash provided by financing activities                         1,829,920        2,655,776
                                                                      ----------       ----------
      NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              (564,358)       1,596,950
Cash and cash equivalents - beginning of period                        3,785,456        3,058,367
                                                                      ----------       ----------
Cash and cash equivalents - end of period                             $3,221,098       $4,655,317
                                                                      ==========       ==========

Non-cash investing and financing activities were as follows:
Inventories transferred to property and equipment,
   attributable to operating leases - net                               $472,849         $334,075

<FN>
The accompanying notes are an integral part of these condensed financial statements.
</FN>
</TABLE>
                                       6
<PAGE>


                       Vasomedical, Inc. and Subsidiaries
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                               February 28, 2002
                                  (unaudited)

NOTE A - BASIS OF PRESENTATION

     The  consolidated  condensed  balance sheet as of February 28, 2002 and the
related  consolidated   condensed  statements  of  earnings  for  the  nine  and
three-month  periods ended February 28, 2002 and 2001,  changes in stockholders'
equity for the nine-month  period ended February 28, 2002 and cash flows for the
nine-month  periods  ended  February  28,  2002 and 2001 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, 2002 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 February 28, 2002 and
2001  are not  necessarily  indicative  of the  operating  results  expected  or
reported for the full year.

NOTE B - INVENTORIES
<TABLE>
<CAPTION>

                                                 February 28,      May 31,
                                                 -----------       ------
        Inventories consist of the following:       2002            2001
                                                    ----            ----
                <S>                              <C>             <C>
                Raw materials                    $4,033,198      $3,364,276
                Work in progress                    307,495         497,667
                Finished goods                    1,155,500         506,000
                                                 ----------      ----------
                                                 $5,496,193      $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
payments and  obligations  under capital  leases in effect for the twelve months
ended February 28:
<TABLE>
<CAPTION>
                                                              Financing receivables
                                                              ---------------------
           <S>                                                <C>
           2003                                                         $701,940
           2004                                                          701,940
           2005                                                        1,216,068
           2006                                                          556,140
           2007                                                          607,503
           Thereafter                                                  1,355,469
                                                                     -----------
           Total minimum lease payments                                5,139,060
           Less estimated executory costs                              (523,333)
                                                                     -----------
           Net minimum lease payments                                  4,615,727
           Less interest                                             (1,073,458)
                                                                     -----------
           Present value of minimum lease payments                     3,542,269
           Less valuation allowance                                    (262,733)
                                                                     -----------
           Net financing receivables                                   3,279,536
           Less current portion                                        (403,443)
                                                                     -----------
           Long-term portion                                          $2,876,093
                                                                     ===========
</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)
                               February 28, 2002
                                  (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 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.  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 2002, the Company  established a secured  revolving credit line
with  its  existing  bank.  The  credit  line  provides  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 (3.85% at
February 28, 2002). At February 28, 2002,  approximately  $4,700,000 of the line
was available and there were outstanding borrowings of $500,000. 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 three quarters 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).  In December  2001,  the Board of  Directors  approved  the granting of
400,000  stock options  under the 1999 Plan to an Executive  Vice  President and
Chief Operating  Officer pending  acceptance of employment.  Upon granting,  the
options would vest over a three-year  period at an exercise  price  representing
the fair market value of the underlying common stock at the time of grant.

     In December  2001,  the Board of Directors  granted stock options under the
1999 Plan to a  consultant  to  purchase  25,000  shares  of common  stock at an
exercise  price of $2.95 per share (which  represented  the fair market value of
the underlying  common stock at the time of the respective  grant).  These stock
options were  fair-valued at $50,250 which the Company will charge to operations
over the one-year period in which services are rendered. During the three months
ended February 28, 2002, the Company charged $12,563 to operations.

     In the first  three  quarters  of fiscal  2002,  options  and  warrants  to
purchase 113,667 shares of common stock were exercised,  aggregating $199,643 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
2,189,000 and 831,500 shares of common stock were excluded from the  computation
of diluted  earnings per share as of February  28, 2002 and 2001,  respectively,
because the effect of their inclusion would be antidilutive.

                                       8
<PAGE>
                       Vasomedical, Inc. and Subsidiaries
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)
                               February 28, 2002
                                  (unaudited)

NOTE F - EARNINGS PER COMMON SHARE (continued)

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share:
<TABLE>
<CAPTION>
                                           Nine months ended February 28,     Three months ended February 28,
                                              2002                2001             2002             2001
                                              ----                ----             ----             ----
<S>                                        <C>                 <C>                <C>             <C>
Numerator:
   Basic and diluted earnings              $2,346,084          $4,880,305         $98,268         $1,785,230
                                           ==========          ==========         =======         ==========
Denominator:
   Basic - weighted average shares          57,231,460         56,405,653      57,281,353          56,710,946
         Stock options                       2,515,822          1,109,133       1,568,948           1,076,190
         Warrants                              944,931          2,295,395         618,314           2,104,059
                                            ----------         ----------      ----------          ----------
   Diluted - weighted average shares        60,692,213         59,810,181      59,486,615          59,891,195
                                            ==========         ==========         =======          ==========
Basic earnings per share                          $.04               $.09            $.00                $.03
                                                  ====               ====            ====                ====
Diluted earnings per share                        $.04               $.08            $.00                $.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 sought damages in the sum
of $1,000,000 based upon an alleged breach of a sales contract. In January 2002,
this matter was dismissed by the court.

Purchase Commitments
--------------------

     At February 28, 2002, the Company had outstanding  purchase  commitments of
$486,000 with Foshan Life Sciences Co. Ltd. ("FSLC"), a Chinese company that has
assumed the  operational  activities  of VAMED Medical  Instrument  Company Ltd.
("VAMED"),  another Chinese  company,  for the contract  manufacture of its EECP
Model  MC2  system.  The  Company  believes  that  FSLC will be able to meet the
Company's future needs for these systems.

NOTE H  SUBSEQUENT EVENT

    In March 2002, the Company provided a $500,000 unsecured loan to a customer
engaged in establishing a national  network of EECP centers.  This financing was
part of an aggregate $3.2 million credit facility  executed by the customer with
the Company and an unaffiliated  lender in January 2002. The customer issued two
notes to the Company of $250,000 each for the  establishment of two EECP centers
in Florida  that bear  interest at 18% per annum and mature in  September  2005.
Payments of principal and interest under these notes will commence in April 2003
in varying  amounts  determined  by a formula  based upon cash  generated by the
respective  centers,  as defined in the loan agreement.  In connection with this
financing,  the customer  issued to the Company a warrant to purchase  52,620 of
its common  shares at $2.20 per share  expiring  in January  2007.  The  warrant
contains a  repurchase  option for a 30-day  period  beginning  December 1, 2006
(assuming no earlier  liquidity  event has taken place,  as defined) that allows
the  Company,  at its option,  to require the customer to redeem the warrant for
$249,945.  The warrant  value is  collateralized  by a security  interest in the
customer's accounts receivable.

     Under a  multiyear  sales  contract,  the  Company  sold  to this  customer
equipment  (EECP  units)  under  sales-type  leases   aggregating   revenues  of
$2,783,611  and $880,090 for the nine and three months ended  February 28, 2002,
respectively.  At February  28, 2002,  financing  receivables  of  approximately
$2,643,896  from these  sales-type  lease  transactions  with this  customer are
outstanding  (Note C). In fulfilling the  requirements  of the multi-year  sales
contract,  the  Company's  concentration  of credit risk with this  customer may
increase significantly.

                                       9
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Results of Operations
Nine Months and Three Months Ended February 28, 2002 and 2001
-------------------------------------------------------------

     The Company  generated  revenues from the sale and lease of EECP systems of
$26,189,000 and  $18,767,000 for the nine-month  periods ended February 28, 2002
and  2001,  respectively,  representing  a  40%  increase,  and  $8,019,000  and
$7,068,000  for the  three-month  periods  ended  February  28,  2002 and  2001,
respectively, representing a 13% increase. The Company generated earnings before
income taxes of  $3,822,000  and  $3,642,000  for the  nine-month  periods ended
February 28, 2002 and 2001,  respectively,  and $243,000 and  $1,333,000 for the
three-month periods ended February 28, 2002 and 2001, respectively.  The Company
reported net earnings of $2,346,000 and $4,880,000 for the  nine-months  periods
ended February 28, 2002 and 2001,  respectively,  after recognition of an income
tax  provision  (benefit) of  $1,476,000  and  $(1,238,000),  respectively.  The
Company  reported net  earnings of $98,000 and  $1,785,000  for the  three-month
periods ended February 28, 2002 and 2001, respectively,  after recognition of an
income tax provision (benefit) of $144,000 and $(452,000), 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,  as well as numerous other studies reported
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 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 nine
and three month periods  ended  February 28, 2002,  revenues of  $3,464,000  and
$880,000,  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 third  quarter  ended  February  28,  2002  compared  to the  comparable
prior-year  period (from 68% to 67%) was primarily  attributable  to a change in
our  product  mix now  favoring  our new,  but more  costly,  Model  TS3  system
manufactured in Westbury,  NY. Management believes that the increased production
costs of TS3 will be offset in the  future by  manufacturing  efficiencies.  The
Company is presently engaged in a product cost reduction  program.  In addition,
gross profit was further  affected by the change in sales mix by the increase in
revenues from non- domestic  business in the first three quarters of fiscal 2002
which, as described above, is less profitable than its domestic business.

     Selling,  general and  administrative  (SG&A)  expenses for the nine months
ended  February  28,  2002  and  2001  were  $9,880,000  (38% of  revenues)  and
$8,115,000 (43% of revenues),  respectively. For the three months ended February
28,  2002  and  2001,  SG&A  expenses  were  $3,105,000  (39% of  revenues)  and
$2,821,000  (40% of revenues),  respectively.  The Company has been  effectively
leveraging  its SG&A  expenses as a percentage  of sales,  decreasing  nearly 6%

                                       10
<PAGE>

year-to-date.  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 $3,994,000 (15% of revenues) for
the nine  months  ended  February  28, 2002  increased  by  $2,342,000  from the
comparable  prior-year  period of  $1,652,000  (9% of  revenues).  Research  and
development  (R&D) expenses of $1,680,000 (21% of revenues) for the three months
February 28, 2002 increased by $1,083,000 from the comparable  prior-year period
of  $597,000  (8% of  revenues).  The  increase  in both  nine 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  three  quarters  of  fiscal  2002,  the  Company  recorded  a
provision for income taxes of  $1,476,000,  inclusive of $176,000 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
$1,238,000.

     The  increase  in  interest  income  for the nine and  three  months  ended
February 28, 2002 is the direct result of interest  income reported on equipment
under  sales-type  leases,  offset by the decrease in the average cash  balances
invested during the respective periods, as well as declining interest rates over
those periods.

     The increase in interest expense over the prior-year comparable nine months
ended 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 February 28, 2002, the Company had a
cash balance of $3,221,000  and working  capital of  $17,620,000,  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) provided cash of  $(2,146,000)  and
$339,000 for the nine months ended February 28, 2002 and 2001, respectively. Net
cash used in operations during the nine months ended February 28, 2002 consisted
primarily  of  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  February 28, 2002,  particularly  as they
relate to financing  receivables,  are not necessarily indicative of the results
expected in future quarters.

     Investing  activities  used net cash of $248,000 and $1,398,000  during the
nine months ended February 28, 2002 and 2001,  respectively.  The principal uses
were for the  purchase of property  and  equipment,  notably the purchase of the
Company's headquarters and operating facility in the prior period. Subsequent to
February 28, 2002, the Company made a $500,000 investment,  through the purchase
of notes, in the operating activities of a customer engaged in the establishment
of a national network of EECP centers.

     Financing  activities provided cash of $1,830,000 and $2,656,000 during the
nine months ended February 28, 2002 and 2001,  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 operating  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. The balance of the financing activities during fiscal 2002 and 2001

                                       11
<PAGE>

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 February 2002, the Company increased 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. At February 28, 2002, approximately $4,700,000
of the line was  available  and there were  outstanding  borrowings of $500,000.

     Management believes that its working capital position at February 28, 2002,
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

         None

ITEM 5 - OTHER INFORMATION:

         None

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

         10.1 - Credit  Agreement dated February 21, 2002 between  Vasomedical,
                Inc. and Fleet National Bank

         10.2 - Loan  Modification  Agreement  dated March 4, 2002 by and among
                Vasomedical,  Inc.,  HeartGen  Centers,  Inc., RLA 1993 Trust
                and Richard Abrahams

         10.3 - Subordinated  Security  Agreement  dated March 4, 2002 between
                Vasomedical, Inc. and HeartGen Centers, Inc.

         10.4 - Warrant  Agreement  dated March 4, 2002 issued to  Vasomedical,
                Inc. by HeartGen Centers, Inc.

         10.5 - Center  Financing  Note dated  March 5, 2002 issued by HeartGen
                Centers, Inc. to Vasomedical, Inc.

         10.6 - Center  Financing  Note dated March 20, 2002 issued by HeartGen
                Centers, Inc. to Vasomedical, Inc.

                                       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:  April 11, 2002

                                       14