UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                   FORM 10-Q


[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934 For the quarterly period ended November 30, 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 January 10, 2003                                57,809,120


     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
               November 30, 2002 and May 31, 2002                              3

            Consolidated Condensed Statements of Earnings for the
               Six and Three Months Ended November 30, 2002 and 2001           4

            Consolidated Condensed Statement of Changes in Stockholders'
               Equity for the Period from June 1, 2002 to November 30, 2002    5

            Consolidated Condensed Statements of Cash Flows for the
               Six Months Ended November 30, 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                                         11

   Item 3 - Qualitative and Quantitative Disclosures About Market Risk        15

   Item 4 - Procedures and Controls                                           15

PART II - OTHER INFORMATION                                                   17


                                       2
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

                     CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                         November 30,    May 31,
                                                                            2002          2002
                                                                         -----------    ---------
                                                                         (unaudited)     (audited)
<S>                                                                      <C>            <C>
          ASSETS
CURRENT ASSETS
      Cash and cash equivalents                                          $3,293,516     $2,967,627
      Accounts receivable, net of an allowance for doubtful accounts of
      $1,554,612 at November 30, 2002 and $1,099,687 at May 31, 2002      9,408,497     12,682,725
      Inventories                                                         5,243,217      4,902,121
      Deferred income taxes                                                       -      3,033,000
      Financing receivables, net                                            192,303        633,786
      Other current assets                                                  559,450        627,243
                                                                        -----------    -----------
              Total current assets                                       18,696,983     24,846,502

PROPERTY AND EQUIPMENT, net                                               3,204,025      3,252,030
FINANCING RECEIVABLES, net                                                  756,317      2,941,587
NOTES RECEIVABLE                                                                  -        512,329
DEFERRED INCOME TAXES                                                    14,334,900      9,658,000
OTHER ASSETS                                                                237,528        207,810
                                                                        -----------    -----------
                                                                        $37,229,753    $41,418,258
                                                                        ===========    ===========
      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
      Accounts payable and accrued expenses                              $3,662,274     $3,645,846
      Current maturities of long-term debt and notes payable              1,075,629      1,046,445
      Sales tax payable                                                     645,567        732,362
      Deferred revenues                                                     536,746        272,000
      Accrued warranty and customer support expenses                        562,000        588,334
      Accrued professional fees                                             253,306        362,083
      Accrued commissions                                                   716,194        973,998
                                                                        -----------    -----------
             Total current liabilities                                    7,451,716      7,621,068

LONG-TERM DEBT                                                            1,140,595      1,072,716
ACCRUED WARRANTY COSTS                                                      307,000        402,666
DEFERRED REVENUES                                                           908,783        719,204
OTHER LIABILITIES                                                           400,000              -

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;
      57,809,120 and 57,309,120 shares at November 30, 2002 and
      May 31, 2002, respectively, issued and outstanding                     57,809         57,309
     Additional paid-in capital                                          50,365,773     50,116,148
     Accumulated deficit                                                (23,401,923)   (18,570,853)
                                                                        -----------    -----------
           Total stockholders' equity                                    27,021,659     31,602,604
                                                                        -----------    -----------
                                                                        $37,229,753    $41,418,258
                                                                        ===========    ===========
</TABLE>
The accompanying notes are an integral part of these condensed statements.

                                       3
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

                 CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
                                  (unaudited)
<TABLE>
<CAPTION>
                                                       Six months ended                     Three months ended
                                                       ----------------                     ------------------
                                                         November 30,                          November 30,
                                                         ------------                          ------------
                                                   2002               2001            2002                2001
                                                   ----               ----            ----                ----
<S>                                             <C>                <C>               <C>                 <C>
Revenues
  Equipment sales                               $10,414,340        $14,912,669     $ 6,209,831         $ 7,481,133
  Equipment rentals and services                    769,098            673,202         434,437             308,062
  Equipment sold under sales-type leases                  -          2,583,924               -             754,363
                                                -----------        -----------     -----------         -----------
                                                 11,183,438         18,169,795       6,644,268           8,543,558
Cost of sales and services                        3,963,889          5,342,718       2,004,537           2,563,610
                                                -----------        -----------     -----------         -----------
  Gross Profit                                    7,219,549         12,827,077       4,639,731           5,979,948

Expenses
  Selling, general and administrative             7,863,844          6,774,863       4,176,948           3,139,911
  Research and development                        2,517,626          2,313,575       1,326,640           1,163,695
  Provision for doubtful accounts                 3,260,708            198,000          11,834              99,000
  Interest and financing costs                       97,067             47,789          48,215              27,560
  Interest and other income, net                   (104,704)           (87,015)        (28,214)            (60,523)
                                                -----------        -----------     -----------         -----------
                                                 13,634,541          9,247,212       5,535,423           4,369,643
                                                -----------        -----------     -----------         -----------
  EARNINGS (LOSS) BEFORE
      INCOME TAXES                               (6,414,992)         3,579,865        (895,692)          1,610,305
      Income tax (expense) benefit, net           1,583,922         (1,332,049)        298,900            (605,247)
                                                -----------        -----------     -----------         -----------
  NET EARNINGS (LOSS)                           $(4,831,070)       $ 2,247,816     $  (596,792)        $ 1,005,058
                                                ===========        ===========     ===========         ===========
Net earnings (loss) per common share
      - basic                                         $(.08)              $.04           $(.01)               $.02
                                                      =====               ====           =====                ====
      - diluted                                       $(.08)              $.04           $(.01)               $.02
                                                      =====               ====           =====                ====
Weighted average common shares
  outstanding - basic                            57,567,317         57,215,550        57,658,021        57,206,922
                                                ===========        ===========     ===========         ===========
              - diluted                          57,567,317         59,582,672        57,658,021        59,364,254
                                                ===========        ===========     ===========         ===========
</TABLE>
The accompanying notes are an integral part of these condensed statements.

                                       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, 2002                  57,309,120   $57,309   $50,116,148   $(18,570,853)   $31,602,604
Exercise of warrants                        500,000       500       224,500                       225,000
Stock options granted for services                                   25,125                        25,125
Net loss                                                                        (4,831,070)    (4,831,070)
                                         ----------   -------   -----------   ------------    -----------
Balance at November 30, 2002             57,809,120   $57,809   $50,365,773   $(23,401,923)   $27,021,659
                                         ==========   =======   ===========   ============    ===========
</TABLE>


The accompanying notes are an integral part of this condensed statement.

                                       5
<PAGE>


                       Vasomedical, Inc. and Subsidiaries

                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (unaudited)
<TABLE>
<CAPTION>
                                                                           Six months ended
                                                                           ----------------
                                                                              November 30,
                                                                              ------------
                                                                         2002            2001
                                                                         ----            ----
<S>                                                                  <C>               <C>
Cash flows from operating activities
  Net earnings (loss)                                                $(4,831,070)      $2,247,816
                                                                     -----------       ----------
  Adjustments to reconcile net earnings (loss)
   to net cash provided by (used in) operating activities
    Depreciation and amortization                                        589,998          465,670
    Provision for doubtful accounts, net of write-offs                 3,001,708          198,000
    Deferred income taxes                                             (1,643,900)       1,217,000
    Stock options granted for services                                    25,125           25,000
    Changes in operating assets and liabilities
        Accounts receivable                                            2,819,302       (1,917,915)
        Financing receivables, net                                       112,892       (2,489,435)
        Inventories                                                     (174,093)      (1,773,129)
        Other current assets                                              67,793         (240,687)
        Other assets                                                     (41,589)         (28,039)
        Accounts payable, accrued expenses and other current
         liabilities                                                    (198,536)          29,139
        Other liabilities                                                493,912          (48,309)
                                                                     -----------       ----------
                                                                       5,052,612       (4,562,705)
                                                                     -----------       ----------
     Net cash provided by (used in) operating activities                 221,542       (2,314,889)
                                                                     -----------       ----------
Cash flows from investing activities
  Purchase of property and equipment                                    (217,716)        (134,277)
                                                                     -----------       ----------
     Net cash used in investing activities                              (217,716)        (134,277)
                                                                     -----------       ----------
Cash flows from financing activities
  Proceeds from notes                                                    126,967        1,141,667
  Payments on notes                                                      (29,904)        (641,667)
  Restricted cash                                                              -          641,667
  Proceeds from exercise of options and warrants                         225,000          156,472
                                                                     -----------       ----------
     Net cash provided by financing activities                           322,063        1,298,139
                                                                     -----------       ----------
      NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS               325,889       (1,151,027)
Cash and cash equivalents - beginning of period                        2,967,627        3,785,456
                                                                     -----------       ----------
Cash and cash equivalents - end of period                             $3,293,516       $2,634,429
                                                                     ===========       ==========


Non-cash investing and financing activities were as follows:
Inventories transferred to property and equipment,
   attributable to operating leases - net                               $312,405         $369,478
</TABLE>
The accompanying notes are an integral part of these condensed statements.

                                       6
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                               November 30, 2002

NOTE A - BASIS OF PRESENTATION

     The  consolidated  condensed  balance sheet as of November 30, 2002 and the
related   consolidated   condensed  statements  of  earnings  for  the  six  and
three-month  periods ended November 30, 2002 and 2001,  changes in stockholders'
equity for the six-month  period ended  November 30, 2002 and cash flows for the
six-month  periods  ended  November  30,  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 November 30, 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, 2002.  Results of operations for the periods ended November 30, 2002 and
2001  are not  necessarily  indicative  of the  operating  results  expected  or
reported for the full year.

NOTE B - IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

     In August 2001, the Financial  Accounting  Standards  Board ("FASB") issued
SFAS No. 144,  "Accounting for the Impairment or Disposal of Long-Lived  Assets"
("SFAS No.  144").  SFAS No. 144  supersedes  SFAS No. 121  "Accounting  for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
Accounting  Principles Board Opinion No. 30, "Reporting  Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and  Infrequently  Occurring  Events and  Transactions."  This statement
retains  the  fundamental  provisions  of  SFAS  No.  121  for  recognition  and
measurement of impairment, but amends the accounting and reporting standards for
segments of a business to be disposed of. The new rules were  effective  for the
Company on June 1, 2002.  The  adoption  of SFAS No. 144 did not have a material
effect on the Company's financial position or results of operations.

NOTE C - INVENTORIES
<TABLE>
<CAPTION>
                                                        November 30,      May 31,
                                                        -----------       ------
        Inventories consist of the following:              2002            2002
                                                           ----            ----
                <S>                                     <C>             <C>
                Raw materials                           $1,970,577      $2,661,303
                Work in progress                           555,732         547,818
                Finished goods                           2,716,908       1,693,000
                                                        ----------      ----------
                                                        $5,243,217      $4,902,121
                                                        ==========      ==========
</TABLE>

NOTE D - FINANCING RECEIVABLES

     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 November 30:
<TABLE>
      <S>                                                    <C>
      2003                                                          $283,442
      2004                                                           781,458
      2005                                                           361,714
                                                                   ---------
      Total minimum lease payments                                 1,426,614
      Less estimated executory costs                                 (58,661)
                                                                   ---------
      Net minimum lease payments                                   1,367,953
      Less interest                                                 (174,340)
                                                                   ---------
      Present value of minimum lease payments                      1,193,613
      Less valuation allowance                                      (244,993)
                                                                   ---------
      Net financing receivables                                      948,620
      Less current portion                                          (192,303)
                                                                   ---------
      Long-term portion                                             $756,317
                                                                   =========
</TABLE>

     The annual minimum lease payments are subject to adjustment  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 (unaudited)
                               November 30, 2002

NOTE E - RECEIVABLES FROM A MAJOR CUSTOMER

     Under a multi-year sales contract,  the Company sold equipment (EECP units)
to a customer  engaged in establishing a national  network of EECP centers under
sales-type  leases  aggregating  revenues  of  $3,160,792  in  fiscal  2002.  No
additional equipment was sold to this customer during fiscal 2003. At August 31,
2002,  financing  receivables of approximately  $2,558,000 from these sales-type
lease  transactions with this customer were outstanding.  In addition,  in March
2002, the Company  provided a $500,000  unsecured  loan to this  customer.  This
financing  was part of an aggregate  $3.2 million  credit  facility,  subject to
certain   conditions,   executed  by  the  customer  with  the  Company  and  an
unaffiliated  lender in January  2002,  under  which the  Company had no further
financing  obligation.  The customer issued two notes to the Company of $250,000
each in connection with two EECP centers that bore interest at 18% per annum and
were scheduled to mature in September  2005.  Payments of principal and interest
under these  notes was  scheduled  to commence in April 2003 in varying  amounts
determined  by a formula  based  upon cash  generated,  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 allowed the Company,  at its option, to require the customer to
redeem the  warrant  for  $249,945.  The warrant  value is  collateralized  by a
subordinated  security interest in the customer's accounts receivable.  As noted
below,  the customer ceased  operations in November 2002,  and, as a result,  it
does not appear that the Company will receive any proceeds  from the  redemption
of the warrant.

     In late August 2002,  this  customer  became  delinquent  in its  scheduled
monthly payments under its financing  obligations to the Company.  In September,
the Company was notified by this customer of recent circumstances that precluded
their  ability  to remain  current  under  their  financing  obligations  to the
Company.  Based on their  situation,  for which the customer was  attempting  to
remedy  through  a  recapitalization,   significant   uncertainties  existed  in
connection with the ongoing viability of their business. Accordingly, management
decided to write-off, in full, all funds due from this customer as of August 31,
2002, which aggregated approximately $3,000,000, including the net book value of
the equipment due to the  uncertainty of the Company's  ability to repossess the
equipment.  During the second quarter,  the customer  ceased  operations and the
Company was able to successfully recover all of the units that it had sold under
sales-type  leases to the customer  back into its finished  goods  inventory and
recorded a bad debt recovery of $479,000, which represents the net book value of
the equipment.  The Company is currently in the process of  redeploying  certain
pieces of the  equipment  while other pieces have been returned to the Company's
inventory.

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

     The Company  purchased its headquarters and warehouse  facility and secured
notes of $641,667 and $500,000,  respectively,  under two programs  sponsored by
New York State. These notes,  which bear interest at 7.8% and 6%,  respectively,
are  payable  in monthly  installments  consisting  of  principal  and  interest
payments over a fifteen-year  term and are secured by the building.  At November
30, 2002,  $1,096,341  remains  outstanding in connection with these notes.

     The Company  maintains  a secured  revolving  credit line with a bank.  The
credit  line,  as  amended  in  October  2002,  provides  for  borrowings  up to
$5,000,000  ($2,000,000,  at any  time  that  consolidated  net  income  for the
immediately  preceding three-month period is less than $1), primarily based upon
eligible  accounts  receivable,  as defined therein,  at the Libor Rate plus 200
basis points (3.4% at November 30,  2002).  At November 30, 2002,  $2,000,000 of
the line was available of which there were outstanding borrowings of $1,000,000.
Under the terms of the agreement, which expires in February 2005, the Company is
required to meet certain covenants, including, among others, minimum net income,
minimum interest coverage and minimum tangible net worth. In addition,  the line
is secured by substantially all the tangible assets of the Company.  At November
30, 2002,  the Company did not meet the minimum  requirements  of one  financial
covenant  but has  received  a waiver  from the  bank  for the  second  quarter.
Management  expects  that the  Company  will be in  compliance  with the revised
covenants in future quarters.

                                       8
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                               November 30, 2002

NOTE G - STOCKHOLDERS' EQUITY

     In the first half of fiscal  2003,  the Board of  Directors  granted  stock
options  under the 1999 Stock  Option  Plan (the "1999  Plan") to  employees  to
purchase an  aggregate of 395,000  shares of common  stock,  at exercise  prices
ranging from $.72 to $1.67 per share (which represented the fair market value of
the underlying common stock at the time of the respective grants). Subsequent to
November 30,  2002,  stock  options  under the 1999 Plan were granted to outside
directors  to  purchase an  aggregate  of 120,000  shares of common  stock at an
exercise  price of $1.00 per share (which  represented  the fair market value of
the underlying common stock at the time of the respective grants).

     In the first half of fiscal 2003,  warrants to purchase  500,000  shares of
common stock were exercised, aggregating $225,000 in proceeds to the Company.

NOTE H - EARNINGS (LOSS) PER COMMON SHARE

     Basic earnings (loss) per share are based on the weighted average number of
common shares  outstanding  without  consideration  of potential  common shares.
Diluted earnings (loss) 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  5,720,000 and 2,399,000  shares of common stock were excluded from the
computation  of diluted  earnings  per share as of  November  30, 2002 and 2001,
respectively, because the effect of their inclusion would be antidilutive.

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings (loss) per share:
<TABLE>
<CAPTION>
                                                   Six months ended Nov. 30,            Three months ended Nov. 30,
                                                       2002               2001             2002             2001
                                                       ----               ----             ----             ----
<S>                                                <C>                 <C>             <C>              <C>
Numerator:
   Basic and diluted earnings (loss)               $(4,831,070)        $2,247,816      $(596,792)       $1,005,058
                                                   ===========         ==========     ==========        ==========
Denominator:
   Basic - weighted average shares                  57,567,317         57,215,550     57,658,021        57,206,922
           Stock options                                     -          1,801,809              -         1,684,780
           Warrants                                          -            565,313              -           472,552
                                                   -----------         ----------     -----------       ----------
   Diluted - weighted average shares                57,567,317         59,582,672     57,658,021        59,364,254
                                                   ===========         ==========     ==========        ==========
Basic and diluted earnings (loss) per share              $(.08)              $.04          $(.01)             $.02
                                                         =====               ====          =====              ====
</TABLE>

NOTE I - COMMITMENTS AND CONTINGENCIES

Employment Agreements
---------------------

     In October 2002, the Company and its Chief Executive Officer entered into a
termination and consulting agreement,  whereby the employment agreement that had
previously  existed  between  the parties  was  terminated.  As a result of this
termination,  the Company will pay to the former employee a severance payment of
$240,000 in equal monthly installments through October 31, 2003. The Company has
recorded a charge to  operations  during the three- month period ended  November
30, 2002 to reflect this obligation.  The consulting agreement, which expires on
December 31, 2003,  provides for a consulting fee of $40,000 to be paid in equal
monthly  installments  over the term of the agreement.  Further,  the consulting
agreement  provides  for the  continued  vesting of stock  options that had been
previously  granted to the employee which would have otherwise vested during the
term of the  agreement.  The terms of the original  option  grants  provided for
vesting  throughout  the period  that the former  employee  was  employed  by or
provided  services to the  Company.  There were no  modifications  to any of the
previously  granted stock  options.  The Company  measured the fair value of the
unvested options as of the date of the termination and consulting  agreement and
will record a charge to operations of  approximately  $25,000 over the remaining
vesting period.

     In October 2002, the Company entered into an employment  agreement with the
Company's  new President  and Chief  Operating  Officer.  The  agreement,  which
expires in October 2004, provides for certain settlement  benefits,  including a
lump-sum  payment  of twelve  months of base  salary in the event of a change of
control,  as defined,  or a termination payment in an amount equal to six months
of base salary in the event of termination without cause, as defined.

                                       9
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                               November 30, 2002

NOTE I - COMMITMENTS AND CONTINGENCIES (continued)

Employment Agreements
---------------------

     The approximate  aggregate  minimum  compensation  obligations under active
employment agreements at November 30, 2002 are summarized as follows:
<TABLE>
<CAPTION>
                Twelve months ended November 30,        Amount
                -------------------------------         ------
                                        <S>            <C>
                                        2003           $370,000
                                        2004            352,000
                                        2005             25,000
                                                       --------
                                                       $747,000
                                                       ========
</TABLE>
Litigation
----------

     In June 2001, an action was commenced in the New York Supreme Court, Nassau
County,  against  the  Company  by the former  holder of a warrant  to  purchase
100,000  shares of the Company's  stock seeking  undefined  damages based upon a
claim that the Company  breached an  agreement  to  register  the common  shares
underlying  the warrant at the "earliest  practicable  date" after due demand by
the warrant holder had been made. In October 2002, the Company decided to settle
this matter for $600,000  through the execution of an agreement that enables the
Company to satisfy this obligation over a four-year  period  ($200,000 in fiscal
2003,  $133,000 each in fiscal years 2004 and 2005 and $134,000 in fiscal 2006).
Accordingly,  the  Company  recorded  a  $600,000  charge to  operations  in the
six-month period ended November 30, 2002.

     In or about late June 2002,  the Company was  notified by a letter from the
domestic  counsel for Foshan Life  Sciences Co. Ltd.  ("FLSC"),  a joint venture
comprised of a Florida  company and Vamed  Medical  Instrument  Company  Limited
("Vamed"),  a  Chinese  company  with  whom  the  Company  had an  agreement  to
manufacture  the Company's  EECP Model MC2 system,  that FLSC was  initiating an
arbitration  proceeding before the Hong Kong International  Arbitration  Council
("HKIAC") to recover  compensatory  and punitive damages in excess of $1,000,000
and  injunctive  relief  based  upon  claims  of  breach  of  the  manufacturing
agreement,   tortious   interference   and   misappropriation   of  confidential
information and trade secrets.  Although possessing several substantive defenses
to these claims,  the Company initially has challenged the HKIAC's right to hear
and  determine  the dispute on the ground that FLSC is neither a legitimate  nor
recognized  party  to  the  manufacturing  agreement  which  provides  for  such
arbitration  and,  therefore,  is not entitled to enforce the same.  The Company
also has  demanded  that  FLSC  deposit  with the  HKIAC  security  to cover the
Company's  costs of  arbitration.  To date,  FLSC has neither  responded  to the
Company's  demand for security nor apparently  filed a formal statement of claim
with the HKIAC.

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

     At November 30, 2002, the Company had outstanding  purchase  commitments of
$162,000  with  FLSC,  a  Chinese  company  that  has  assumed  the  operational
activities of Vamed,  another Chinese  company,  for the manufacture of its EECP
Model  MC2  system.  The  Company  believes  that  FLSC will be able to meet the
Company's future need for this system.

                                       10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Results of Operations
Six Months and Three Months Ended November 30, 2002 and 2001
------------------------------------------------------------

     The Company  generated  revenues from the sale and lease of EECP systems of
$11,183,000 and  $18,170,000  for the six-month  periods ended November 30, 2002
and  2001,  respectively,  representing  a  38%  decrease,  and  $6,644,000  and
$8,544,000  for the  three-month  periods  ended  November  30,  2002 and  2001,
respectively, representing a 22% decrease. The Company generated earnings (loss)
before income taxes of  $(6,415,000)  and $3,580,000  for the six-month  periods
ended  November 30, 2002 and 2001,  respectively,  and $(896,000) and $1,610,000
for the three- month periods ended November 30, 2002 and 2001, respectively. The
Company  reported net earnings  (loss) of  $(4,831,000)  and  $2,248,000 for the
six-months  periods  ended  November  30,  2002 and  2001,  respectively,  after
recognition of an income tax provision (benefit) of $(1,584,000) and $1,332,000,
respectively.  The  Company  reported  net  earnings  (loss) of  $(597,000)  and
$1,005,000  for the  three-month  periods  ended  November  30,  2002 and  2001,
respectively,  after  recognition  of  an  income  tax  provision  (benefit)  of
$(299,000) and $605,000, respectively.

     The decrease in revenues for the six and three-month periods ended November
30, 2002 as compared to November 30, 2001 are a result of the following:

(1)  The Company's prior-year six and three month period revenues were favorably
     impacted by  $2,584,000  and  $754,000,  respectively,  resulting  from the
     shipment of EECP units under sales-type leases. There was no equipment sold
     under sales-type  leases in the current  quarterly  periods and the Company
     does not expect  fiscal 2003 revenues  from  sales-type  leases to approach
     fiscal  2002  levels,  if at  all.  The  Company  offered  equipment  under
     sales-type  leases only to select  customers in the past, based upon, among
     other things, the customers' business model and history with the Company.

(2)  Revenues in fiscal  2003 were  affected by several  factors  including,  an
     increase  in the  duration  of the  selling  cycle  of the  Company's  EECP
     systems,  the delay by the Centers for Medicare and Medicaid Services (CMS)
     in updating annual  reimbursement  rates,  and reduced average unit selling
     prices.  Factors that have created a longer  selling cycle for EECP systems
     include,  among  other  things,  (a) a  change  in the  mix of  prospective
     customers  toward larger medical  practices and hospitals which have longer
     decision-making  processes;  (b)  inconsistent or inadequate  reimbursement
     coverage  policies  among  certain  third-party  insurers;  and (c) general
     economic conditions.

     The  Company's  revenue  growth over the last  several  fiscal year periods
resulted  primarily from the increase in cardiology  practices and hospitals who
became  providers of EECP therapy  following the announcement by the Centers for
Medicare and Medicaid  Services (CMS) 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.

     The Company  continues to be optimistic about its future. In June 2002, the
Company  announced  that all  three of its  models of the EECP  system  had been
granted a 510(k) market  clearance from the Food and Drug  Administration  (FDA)
for a new indication for the treatment of congestive  heart failure.  Congestive
heart failure  afflicts  more than 5 million  people in the United States alone,
with more than 550,000 new patients  diagnosed every year. It is the single most
expensive  disease state in the nation,  accounting for more than $40 billion in
direct and indirect medical costs.  EECP therapy was the featured topic at a CME
(Continuing  Medical  Education)  satellite  symposium held at the Heart Failure
Society of America's Sixth Annual Scientific Meeting in September where over 300
heart failure  specialists  attended the symposium,  entitled "Enhanced External
Counterpulsation:  A Novel  Potential  Approach  to Heart  Failure,"  which  was
sponsored by the University of Minnesota and supported by an  educational  grant
from the  Company.  Vasomedical's  multicenter,  randomized,  controlled,  PEECH
(Prospective  Evaluation of EECP in Congestive  Heart Failure)  trial,  which is
more than 50% enrolled,  is of  significant  importance  and should  confirm the
benefits of EECP for heart  failure  patients that have been observed to date in
smaller  studies  and lead to more  widespread  acceptance  and  adoption of the
therapy in clinical practice.  The Company's heart failure feasibility study was
published in the July/August issue of the journal Congestive Heart Failure.

                                       11
<PAGE>

     In November  2002,  the Company  received the CE Mark approval for its EECP
systems from its notified body, DGM of Denmark,  indicating  compliance with the
European Union (EU) Medical Device Directives. This enables the Company to begin
marketing new or improved  EECP products in all 15 EU countries and  cooperating
partner  countries  without  undergoing  separate review and inspection for each
product.  As a result,  the Company  began  marketing its Model TS3 EECP system,
which includes the Company's  patent-pending  congestive heart failure treatment
and oxygen saturation monitoring technologies, throughout the EU.

     In late  December,  CMS  published  changes to the Medicare  Physician  Fee
Schedule  for  Calendar  Year 2003 that are expected to result in a new national
average payment level of $195.45 per session for the Company's EECP therapy,  or
$6,841 per  standard  course of  treatment.  The new  proposed  average  payment
reflects a 27% increase in the national average reimbursement for EECP over 2002
levels.  The national  average payment rate for the therapy has increased by 51%
since January 2000. The new rates are scheduled to take effect March 1, 2003.

     Gross profit  margins for the six months  ended  November 30, 2002 and 2001
and were 65% and 71%,  respectively.  Gross profit  margins for the three months
ended  November  30,  2002 and 2001  and were 70% and 70%,  respectively.  Gross
profits  are  dependent  on a number of  factors,  particularly  the mix of EECP
models sold, 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
margin for the six months  ended  November 30, 2002  compared to 2001  primarily
resulted  from the  significant  decrease in revenue  from the prior  comparable
period.

     Selling,  general and  administrative  (SG&A)  expenses  for the six months
ended November 30, 2002 and 2001 were $7,864,000 and  $6,775,000,  respectively.
For the three  months  ended  November  30, 2002 and 2001,  SG&A  expenses  were
$4,177,000 and $3,140,000,  respectively. The increase in the percentage of SG&A
expenses as a percentage of sales was primarily due to the significant  decrease
in revenues from the prior comparable periods. The increase in SG&A expenses, on
an absolute basis,  from the comparable prior fiscal periods resulted  primarily
from a $600,000  accrual  arising from the settlement of litigation in the first
quarter,  non-recurring charges of $420,000 for employee severance  arrangements
and executive  recruiting fees in the second quarter,  increases in professional
and consulting fees of approximately  $300,000, and other increases in excess of
$400,000  which resulted from the timing of certain  domestic and  international
marketing  and  promotional  programs in the current year versus the prior year,
offset by overall decreases in sales commissions related to decreased revenues.

     During the first and second  quarters of fiscal 2003,  the Company  charged
$3,249,000 and $12,000,  which is net of bad debt  recoveries of $479,000 in the
second quarter, to its provision for doubtful accounts as compared to $99,000 in
each of the first and second quarters of fiscal 2002, primarily as a result of a
full write-off of receivables,  including the net book of value of the equipment
due to the uncertainty of the Company's ability to repossess the equipment, with
respect to a major customer  during the first quarter of fiscal 2003, as well as
specific  reserves  against  certain  international  accounts for which extended
credit terms were offered.  During the second  quarter,  the Company was able to
successfully  recover all of the units that it had sold under sales-type  leases
to the aforementioned  major customer back into its finished goods inventory and
recorded a bad debt recovery of $479,408, which represents the net book value of
the equipment.  The Company is currently in the process of  redeploying  certain
pieces of the  equipment  while  certain  other pieces have been returned to the
Company's inventory.

     Research and development (R&D) expenses of $2,518,000 (23% of revenues) for
the six months ended  November 30, 2002  increased by $204,000,  or 9%, from the
prior six months ended  November 30, 2001 of $2,314,000  (13% of revenues).  R&D
expenses are primarily impacted by the PEECH clinical trial in heart failure and
other clinical initiatives  (including the International EECP Patient Registry),
as well as continued  product design and development  costs. The Company expects
to continue its investments in product development and clinical trials in fiscal
2003 and beyond to further  validate  and expand the  clinical  applications  of
EECP, including, but not limited to, heart failure and acute coronary syndromes.

     In the six months ended November 30, 2002,  the Company  recorded a benefit
for income taxes of $1,584,000,  inclusive of a $622,000 valuation  allowance on
deferred tax assets.  This is in contrast to an income tax provision reported in
the six months ended November 30, 2001 of $1,332,000.

     The  increase in interest  income  from the prior  six-month  period is the
direct result of interest  income  reported on equipment  sold under  sales-type
leases  in  the  first quarter of  fiscal  2003, offset by  the decrease in  the


                                       12
<PAGE>

cash balances invested during the year, as well as declining interest rates this
year over last  year.  However,  as a result of the  significant  first  quarter
write-off of receivables  generated from equipment sold under sales-type leases,
interest income decreased in the second quarter of fiscal 2003.

     The increase in interest expense over the prior periods is primarily due to
interest  on loans  secured to  refinance  the  November  2000  purchase  of the
Company's  headquarters  and  warehouse  facility,  as well as  working  capital
borrowings under the Company's revolving secured credit facility.

Liquidity and Capital Resources

     The Company has financed its fiscal 2003 and 2002 operations primarily from
working capital and operating  results.  At November 30, 2002, the Company had a
cash balance of $3,294,000  and working  capital of  $11,245,000,  compared to a
cash balance of $2,968,000  and working  capital of $17,225,000 at May 31, 2002.
The  Company's  operating  activities  provided  (used)  cash  of  $222,000  and
$(2,315,000)  for November 30, 2002 and 2001,  respectively.  Net cash  provided
from  operations  during  the six  months  ended  November  30,  2002  consisted
primarily of  decreases  in accounts  receivable  and other  current  assets and
increases in other long-term liabilities,  offset by increases in inventory, and
decreases in accounts payable and accrued expenses.  The increase in inventories
resulted from an increase in finished  goods of the  Company's  Model TS3 system
due to a shortfall  in  anticipated  sales  during the period.  The  decrease in
accounts  receivable  resulted primarily from decreased sales in the period. 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 and management of finished goods  inventory  levels.  Cash provided by
operations during the first half of fiscal 2003 is not necessarily indicative of
the results expected in future years.

     Investing activities  used net cash of $218,000 and $134,000 during the six
months ended November 30, 2002 and 2001, respectively. The principal use of cash
was for the purchase of property and equipment.

     Financing  activities  provided cash of $322,000 and $1,298,000  during the
six months ended November 30, 2002 and 2001, respectively.  Financing activities
during  fiscal 2002 and 2001  consisted of the receipt of cash proceeds upon the
exercise of Company  common stock  options and warrants by officers,  directors,
employees and consultants.  In addition,  in fiscal 2001, the Company refinanced
its  long-term  obligations  on the purchase of its  headquarters  and warehouse
facility.  In October 2002, the Company  amended its existing credit facility to
provide  for  borrowings  up  to  $5,000,000  ($2,000,000,   at  any  time  that
consolidated net income for the immediately preceding three-month period is less
than $1), primarily based upon eligible accounts receivable, as defined therein,
at the  Libor  Rate plus 200  basis  points.  Although  the  Company  was not in
compliance  with one financial  covenant at November 30, 2002, the bank issued a
waiver to the Company for that period.  As noted above, the covenants  contained
in the amended credit agreement have been revised.  Management  expects that the
Company will be in compliance with the revised covenants in future quarters.  At
November  30,  2002,  $2,000,000  of the line was  available of which there were
outstanding borrowings of $1,000,000.

     Management believes that its working capital position at November 30, 2002,
the availability of its credit facility, the effect of initiatives undertaken to
improve our cash position by rationalizing  operating expenses and by tightening
our sales and credit  policies,  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.

     The following table presents the Company's  expected cash  requirements for
contractual obligations outstanding as of November 30, 2002:
<TABLE>
<CAPTION>
                                                  Due as of  Due as of 11/30/04   Due as of 11/30/06        Due
                                        Total      11/30/03        and 11/30/05         and 11/30/07     Thereafter
--------------------------------------------------------------------------------------------------------------------
<S>                                <C>           <C>                   <C>                  <C>            <C>
Line-of Credit (1)                 $1,000,000    $1,000,000
Long-Term Debt                      1,216,000        76,000            $170,000             $152,000       $818,000
Operating Leases                      197,000        83,000              84,000               30,000              -
Litigation Settlement                 600,000       200,000             266,000              134,000              -
Severance obligations                 280,000       280,000                   -                    -              -
Employment Agreements                 747,000       370,000             377,000                    -              -
Purchase Obligations                  162,000       162,000                   -                    -              -
                                ------------------------------------------------------------------------------------
Total Contractual Cash
Obligations                        $4,202,000    $2,171,000            $897,000             $316,000       $818,000
                                ====================================================================================


                                       13
<PAGE>
<FN>
(1) The Company  maintains  a revolving  credit  agreement  that,  as amended in
October 2002,  provides for borrowings of up to $5,000,000  ($2,000,000,  at any
time that  consolidated  net income for the  immediately  preceding  three-month
period is less than $1), primarily based upon eligible accounts  receivable,  as
defined therein.  $2,000,000 is available under the revolving credit  agreement,
of which  $1,000,000 is outstanding  at November 30, 2002. The revolving  credit
agreement expires in February 2005.
</FN>
</TABLE>
Effects of Inflation

     The Company believes that inflation and changing prices over the past three
years have not had a  significant  impact on our  revenue  or on our  results of
operations.

Critical Accounting Policies

     Financial  Reporting  Release No. 60, which was released by the  Securities
and Exchange  Commission,  or SEC, in December  2001,  requires all companies to
include a  discussion  of critical  accounting  policies or methods  used in the
preparation  of  financial  statements.  Note A of  the  Notes  to  Consolidated
Financial  Statements  included in the Company's  Annual Report on Form 10-K for
the year ended May 31,  2002  includes a summary  of the  Company's  significant
accounting  policies  and  methods  used  in the  preparation  of our  financial
statements.  In preparing these financial  statements,  the Company has made its
best  estimates  and  judgments  of certain  amounts  included in the  financial
statements,  giving due  consideration to materiality.  The application of these
accounting  policies involves the exercise of judgment and use of assumptions as
to future uncertainties and, as a result, actual results could differ from these
estimates.  The  Company  does  not  believe  there is a great  likelihood  that
materially  different  amounts would be reported under  different  conditions or
using different  assumptions.  The Company's critical accounting policies are as
follows:

Revenue Recognition

     The  Company  recognizes  revenue  from the sale of its EECP  system in the
period in which the Company  fulfills its obligations  under the sale agreement,
including  delivery and customer  acceptance.  The Company has also entered into
lease  agreements for its EECP system,  generally for terms of one year or less,
that are  classified as operating  leases.  Revenues from  operating  leases are
recognized  on a  straight-line  basis over the life of the  respective  leases.
Revenues from the sale of extended  warranties on the EECP system are recognized
on a straight-line  basis over the life of the extended  warranty,  ranging from
one year to four years.  Deferred revenues relate to extended warranty fees that
have  been paid by  customers  prior to the  performance  of  extended  warranty
services.

     The Company follows SFAS No. 13,  "Accounting For Leases," for its sales of
EECP units under sales-type  leases with two customers.  In accordance with SFAS
No. 13, the Company  records the sale and financing  receivable at the amount of
the minimum lease payment,  less unearned interest income,  which is computed at
the interest rate implicit in the lease,  and executory  costs.  The cost of the
EECP unit  acquired  by the  customer  is  recorded as cost of sales in the same
period.

Accounts Receivable/Financing Receivables

     Estimates are used in determining our allowance for doubtful accounts based
on our historical  collections  experience,  current trends, credit policy and a
percentage of our accounts  receivable by aging category.  In determining  these
percentages,  we look at historical  write-offs of our receivables.  The Company
also looks at the credit  quality of its customer base as well as changes in its
credit policies. The Company continuously monitors collections and payments from
its customers.  While credit losses have historically  been within  expectations
and the  provisions  established,  the  Company  cannot  guarantee  that it will
continue to experience the same credit loss rates that it has in the past.

     In  addition,  the  Company  periodically  reviews  and  assesses  the  net
realizability of its receivables  arising from sales-type leases. If this review
results in a lower estimate of the net realizable  value of the  receivable,  an
allowance for the  unrealized  amount is  established in the period in which the
estimate is changed. In the first quarter of fiscal 2003,  management decided to
write-off  financing   receivables  under  sales-type  leases  of  approximately
$2,500,000  as a result of  significant  uncertainties  with  respect to a major
customer's ability to meet its present and future financial obligations.

Inventories

     The Company values inventory at the lower of cost or estimated market, cost
being determined on a first-in,  first-out basis. The Company  regularly reviews
inventory  quantities on hand,  particularly  raw materials and components,  and


                                       14
<PAGE>

records a  provision  for excess  and  obsolete  inventory  based  primarily  on
existing and anticipated design and engineering  changes to our products as well
as forecasts of future product demand.

Warranty Costs

     Equipment sold is generally  covered by a warranty  period of one year. The
Company  accrues a warranty  reserve  for  estimated  costs to provide  warranty
services.  The estimate of costs to service our warranty obligations is based on
historical  experience  and an  expectation  of future  conditions.  While these
warranty costs have historically been within the Company's  expectations and the
provisions established, to the extent the Company experiences increased warranty
claim activity or increased costs  associated  with servicing those claims,  the
warranty accrual will increase, and the Company would experience decreased gross
profit.

Income Taxes

     Deferred  income taxes are  recognized  for temporary  differences  between
financial  statement  and income tax bases of assets  and  liabilities  and loss
carryforwards  for which  income tax  benefits  are  expected  to be realized in
future years. A valuation  allowance is established,  when necessary,  to reduce
deferred tax assets to the amount expected to be realized.  In estimating future
tax  consequences,  the Company  generally  considers all expected future events
other than an  enactment  of changes in the tax laws or rates.  The deferred tax
asset is continually  evaluated for  realizability.  To the extent  management's
judgment  regarding  the  realization  of the  deferred  tax assets  change,  an
adjustment  to the  allowance  is  recorded,  with  an  offsetting  increase  or
decrease,  as appropriate,  in income tax expense. Such adjustments are recorded
in the period in which  management's  estimate  as to the  realizability  of the
asset changed.

Stock Compensation

     The Company measures  stock-based  awards using the intrinsic value method.
As described in Note I to the consolidated  financial statements included in the
Annual Report on Form 10-K for the year ended May 31, 2002, pro forma disclosure
of the  effect  on net  earnings  and net  earnings  per  common  share has been
computed  as if the fair  value-based  method  had  been  applied  in  measuring
compensation expense.

Recently Issued Accounting Standards

     In August 2001, the Financial  Accounting  Standards  Board ("FASB") issued
SFAS No. 144,  "Accounting for the Impairment or Disposal of Long-Lived  Assets"
("SFAS No.  144").  SFAS No. 144  supersedes  SFAS No. 121  "Accounting  for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and
Accounting  Principles Board Opinion No. 30, "Reporting  Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and  Infrequently  Occurring  Events and  Transactions."  This statement
retains  the  fundamental  provisions  of  SFAS  No.  121  for  recognition  and
measurement of impairment, but amends the accounting and reporting standards for
segments of a business to be disposed of. The new rules were  effective  for the
Company on June 1, 2002.  The  adoption  of SFAS No. 144 did not have a material
effect on the Company's financial position or results of operations.

Qualitative and Quantitative Disclosures About Market Risk

     The Company is exposed to certain financial market risks, including changes
in interest rates. All of the Company's  revenue,  expenses and capital spending
are transacted in US dollars.  The Company's exposure to market risk for changes
in interest rates relates  primarily to our cash and cash  equivalent  balances,
investments in sales-type leases and the line of credit agreement.  The majority
of our investments are in short-term  instruments and subject to fluctuations in
US interest rates. Due to the nature of our short-term  investments,  we believe
that there is no material risk exposure.

Procedures and Controls

     Within the 90 days prior to the date of this  report,  the Company  carried
out an  evaluation,  under the  supervision  and with the  participation  of the
Company's management,  including the Company's Chief Executive Officer and Chief
Financial  Officer,  of the  effectiveness  of the design and  operation  of the
Company's  disclosure  controls  and  procedures  pursuant to Exchange  Act Rule
13a-14.  Based  upon that  evaluation,  the Chief  Executive  Officer  and Chief


                                       15
<PAGE>

Financial  Officer  concluded  that  the  Company's   disclosure   controls  and
procedures  are effective.  There were no  significant  changes in the Company's
internal  controls or in other  factors  that could  significantly  affect these
controls subsequent to the date of their evaluation.



     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 "anticipated",  "believes", "estimates", "expects"
and  "intends"  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;  medical insurance  reimbursement  policies;  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.


                                       16
<PAGE>

                       VASOMEDICAL, INC. AND SUBSIDIARIES
                       ----------------------------------

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

ITEM 1 - LEGAL PROCEEDINGS:

        Previously reported.

ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS:

        None

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES:

        None

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          A. The registrant  held its Annual Meeting of Stockholders on December
     18, 2002.

          B. Not applicable.

          C. Three  directors,  namely E. Donald  Shapiro,  Anthony  Viscusi and
     Martin Zeiger, were elected at the Annual Meeting to serve in Class I until
     the Annual Meeting of  Stockholders  for fiscal 2005. The minimum number of
     votes cast in favor of their elections was 50,675,916.

          The other matter voted upon was the ratification of the appointment of
     Grant  Thornton  LLP  as  the  Company's   independent   certified   public
     accountants  for the fiscal year ended May 31, 2003. The votes cast were as
     follows:

          Votes  For:  50,895,249;  Votes  Against:  970,410;  Votes  Abstained:
     109,330

ITEM 5 - OTHER INFORMATION:

        None

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

        (a) Exhibits

          10.1 Amendment and Waiver to Credit  Agreement  dated October 18, 2002
               between the Registrant and Fleet National Bank
          10.2 Agreement  dated October 1, 2002 between the Registrant and Peter
               F. Cohn
          10.3 Termination  and  Settlement  Agreement  dated  October  21, 2002
               between the Registrant and D. Michael Deignan
          10.4 Employment   Agreement   dated   October  28,  2002  between  the
               Registrant and Gregory D. Cash
          99   Certification of Periodic Report

        (b) Reports on Form 8K: None


                                       17
<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/ Photios T. Paulson
                                 ----------------------
                                 Photios T. Paulson
                                 Chief Executive Officer and Director (Principal
                                 Executive Officer)

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

Date:  January 14, 2003


                                       18
<PAGE>



CERTIFICATION BY P.T. PAULSON PURSUANT TO SECURITIES EXCHANGE ACT RULE 13A-14

I, Photios T. Paulson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Vasomedical, Inc.;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the  registrant  and have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant  deficiencies and material weaknesses.

Date: January 14, 2003

/s/  Photios T.  Paulson
------------------------
Photios T.  Paulson
Chief  Executive Officer

                                       19
<PAGE>
CERTIFICATION BY J.A. GIACALONE PURSUANT TO SECURITIES EXCHANGE ACT RULE 13A-14

I, Joseph A. Giacalone, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Vasomedical, Inc.;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the  registrant  and have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant  deficiencies and material weaknesses.

Date: January 14, 2003

/s/ Joseph A.  Giacalone
------------------------
Joseph A. Giacalone
Chief  Financial
Officer



                                       20