<PAGE>
 
________________________________________________________________________________

                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  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 March 31, 1998
                                       OR
   [   ]  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 0-22229

              ___________________________________________________


                               VITAL IMAGES, INC.
             (Exact name of registrant as specified in its charter)


               MINNESOTA                                42-1321776
     (State or other jurisdiction of       (I.R.S. Employer Identification No.)
     incorporation or organization)



     3100 WEST LAKE STREET, SUITE 100                    55416
        MINNEAPOLIS, MINNESOTA                        (Zip Code)
          (Address of principal
            executive offices)


                                 (612) 915-8000
              (Registrant's telephone number, including area code)
              ___________________________________________________



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


              ___________________________________________________



On May 8, 1998, there were 4,815,486 shares of the Registrant's common stock,
par value $.01 per share, outstanding.

                                       1
<PAGE>
 
                               VITAL IMAGES, INC.
                               ------------------
                                   FORM 10-Q
                                 MARCH 31, 1998



                               TABLE OF CONTENTS

                                        
                                                                           Page
                                                                          Number
                                                                          ------


PART I.  FINANCIAL INFORMATION



         Item 1.  Financial Statements

                  Balance Sheets as of March 31, 1998 and December 31, 1997 ...3

                  Statements of Operations for the Three Months Ended
                     March 31, 1998 and 1997 ..................................4

                  Statements of Cash Flows for the Three Months Ended
                     March 31, 1998 and 1997 ..................................5

                  Notes to Financial Statements ...............................6

         Item 2.  Management's Discussion and Analysis of Financial
                     Condition and Results of Operations ......................8



PART II.  OTHER INFORMATION

         Item 6.  Exhibits and Reports on Form 8-K ...........................13


SIGNATURES ...................................................................14


INDEX TO EXHIBITS ............................................................15

                                       2
<PAGE>
 
-------------------------------------------------------------------------------

                          PART I. FINANCIAL INFORMATION
-------------------------------------------------------------------------------

ITEM 1. FINANCIAL STATEMENTS

VITAL IMAGES, INC.
BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                                              MARCH 31,           DECEMBER 31,
                                                                                 1998                 1997
                                                                             -----------          ------------
                                                                             (UNAUDITED)
<S>                                                                          <C>                <C>
ASSETS
Current assets:
     Cash and cash equivalents                                                $    314,382      $     448,377
     Marketable securities                                                       5,180,951          5,963,464
     Accounts receivable, net of allowance for doubtful accounts
      of $60,000 and $40,000 as of March 31, 1998 and December
      31, 1997, respectively                                                       391,493            581,130
     Prepaid expenses and other current assets                                     233,975            264,826
                                                                         -------------------- --------------------
         Total current assets                                                    6,120,801          7,257,797
Property and equipment, net                                                        941,810            997,947
Patent costs                                                                        40,267             40,267
                                                                         -------------------- --------------------
         TOTAL ASSETS                                                         $  7,102,878      $   8,296,011
                                                                         ==================== ====================


LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                         $    252,323      $     203,579
     Accrued payroll                                                               191,635            322,572
     Deferred revenue                                                              235,412            212,556
     Other current liabilities                                                     125,823            104,003
                                                                         -------------------- --------------------
         Total current liabilities                                                 805,193            842,710
Deferred revenue                                                                   180,992            200,107
                                                                         -------------------- --------------------
         Total liabilities                                                         986,185          1,042,817

Shareholders' equity:
    Preferred stock: authorized 5,000,000 shares of $.01 par value;
     none issued or outstanding as of March 31, 1998 and December 31,        
     1997                                                                           -                  -
    Common stock: authorized 20,000,000 shares of $.01 par
     value; issued and outstanding, 4,812,201 shares as of March
     31, 1998 and 4,806,561 shares as of December 31, 1997                          48,122             48,066
    Additional paid-in capital                                                  18,016,146         18,006,824
    Accumulated deficit                                                        (11,947,575)       (10,801,696)
                                                                         -------------------- --------------------
         Total shareholders' equity                                              6,116,693          7,253,194
                                                                         -------------------- --------------------

         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $  7,102,878      $   8,296,011
                                                                         ==================== ====================

</TABLE>
(The accompanying notes are an integral part of the interim financial
statements.)

                                       3
<PAGE>
 
VITAL IMAGES, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                                        FOR THE THREE
                                                                                        MONTHS ENDED
                                                                                          MARCH 31,
                                                                               1998                     1997
                                                                               ----                     ----
                                                                                         (UNAUDITED)
<S>                                                                      <C>                     <C>
Revenue:
     License fees                                                          $     472,853           $       76,999
     Maintenance and services                                                     93,680                   79,089
     Hardware                                                                    199,332                     -
                                                                         ------------------      --------------------
         Total revenue                                                           765,865                  156,088

Cost of revenue:
     License fees                                                                 36,446                   21,833
     Maintenance and services                                                     24,411                     -
     Hardware                                                                    158,020                     -
                                                                         ------------------      --------------------
         Total cost of revenue                                                   218,877                   21,833

              Gross margin                                                       546,988                  134,255

Operating expenses:
     Sales and marketing                                                         639,714                  390,822
     Research and development                                                    529,321                  423,186
     General and administrative                                                  600,135                  307,086
                                                                         ------------------      --------------------
         Total operating expenses                                              1,769,170                1,121,094

              Operating loss                                                  (1,222,182)                (986,839)

Interest income                                                                   79,421                  114,179
                                                                         ------------------      --------------------

Loss before income taxes                                                      (1,142,761)                (872,660)
Income taxes                                                                       3,118                      500
                                                                         ------------------      --------------------

Net loss                                                                   $  (1,145,879)             $  (873,160)
                                                                         ==================      ====================


Net loss per share - basic and diluted                                     $       (0.24)             $     (0.18)
                                                                         ==================      ====================

Weighted average common shares outstanding - basic and diluted                 4,804,736                4,750,578
                                                                         ==================      ====================
</TABLE>
(The accompanying notes are an integral part of the interim financial
statements.)

                                       4
<PAGE>
 
VITAL IMAGES, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                                                          FOR THE THREE
                                                                                          MONTHS ENDED
                                                                                            MARCH 31,
                                                                                  1998                     1997
                                                                                  ----                     ----
                                                                                           (UNAUDITED)
<S>                                                                           <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                  $(1,145,879)           $     (873,160)
     Adjustments to reconcile net loss to net cash used in operating
     activities:
         Depreciation and amortization                                             118,740                    57,326
         Stock-based compensation                                                    -                        30,300
         Provision for uncollectible accounts receivable                            20,000                       952
         Changes in operating assets and liabilities:
             Accounts receivable                                                   169,637                     6,604
             Prepaid expenses and other current assets                              30,851                    36,726
             Accounts payable                                                       48,744                   (26,671)
             Deferred revenue                                                        3,741                   (73,765)
             Accrued payroll and other liabilities                                (109,117)                    2,974
                                                                          ---------------------    ---------------------
                Net cash used in operating activities                             (863,283)                 (838,714)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Additions to property and equipment                                           (62,603)                 (141,649)
     Additions to patent costs                                                       -                        (3,048)
     Investments in marketable securities                                       (3,717,487)                     -
     Maturities of marketable securities                                         4,500,000                      -
                                                                          ---------------------    ---------------------
                Net cash provided by (used in) investing activities                719,910                  (144,697)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net investment by Bio-Vascular                                                  -                        (3,205)
     Purchases of common stock under Employee Stock Purchase Plan                    9,378                      -
                                                                          ---------------------    ---------------------
                Net cash provided by (used in) financing activities                  9,378                    (3,205)

NET DECREASE IN CASH AND CASH EQUIVALENTS                                         (133,995)                 (986,616)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                     448,377                 6,481,067
                                                                          ---------------------    ---------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                      $    314,382            $    5,494,451
                                                                          =====================    =====================

</TABLE>
(The accompanying notes are an integral part of the interim financial
statements.)

                                       5
<PAGE>
 
VITAL IMAGES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(1) BASIS OF PRESENTATION:


The accompanying unaudited financial statements of Vital Images, Inc. ("Vital
Images" or the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.  In the
opinion of management, all adjustments considered necessary, including items of
a normal recurring nature, for a fair presentation have been included. Operating
results for the three months ended March 31, 1998 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1998.
These financial statements should be read in conjunction with the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.


(2) SPIN-OFF OF VITAL IMAGES:

On May 12, 1997, Bio-Vascular, Inc. ("Bio-Vascular"), the former parent company
of Vital Images, distributed all of the shares of Vital Images to the
shareholders of Bio-Vascular (the "Distribution"), and on that date Vital Images
began operating as an independent public company.  All Bio-Vascular shareholders
of record as of May 5, 1997 received one share of Vital Images common stock for
each two shares of Bio-Vascular stock held on that date, and cash in lieu of
fractional shares.


(3) REVENUE RECOGNITION:

Effective January 1, 1998 the Company adopted Statement of Position 97-2,
Software Revenue Recognition ("SOP 97-2"), which provides guidance on applying
generally accepted accounting principles in recognizing revenue on software
transactions and supersedes SOP 91-1, Software Revenue Recognition. The adoption
of SOP 97-2 did not materially impact the Company's revenue recognition
practices, financial position or results of operations during the first quarter
of 1998 and would not have materially impacted the revenue recognition
practices, financial position or results of operations of the quarter ended
March 31, 1997.

                                       6
<PAGE>
 
VITAL IMAGES, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
--------------------------------------------------------------------------------


(4) MAJOR CUSTOMERS AND GEOGRAPHIC DATA:
<TABLE>
<CAPTION>
                                                                                    Percentage of
                                            Significant                                Accounts
                                             Customer                  Revenue        Receivable
                                             --------                  -------        ----------
<S>                              <C>                                  <C>              <C>
Three months ended               Toshiba America Medical Systems,     $ 329,000          39%
  March 31, 1998                               Inc.
                                    CogniSeis Development, Inc.       $ 153,000           -

Three months ended                Duke University Medical Center      $  18,000           4%
  March 31, 1997
</TABLE>

The Company's accounts receivable are generally concentrated with a small base
of customers. As of March 31, 1998, three customers accounted for 65% of
accounts receivable, while as of December 31, 1997, six customers accounted for
73% of accounts receivable.

Export revenue amounted to 3% and 31% of total revenue for the three months
ended March 31, 1998 and 1997, respectively. Substantially all of the Company's
export revenue is negotiated, invoiced and paid in U.S. dollars. Gross export
revenue by geographic area is summarized as follows:

                                                          Three Months Ended
                                                                March 31,
                                                         ----------------------
                                                             1998         1997
                                                             ----         ----
Europe and Middle East.................................. $  16,000    $  28,000
Asia and Pacific Region.................................     4,000       16,000
Canada, Mexico and others...............................     2,000        4,000



(5) NET LOSS PER SHARE:


For the three months ended March 31, 1998, net loss per share is computed using
the weighted average common shares outstanding during the period.  Common share
equivalents are not included in the net loss per share calculations, since they
are anti-dilutive.  Warrants and options to purchase common stock, 1,462,211
outstanding as of March 31, 1998, could potentially dilute basic earnings per
share in future periods if the Company generates net income.


For the three months ended March 31, 1997, the weighted average common shares
outstanding used in the net loss per share calculation is one-half of the
weighted average of Bio-Vascular common shares outstanding based on the
distribution of one share of the Company's common stock for each two shares of
Bio-Vascular's common stock pursuant to the Distribution.  Common share
equivalents are not included in the net loss per share calculation, since they
are anti-dilutive.

                                       7
<PAGE>
 
ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS


OVERVIEW


On May 12, 1997 (the "Distribution Date"), Bio-Vascular, the former parent
company of Vital Images, distributed all of the shares of Vital Images to the
shareholders of Bio-Vascular (the "Distribution"), and on that date Vital Images
began operating as an independent public company.  All Bio-Vascular shareholders
of record as of May 5, 1997 received one share of Vital Images common stock for
each two shares of Bio-Vascular stock held on that date, and cash in lieu of
fractional shares.

In anticipation of the Distribution, Bio-Vascular assigned to Vital Images,
$10,000,000 in cash, cash equivalents and marketable securities, effective
November 1, 1996.  On the Distribution Date, Bio-Vascular contributed to Vital
Images an additional $1,845,000 in cash equivalents in order to restore Vital
Images' cash, cash equivalents and marketable securities balance to $10,000,000.

On July 17, 1997, the Board of Directors of the Company adopted a resolution
changing the Company's fiscal year end from October 31 to December 31 of each
year.  This quarterly report on Form 10-Q contains unaudited financial
statements for the three months ended March 31, 1998 and the comparable period
of the prior calendar year.



COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1998 WITH THE THREE MONTHS ENDED
MARCH 31, 1997


Revenue was $766,000 compared to $156,000, a 391% increase.  This increase was
primarily the result of system and software revenue of $488,000 from shipments
of Vitrea, the Company's new medical visualization product released in October
of 1997.  It is expected that revenue will continue to increase in future
quarters due to increased sales of Vitrea software and systems.  However, actual
results could vary materially from the foregoing forward-looking statement as a
result of lower than expected demand for the Vitrea product or the timing of
future releases of Vitrea software.

The gross margin percentage decreased from 86% to 71%, primarily as a result of
Vitrea system sales increasing as a proportion of the Company's product mix.
The Vitrea system, consisting of Vitrea software and third party hardware and
peripherals, is designed to offer end users an integrated visualization system.
The Company receives only a nominal discount in purchasing the third party
hardware and peripheral components of the Vitrea system and the Company's gross
margin on the resale of these system components approximates its discount.  The
Company anticipates that as Vitrea systems continue as a significant proportion
of the Company's product mix, the overall gross margin percentage will
approximate the results of this quarter.  This forward-looking statement will be
influenced primarily by vendor discounts on the third party hardware and
peripheral components of the Vitrea system and on the Company's product mix.

                                       8
<PAGE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS-CONTINUED
--------------------------------------------------------------------------------


Sales and marketing expenses increased to $640,000 from $391,000, a 64%
increase.  The increase was primarily due to increased compensation costs,
including the addition of a Director of Sales in March 1998 and a full quarter
of compensation expense for the Vice President of Marketing and Business
Development hired in February 1997, increased costs due to increases in the
Company's customer support infrastructure, as well as travel expenses related to
the marketing and promotion of the Vitrea product.  The Company expects sales
and marketing costs to increase in future periods as a result of the cost of
additional sales and customer support personnel.

Research and development expenses increased 25% to $529,000 from $423,000.  The
increase was primarily due to increased compensation costs resulting from
increased staffing for the development of the Vitrea product.  In addition,
depreciation and other expenses related to staffing also increased due to
increased development efforts for Vitrea software.  The Company anticipates that
such costs will increase in future periods as future releases of Vitrea software
are developed, but at a rate less than the increase for the three months ended
March 31, 1998 as compared with the three months ended March 31, 1997.

General and administrative expenses increased from $307,000 to $600,000, a 95%
increase. The increase was primarily due to a charge of $180,000 in connection
with the resignation of the Company's former Chief Executive Officer.  In
addition, increases in the Company's administrative infrastructure, and the
incremental costs associated with becoming an independent public company
contributed to the increase in expenses.  During the three months ended 
March 31, 1997, the Company leased new corporate offices resulting in increased
rent expense, increased its purchases of property and equipment resulting in
increased depreciation, and incurred costs for legal and investor relations
expenses as a result of becoming an independent public company. Finally,
compensation costs increased as a result of increased staffing, including a full
quarter of compensation expense for the Chief Financial Officer hired in
February 1997. The Company believes that, excluding the $180,000 discussed
above, general and administrative costs will increase in future periods
primarily due to increased compensation expense for 1997 hires that will be
present for the entire year and administrative costs associated with being an
independent public company.

The increased expenses attributable to the continuing development of the
Company's management team and infrastructure and the development and promotion
of Vitrea, resulted in an operating loss of $1,222,000 for the three months
ended March 31, 1998, compared with an operating loss of $987,000 for the three
months ended March 31, 1997.

Interest income was $79,000 for the three months ended March 31, 1998 compared
with $114,000 for the comparable period in 1997.  The decrease in interest
income during the three months ended March 31, 1998 was due to a lower balance
of cash, cash equivalents and marketable securities as a result of the use of
cash to fund the Company's operations.

The income tax provisions for the three months ended March 31, 1998 and 1997
consist solely of certain state minimum fees. A valuation allowance has been
established to completely reserve for the deferred tax assets of the Company.

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


LIQUIDITY AND CAPITAL RESOURCES


In anticipation of the Distribution, Bio-Vascular assigned to Vital Images,
$10,000,000 in cash, cash equivalents and marketable securities, effective
November 1, 1996.  On the Distribution Date, Bio-Vascular contributed to Vital
Images an additional $1,845,000 in cash equivalents in order to restore Vital
Images' cash, cash equivalents and marketable securities balance to $10,000,000.

If the Company's operations progress as anticipated, of which there can be no
assurance, management believes that its cash, cash equivalents and marketable
securities should be sufficient to satisfy its cash requirements for at least
the next twelve months.  The timing of the Company's future capital
requirements, however, will depend on a number of factors, including the ability
and willingness of physicians to use three-dimensional visualization software in
clinical diagnosis, surgical planning patient screening and other diagnosis and
treatment protocols; the ability of the Company to build an effective sales and
distribution channel; the impact of competition in the medical visualization
business; and the ability to enhance existing products and develop new products
on a timely basis.  If the Company's operations do not progress as anticipated,
additional capital will be required sooner.  There can be no assurance that any
required additional capital will be available on acceptable terms or at all, and
the failure to obtain any such required capital would have a material adverse
effect on the Company's business.

For the three months ended March 31, 1998 and 1997, cash used by operating
activities was $863,000 and $839,000, respectively.  The Company invested
$63,000 and $142,000 in property and equipment during the three months ended
March 31, 1998 and 1997, respectively, primarily for the acquisition of computer
equipment. The Company used $3,717,000 to purchase marketable securities and had
$4,500,000 of marketable securities mature during the three months ended March
31, 1998.

The Company has no material commitments at this time other than facility leases
and expected employment contracts, but will be using cash in the near term as it
continues to develop the market for its products and its channels of
distribution.


FOREIGN CURRENCY TRANSACTIONS


Substantially all of the Company's foreign transactions are negotiated, invoiced
and paid in U.S. dollars.


YEAR 2000 ISSUES

Many computer systems experience problems handling dates beyond the year 1999. 
Therefore, some computer hardware and software will need to be modified prior to
the year 2000 in order to remain functional. The Company is assessing the
internal readiness of its computer systems and the compatibility of its products
sold to customers for handling the year 2000. In addition, the Company is
assessing the readiness of third-parties (e.g., customers and suppliers) which
interact with the Company's systems. The Company plans to devote the necessary
resources to resolve all significant year 2000 issues in a timely manner. Based
on management's current assessment, it does not believe that the cost of such
actions will have a material effect on the Company's results of operations or
financial condition, in part because the Company's principal product has only
recently been introduced and was developed to be year 2000 functional. However,
there can be no assurance that year 2000 issues will not arise which relate to
the Company's suppliers or the integration of the Company's products into the
systems of its customers.


NEW ACCOUNTING STANDARD


Effective January 1, 1998 the Company adopted Statement of Position 97-2,
Software Revenue Recognition ("SOP 97-2"), which provides guidance on applying
generally accepted accounting principles in recognizing revenue on software
transactions and supersedes SOP 91-1, Software Revenue Recognition. The adoption
of SOP 97-2 did not materially impact the Company's revenue recognition
practices, financial position or results of operations during the first quarter
of 1998 and would not have materially impacted the revenue recognition
practices, financial position or results of operations of the quarter ended
March 31, 1997.

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

CERTAIN IMPORTANT FACTORS

This Form 10-Q contains certain forward-looking statements and information that
are based on management's beliefs, as well as on assumptions made by, and upon
information currently available to, management.  When used in this Form 10-Q,
the words "expect," "anticipate," "intend," "plan," "believe," "seek," and
"estimate" or similar expressions are intended to identify such forward-looking
statements. However, this Form 10-Q also contains other forward-looking
statements.  Forward-looking statements are not guarantees of future performance
and are subject to certain risks, uncertainties and assumptions, including, but
not limited to, the following factors, which could cause the Company's future
results and shareholder values to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company: the early stage
of the industry and business in which the Company operates, the Company's
transition to an independent medical visualization business, the extent to which
the Company's products gain market acceptance, litigation regarding patent and
other intellectual property rights, the introduction of competitive products by
others, dependence on major customers, the progress of product development, the
availability of third-party reimbursement, and the receipt and timing of
regulatory approvals and other factors detailed from time to time in the
Company's filings with the Securities and Exchange Commission, including those
set forth under the heading "Important Factors" in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

                                       11
<PAGE>
 
_______________________________________________________________________________


                                 PART II.  OTHER INFORMATION

_______________________________________________________________________________

ITEM 1.     LEGAL PROCEEDINGS

None.


ITEM 2.    CHANGES IN SECURITIES

None.


ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.


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

None.


ITEM 5.    OTHER INFORMATION

None.

                                       12
<PAGE>
 
ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K



(a)  Exhibits.   The exhibits to this quarterly report on Form 10-Q are listed
     in the exhibit index beginning on page 15


(b)  Form 8-K. The Company filed no reports on Form 8-K during the three months
     ended March 31, 1998.

                                       13
<PAGE>
 
SIGNATURES



     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                                    VITAL IMAGES, INC.



May 12, 1998                 /s/  Gregory S. Furness
                             ------------------------------------------
                                  Gregory S. Furness
                                  Vice President of Finance and
                                  Chief Financial Officer
                                  (Principal Financial Officer)

                                       14
<PAGE>
 
VITAL IMAGES, INC.
INDEX TO EXHIBITS
--------------------------------------------------------------------------------


10.5  Incentive Stock Option Adjustment Plan (filed herewith electronically) (1)


10.10 Employee Stock Purchase Plan (filed herewith electronically) (2)

27.1  Financial Data Schedule for the Three Months Ended March 31, 1998 (filed
      herewith electronically)


      (1)  Document is being re-filed to replace and correct Exhibit 10.5 to the
           Company's Registration Statement on Form 10 (File No. 0-22229)

      (2)  Document is being re-filed to correct typographical error in
           authorized shares referred to in Exhibit 10.10 to the Company's
           Registration Statement on Form 10 (file No. 0-22229)



                                      15
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________________________________________________________________________________

                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  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 March 31, 1998
                                       OR
   [   ]  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 0-22229

              ___________________________________________________

                               VITAL IMAGES, INC.
             (Exact name of registrant as specified in its charter)

               MINNESOTA                                42-1321776
     (State or other jurisdiction of       (I.R.S. Employer Identification No.)
     incorporation or organization)

     3100 WEST LAKE STREET, SUITE 100                    55416
        MINNEAPOLIS, MINNESOTA                        (Zip Code)
          (Address of principal
            executive offices)

                                 (612) 915-8000
              (Registrant's telephone number, including area code)
              ___________________________________________________

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

              ___________________________________________________

On May 8, 1998, there were 4,815,486 shares of the Registrant's common stock,
par value $.01 per share, outstanding.

                                       1
VITAL IMAGES, INC.
                               ------------------
                                   FORM 10-Q
                                 MARCH 31, 1998

                               TABLE OF CONTENTS

                                        
                                                                           Page
                                                                          Number
                                                                          ------

PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements

                  Balance Sheets as of March 31, 1998 and December 31, 1997 ...3

                  Statements of Operations for the Three Months Ended
                     March 31, 1998 and 1997 ..................................4

                  Statements of Cash Flows for the Three Months Ended
                     March 31, 1998 and 1997 ..................................5

                  Notes to Financial Statements ...............................6

         Item 2.  Management's Discussion and Analysis of Financial
                     Condition and Results of Operations ......................8

PART II.  OTHER INFORMATION

         Item 6.  Exhibits and Reports on Form 8-K ...........................13

SIGNATURES ...................................................................14

INDEX TO EXHIBITS ............................................................15

                                       2
-------------------------------------------------------------------------------

                          PART I. FINANCIAL INFORMATION
-------------------------------------------------------------------------------

ITEM 1. FINANCIAL STATEMENTS

VITAL IMAGES, INC.
BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
----------------------------------------------------------------------------------------------------------------
                                                                              MARCH 31,           DECEMBER 31,
                                                                                 1998                 1997
                                                                             -----------          ------------
                                                                             (UNAUDITED)
ASSETS
Current assets:
     Cash and cash equivalents                                                $    314,382      $     448,377
     Marketable securities                                                       5,180,951          5,963,464
     Accounts receivable, net of allowance for doubtful accounts
      of $60,000 and $40,000 as of March 31, 1998 and December
      31, 1997, respectively                                                       391,493            581,130
     Prepaid expenses and other current assets                                     233,975            264,826
                                                                         -------------------- --------------------
         Total current assets                                                    6,120,801          7,257,797
Property and equipment, net                                                        941,810            997,947
Patent costs                                                                        40,267             40,267
                                                                         -------------------- --------------------
         TOTAL ASSETS                                                         $  7,102,878      $   8,296,011
                                                                         ==================== ====================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                         $    252,323      $     203,579
     Accrued payroll                                                               191,635            322,572
     Deferred revenue                                                              235,412            212,556
     Other current liabilities                                                     125,823            104,003
                                                                         -------------------- --------------------
         Total current liabilities                                                 805,193            842,710
Deferred revenue                                                                   180,992            200,107
                                                                         -------------------- --------------------
         Total liabilities                                                         986,185          1,042,817

Shareholders' equity:
    Preferred stock: authorized 5,000,000 shares of $.01 par value;
     none issued or outstanding as of March 31, 1998 and December 31,        
     1997                                                                           -                  -
    Common stock: authorized 20,000,000 shares of $.01 par
     value; issued and outstanding, 4,812,201 shares as of March
     31, 1998 and 4,806,561 shares as of December 31, 1997                          48,122             48,066
    Additional paid-in capital                                                  18,016,146         18,006,824
    Accumulated deficit                                                        (11,947,575)       (10,801,696)
                                                                         -------------------- --------------------
         Total shareholders' equity                                              6,116,693          7,253,194
                                                                         -------------------- --------------------

         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           $  7,102,878      $   8,296,011
                                                                         ==================== ====================
(The accompanying notes are an integral part of the interim financial
statements.)

                                       3
VITAL IMAGES, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
-------------------------------------------------------------------------------------------------------------------
                                                                                        FOR THE THREE
                                                                                        MONTHS ENDED
                                                                                          MARCH 31,
                                                                               1998                     1997
                                                                               ----                     ----
                                                                                         (UNAUDITED)
Revenue:
     License fees                                                          $     472,853           $       76,999
     Maintenance and services                                                     93,680                   79,089
     Hardware                                                                    199,332                     -
                                                                         ------------------      --------------------
         Total revenue                                                           765,865                  156,088

Cost of revenue:
     License fees                                                                 36,446                   21,833
     Maintenance and services                                                     24,411                     -
     Hardware                                                                    158,020                     -
                                                                         ------------------      --------------------
         Total cost of revenue                                                   218,877                   21,833

              Gross margin                                                       546,988                  134,255

Operating expenses:
     Sales and marketing                                                         639,714                  390,822
     Research and development                                                    529,321                  423,186
     General and administrative                                                  600,135                  307,086
                                                                         ------------------      --------------------
         Total operating expenses                                              1,769,170                1,121,094

              Operating loss                                                  (1,222,182)                (986,839)

Interest income                                                                   79,421                  114,179
                                                                         ------------------      --------------------

Loss before income taxes                                                      (1,142,761)                (872,660)
Income taxes                                                                       3,118                      500
                                                                         ------------------      --------------------

Net loss                                                                   $  (1,145,879)             $  (873,160)
                                                                         ==================      ====================

Net loss per share - basic and diluted                                     $       (0.24)             $     (0.18)
                                                                         ==================      ====================

Weighted average common shares outstanding - basic and diluted                 4,804,736                4,750,578
                                                                         ==================      ====================
(The accompanying notes are an integral part of the interim financial
statements.)

                                       4
VITAL IMAGES, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
-----------------------------------------------------------------------------------------------------------------------
                                                                                          FOR THE THREE
                                                                                          MONTHS ENDED
                                                                                            MARCH 31,
                                                                                  1998                     1997
                                                                                  ----                     ----
                                                                                           (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                  $(1,145,879)           $     (873,160)
     Adjustments to reconcile net loss to net cash used in operating
     activities:
         Depreciation and amortization                                             118,740                    57,326
         Stock-based compensation                                                    -                        30,300
         Provision for uncollectible accounts receivable                            20,000                       952
         Changes in operating assets and liabilities:
             Accounts receivable                                                   169,637                     6,604
             Prepaid expenses and other current assets                              30,851                    36,726
             Accounts payable                                                       48,744                   (26,671)
             Deferred revenue                                                        3,741                   (73,765)
             Accrued payroll and other liabilities                                (109,117)                    2,974
                                                                          ---------------------    ---------------------
                Net cash used in operating activities                             (863,283)                 (838,714)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Additions to property and equipment                                           (62,603)                 (141,649)
     Additions to patent costs                                                       -                        (3,048)
     Investments in marketable securities                                       (3,717,487)                     -
     Maturities of marketable securities                                         4,500,000                      -
                                                                          ---------------------    ---------------------
                Net cash provided by (used in) investing activities                719,910                  (144,697)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net investment by Bio-Vascular                                                  -                        (3,205)
     Purchases of common stock under Employee Stock Purchase Plan                    9,378                      -
                                                                          ---------------------    ---------------------
                Net cash provided by (used in) financing activities                  9,378                    (3,205)

NET DECREASE IN CASH AND CASH EQUIVALENTS                                         (133,995)                 (986,616)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                     448,377                 6,481,067
                                                                          ---------------------    ---------------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                      $    314,382            $    5,494,451
                                                                          =====================    =====================
(The accompanying notes are an integral part of the interim financial
statements.)

                                       5
VITAL IMAGES, INC.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

(1) BASIS OF PRESENTATION:

The accompanying unaudited financial statements of Vital Images, Inc. ("Vital
Images" or the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.  In the
opinion of management, all adjustments considered necessary, including items of
a normal recurring nature, for a fair presentation have been included. Operating
results for the three months ended March 31, 1998 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1998.
These financial statements should be read in conjunction with the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.

(2) SPIN-OFF OF VITAL IMAGES:

On May 12, 1997, Bio-Vascular, Inc. ("Bio-Vascular"), the former parent company
of Vital Images, distributed all of the shares of Vital Images to the
shareholders of Bio-Vascular (the "Distribution"), and on that date Vital Images
began operating as an independent public company.  All Bio-Vascular shareholders
of record as of May 5, 1997 received one share of Vital Images common stock for
each two shares of Bio-Vascular stock held on that date, and cash in lieu of
fractional shares.

(3) REVENUE RECOGNITION:

Effective January 1, 1998 the Company adopted Statement of Position 97-2,
Software Revenue Recognition ("SOP 97-2"), which provides guidance on applying
generally accepted accounting principles in recognizing revenue on software
transactions and supersedes SOP 91-1, Software Revenue Recognition. The adoption
of SOP 97-2 did not materially impact the Company's revenue recognition
practices, financial position or results of operations during the first quarter
of 1998 and would not have materially impacted the revenue recognition
practices, financial position or results of operations of the quarter ended
March 31, 1997.

                                       6
VITAL IMAGES, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
--------------------------------------------------------------------------------

(4) MAJOR CUSTOMERS AND GEOGRAPHIC DATA:
Percentage of
                                            Significant                                Accounts
                                             Customer                  Revenue        Receivable
                                             --------                  -------        ----------
Three months ended               Toshiba America Medical Systems,     $ 329,000          39%
  March 31, 1998                               Inc.
                                    CogniSeis Development, Inc.       $ 153,000           -

Three months ended                Duke University Medical Center      $  18,000           4%
  March 31, 1997
The Company's accounts receivable are generally concentrated with a small base
of customers. As of March 31, 1998, three customers accounted for 65% of
accounts receivable, while as of December 31, 1997, six customers accounted for
73% of accounts receivable.

Export revenue amounted to 3% and 31% of total revenue for the three months
ended March 31, 1998 and 1997, respectively. Substantially all of the Company's
export revenue is negotiated, invoiced and paid in U.S. dollars. Gross export
revenue by geographic area is summarized as follows:

                                                          Three Months Ended
                                                                March 31,
                                                         ----------------------
                                                             1998         1997
                                                             ----         ----
Europe and Middle East.................................. $  16,000    $  28,000
Asia and Pacific Region.................................     4,000       16,000
Canada, Mexico and others...............................     2,000        4,000

(5) NET LOSS PER SHARE:

For the three months ended March 31, 1998, net loss per share is computed using
the weighted average common shares outstanding during the period.  Common share
equivalents are not included in the net loss per share calculations, since they
are anti-dilutive.  Warrants and options to purchase common stock, 1,462,211
outstanding as of March 31, 1998, could potentially dilute basic earnings per
share in future periods if the Company generates net income.

For the three months ended March 31, 1997, the weighted average common shares
outstanding used in the net loss per share calculation is one-half of the
weighted average of Bio-Vascular common shares outstanding based on the
distribution of one share of the Company's common stock for each two shares of
Bio-Vascular's common stock pursuant to the Distribution.  Common share
equivalents are not included in the net loss per share calculation, since they
are anti-dilutive.

                                       7
ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS

OVERVIEW

On May 12, 1997 (the "Distribution Date"), Bio-Vascular, the former parent
company of Vital Images, distributed all of the shares of Vital Images to the
shareholders of Bio-Vascular (the "Distribution"), and on that date Vital Images
began operating as an independent public company.  All Bio-Vascular shareholders
of record as of May 5, 1997 received one share of Vital Images common stock for
each two shares of Bio-Vascular stock held on that date, and cash in lieu of
fractional shares.

In anticipation of the Distribution, Bio-Vascular assigned to Vital Images,
$10,000,000 in cash, cash equivalents and marketable securities, effective
November 1, 1996.  On the Distribution Date, Bio-Vascular contributed to Vital
Images an additional $1,845,000 in cash equivalents in order to restore Vital
Images' cash, cash equivalents and marketable securities balance to $10,000,000.

On July 17, 1997, the Board of Directors of the Company adopted a resolution
changing the Company's fiscal year end from October 31 to December 31 of each
year.  This quarterly report on Form 10-Q contains unaudited financial
statements for the three months ended March 31, 1998 and the comparable period
of the prior calendar year.

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1998 WITH THE THREE MONTHS ENDED
MARCH 31, 1997

Revenue was $766,000 compared to $156,000, a 391% increase.  This increase was
primarily the result of system and software revenue of $488,000 from shipments
of Vitrea, the Company's new medical visualization product released in October
of 1997.  It is expected that revenue will continue to increase in future
quarters due to increased sales of Vitrea software and systems.  However, actual
results could vary materially from the foregoing forward-looking statement as a
result of lower than expected demand for the Vitrea product or the timing of
future releases of Vitrea software.

The gross margin percentage decreased from 86% to 71%, primarily as a result of
Vitrea system sales increasing as a proportion of the Company's product mix.
The Vitrea system, consisting of Vitrea software and third party hardware and
peripherals, is designed to offer end users an integrated visualization system.
The Company receives only a nominal discount in purchasing the third party
hardware and peripheral components of the Vitrea system and the Company's gross
margin on the resale of these system components approximates its discount.  The
Company anticipates that as Vitrea systems continue as a significant proportion
of the Company's product mix, the overall gross margin percentage will
approximate the results of this quarter.  This forward-looking statement will be
influenced primarily by vendor discounts on the third party hardware and
peripheral components of the Vitrea system and on the Company's product mix.

                                       8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS-CONTINUED
--------------------------------------------------------------------------------

Sales and marketing expenses increased to $640,000 from $391,000, a 64%
increase.  The increase was primarily due to increased compensation costs,
including the addition of a Director of Sales in March 1998 and a full quarter
of compensation expense for the Vice President of Marketing and Business
Development hired in February 1997, increased costs due to increases in the
Company's customer support infrastructure, as well as travel expenses related to
the marketing and promotion of the Vitrea product.  The Company expects sales
and marketing costs to increase in future periods as a result of the cost of
additional sales and customer support personnel.

Research and development expenses increased 25% to $529,000 from $423,000.  The
increase was primarily due to increased compensation costs resulting from
increased staffing for the development of the Vitrea product.  In addition,
depreciation and other expenses related to staffing also increased due to
increased development efforts for Vitrea software.  The Company anticipates that
such costs will increase in future periods as future releases of Vitrea software
are developed, but at a rate less than the increase for the three months ended
March 31, 1998 as compared with the three months ended March 31, 1997.

General and administrative expenses increased from $307,000 to $600,000, a 95%
increase. The increase was primarily due to a charge of $180,000 in connection
with the resignation of the Company's former Chief Executive Officer.  In
addition, increases in the Company's administrative infrastructure, and the
incremental costs associated with becoming an independent public company
contributed to the increase in expenses.  During the three months ended 
March 31, 1997, the Company leased new corporate offices resulting in increased
rent expense, increased its purchases of property and equipment resulting in
increased depreciation, and incurred costs for legal and investor relations
expenses as a result of becoming an independent public company. Finally,
compensation costs increased as a result of increased staffing, including a full
quarter of compensation expense for the Chief Financial Officer hired in
February 1997. The Company believes that, excluding the $180,000 discussed
above, general and administrative costs will increase in future periods
primarily due to increased compensation expense for 1997 hires that will be
present for the entire year and administrative costs associated with being an
independent public company.

The increased expenses attributable to the continuing development of the
Company's management team and infrastructure and the development and promotion
of Vitrea, resulted in an operating loss of $1,222,000 for the three months
ended March 31, 1998, compared with an operating loss of $987,000 for the three
months ended March 31, 1997.

Interest income was $79,000 for the three months ended March 31, 1998 compared
with $114,000 for the comparable period in 1997.  The decrease in interest
income during the three months ended March 31, 1998 was due to a lower balance
of cash, cash equivalents and marketable securities as a result of the use of
cash to fund the Company's operations.

The income tax provisions for the three months ended March 31, 1998 and 1997
consist solely of certain state minimum fees. A valuation allowance has been
established to completely reserve for the deferred tax assets of the Company.

                                       9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED
--------------------------------------------------------------------------------

LIQUIDITY AND CAPITAL RESOURCES

In anticipation of the Distribution, Bio-Vascular assigned to Vital Images,
$10,000,000 in cash, cash equivalents and marketable securities, effective
November 1, 1996.  On the Distribution Date, Bio-Vascular contributed to Vital
Images an additional $1,845,000 in cash equivalents in order to restore Vital
Images' cash, cash equivalents and marketable securities balance to $10,000,000.

If the Company's operations progress as anticipated, of which there can be no
assurance, management believes that its cash, cash equivalents and marketable
securities should be sufficient to satisfy its cash requirements for at least
the next twelve months.  The timing of the Company's future capital
requirements, however, will depend on a number of factors, including the ability
and willingness of physicians to use three-dimensional visualization software in
clinical diagnosis, surgical planning patient screening and other diagnosis and
treatment protocols; the ability of the Company to build an effective sales and
distribution channel; the impact of competition in the medical visualization
business; and the ability to enhance existing products and develop new products
on a timely basis.  If the Company's operations do not progress as anticipated,
additional capital will be required sooner.  There can be no assurance that any
required additional capital will be available on acceptable terms or at all, and
the failure to obtain any such required capital would have a material adverse
effect on the Company's business.

For the three months ended March 31, 1998 and 1997, cash used by operating
activities was $863,000 and $839,000, respectively.  The Company invested
$63,000 and $142,000 in property and equipment during the three months ended
March 31, 1998 and 1997, respectively, primarily for the acquisition of computer
equipment. The Company used $3,717,000 to purchase marketable securities and had
$4,500,000 of marketable securities mature during the three months ended March
31, 1998.

The Company has no material commitments at this time other than facility leases
and expected employment contracts, but will be using cash in the near term as it
continues to develop the market for its products and its channels of
distribution.

FOREIGN CURRENCY TRANSACTIONS

Substantially all of the Company's foreign transactions are negotiated, invoiced
and paid in U.S. dollars.

YEAR 2000 ISSUES

Many computer systems experience problems handling dates beyond the year 1999. 
Therefore, some computer hardware and software will need to be modified prior to
the year 2000 in order to remain functional. The Company is assessing the
internal readiness of its computer systems and the compatibility of its products
sold to customers for handling the year 2000. In addition, the Company is
assessing the readiness of third-parties (e.g., customers and suppliers) which
interact with the Company's systems. The Company plans to devote the necessary
resources to resolve all significant year 2000 issues in a timely manner. Based
on management's current assessment, it does not believe that the cost of such
actions will have a material effect on the Company's results of operations or
financial condition, in part because the Company's principal product has only
recently been introduced and was developed to be year 2000 functional. However,
there can be no assurance that year 2000 issues will not arise which relate to
the Company's suppliers or the integration of the Company's products into the
systems of its customers.

NEW ACCOUNTING STANDARD

Effective January 1, 1998 the Company adopted Statement of Position 97-2,
Software Revenue Recognition ("SOP 97-2"), which provides guidance on applying
generally accepted accounting principles in recognizing revenue on software
transactions and supersedes SOP 91-1, Software Revenue Recognition. The adoption
of SOP 97-2 did not materially impact the Company's revenue recognition
practices, financial position or results of operations during the first quarter
of 1998 and would not have materially impacted the revenue recognition
practices, financial position or results of operations of the quarter ended
March 31, 1997.

                                       10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--CONTINUED
--------------------------------------------------------------------------------

CERTAIN IMPORTANT FACTORS

This Form 10-Q contains certain forward-looking statements and information that
are based on management's beliefs, as well as on assumptions made by, and upon
information currently available to, management.  When used in this Form 10-Q,
the words "expect," "anticipate," "intend," "plan," "believe," "seek," and
"estimate" or similar expressions are intended to identify such forward-looking
statements. However, this Form 10-Q also contains other forward-looking
statements.  Forward-looking statements are not guarantees of future performance
and are subject to certain risks, uncertainties and assumptions, including, but
not limited to, the following factors, which could cause the Company's future
results and shareholder values to differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company: the early stage
of the industry and business in which the Company operates, the Company's
transition to an independent medical visualization business, the extent to which
the Company's products gain market acceptance, litigation regarding patent and
other intellectual property rights, the introduction of competitive products by
others, dependence on major customers, the progress of product development, the
availability of third-party reimbursement, and the receipt and timing of
regulatory approvals and other factors detailed from time to time in the
Company's filings with the Securities and Exchange Commission, including those
set forth under the heading "Important Factors" in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

                                       11
_______________________________________________________________________________

                                 PART II.  OTHER INFORMATION

_______________________________________________________________________________

ITEM 1.     LEGAL PROCEEDINGS

None.

ITEM 2.    CHANGES IN SECURITIES

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.    OTHER INFORMATION

None.

                                       12
ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits.   The exhibits to this quarterly report on Form 10-Q are listed
     in the exhibit index beginning on page 15

(b)  Form 8-K. The Company filed no reports on Form 8-K during the three months
     ended March 31, 1998.

                                       13
SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                    VITAL IMAGES, INC.

May 12, 1998                 /s/  Gregory S. Furness
                             ------------------------------------------
                                  Gregory S. Furness
                                  Vice President of Finance and
                                  Chief Financial Officer
                                  (Principal Financial Officer)

                                       14
VITAL IMAGES, INC.
INDEX TO EXHIBITS
--------------------------------------------------------------------------------

10.5  Incentive Stock Option Adjustment Plan (filed herewith electronically) (1)

10.10 Employee Stock Purchase Plan (filed herewith electronically) (2)

27.1  Financial Data Schedule for the Three Months Ended March 31, 1998 (filed
      herewith electronically)

      (1)  Document is being re-filed to replace and correct Exhibit 10.5 to the
           Company's Registration Statement on Form 10 (File No. 0-22229)

      (2)  Document is being re-filed to correct typographical error in
           authorized shares referred to in Exhibit 10.10 to the Company's
           Registration Statement on Form 10 (file No. 0-22229)

                                      15