================================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-K/A
                                 Amendment No. 1

[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
     1934 For the fiscal year ended May 31, 2006

[ ]  TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 For the transition period from _____ to _____

                           Commission File No. 0-18105

                          -----------------------------
                                VASOMEDICAL, INC.
             (Exact name of registrant as specified in its charter)

             Delaware                                      11-2871434
   (State or other jurisdiction of                       (IRS Employer
    incorporation or organization)                     Identification No.)

  180 Linden Avenue, Westbury, New York                     11590
(Address of Principal Executive Offices)                 (Zip Code)

       Registrant's telephone number, including area code: (516) 997-4600

           Securities registered under Section 12(b) of the Act: None

              Securities registered under Section 12(g) of the Act:
                          Common Stock, $.001 par value
                                (Title of Class)

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [ X ]

Indicate by a 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 [    ]

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ X ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer.  Large  Accelerated  Filer [ ]
Accelerated Filer [ ] Non-Accelerated Filer [ X ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant (based on the closing sale price of $0.42 as of
November 30, 2005, was approximately $23,831,000. Shares of common stock held by
each officer and director and by each person wh o owns 5% or more of the
outstanding common stock have been excluded in that such persons may be deemed
to be affiliates. The determination of affiliates status is not necessarily a
conclusive determination for other purposes.

At August 16, 2006,  the number of shares  outstanding  of the  issuer's  common
stock was 65,198,592.
<PAGE>
                       DOCUMENTS INCORPORATED BY REFERENCE

None


                                EXPLANATORY NOTE

     Vasomedical,  Inc.  (the  "Company,"  "we,"  "us," or "our") is filing this
Amendment  No. 1 on Form  10-K/A to our Report on Form 10-K for the fiscal  year
ended May 31, 2006 (the "Report") for the purpose of including  information that
was to be incorporated by reference from our definitive proxy statement pursuant
to  Regulation  14A of the  Securities  Exchange Act of 1934,  as amended,  (the
"Exchange  Act").  We will not file our proxy  statement  within 120 days of our
fiscal year ended May 31, 2006,  and are,  therefore,  amending and restating in
their entirety Items 10, 11, 12, 13 and 14 of Part III of the Report.

     Except as  described  above,  no other  amendments  are being  made to this
Report.  This Form 10-K/A does not reflect events occurring after the August 28,
2006 filing of our Report or modify or update the  disclosure  contained  in the
Report in any way other than as  required to reflect  the  amendments  discussed
above and reflected below.

     This amendment should be read in conjunction with our Annual Report for the
year ended May 31, 2006 filed on Form 10-K on August 28, 2006.

<PAGE>


                               INDEX TO FORM 10-K


<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                              ----
                                    PART III

<S>           <C>                                                                                               <C>
Item 10.      Directors and Executive Officers of the Registrant................................................1
Item 11.      Executive Compensation............................................................................3
Item 12.      Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...5
Item 13.      Certain Relationships and Related Transactions....................................................8
Item 14.      Principal Accountant Fees and Services............................................................8
</TABLE>

<PAGE>
                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors of the Registrant
<TABLE>
<CAPTION>
                                                                                                Director
        Name of Director               Age                Principal Occupation                    Since
---------------------------------     -------     --------------------------------------    -----------------
<S>                                     <C>       <C>                                       <C>
Abraham E. Cohen (5)                    70        Chairman, Independent consultant          June 1993
Thomas Glover                           52        President and Chief Executive Officer     October 2004
John C.K. Hui, PhD(4)                   60        Chief Technology Officer                  February 1995
Photios T. Paulson (1)(2)(3)            67        Independent consultant                    April 2000
Kenneth W. Rind, PhD(1)(4)              71        Independent consultant                    February 1995
Martin Zeiger (2)(3)(4)                 69        Independent consultant                    October 2001
    -----------------
<FN>

(1)  Member of the Executive Committee
(2)  Member of the Audit Committee
(3)  Member of Compensation Committee
(4)  Member of the Corporate Governance Committee
(5)  Ex-officio member of all committees
</FN>
</TABLE>
     The  following is a brief account of the business  experience  for at least
the past five years of our directors:

     Abraham E. Cohen has been our  Chairman of the Board since June 1994 and is
presently an independent consultant. He retired in 1992 as Senior Vice President
of Merck & Co.,  Inc., a position he was elected to in 1985.  From 1979 to 1989,
Mr. Cohen was also President of Merck Sharp & Dohme International, a division of
Merck & Co.,  Inc. Mr. Cohen is a director of the  following  public  companies:
Akzo Nobel Nv., Chugai Pharmaceutical Co., Ltd.,  Neurobiological  Technologies,
Inc. and Teva Pharmaceutical Industries, Ltd.

     Thomas Glover has been President and Chief Executive Officer and a director
since  October  2004.  Prior to joining  Vasomedical,  Mr. Glover was the acting
President and CEO and advisor to Incappe,  Inc. a privately  held medical device
company.  He was the  President  and CEO of  Vasca,  Inc.  from 1999 to 2003 and
served as Executive Vice President, Johnson and Johnson Professional,  Inc. from
1997 to 1999.  From 1983 to 1996,  Mr. Glover held several  executive  positions
with  responsibility  for U.S and  international  business  for  Davis  and Geck
(American Cyanamid  Company/American Home Products).  He is currently a director
of Incappe, Inc.

     John C.K. Hui, PhD, our Chief Technology  Officer,  has been a director and
Senior  Vice  President  since  February  1995.  Dr.  Hui has been an  Assistant
Professor in the  Department  of Surgery and Division of Cardiology at the State
University of Stony Brook,  New York since 1978. He has also been a scientist in
the medical department of Brookhaven National Laboratories.  Dr. Hui was CEO and
president of and a principal stockholder in Vasogenics,  Inc. at the time of its
acquisition by us in January 1995.

     Photios T.  Paulson has been a director  since April 2000 and has served as
our Chief  Executive  Officer from October 2002 through June 2003 and from March
to October 2004. Mr. Paulson has been an advisor to the health care industry and
was Vice President of bioMerieux  N.A. Inc. from 1995 to 2002.  Between 1992 and
1995, Mr. Paulson was Chairman of bioMerieux  Vitek Inc.  Between 1987 and 1990,
he was Senior  Advisor,  Health Care Industry,  for Prudential  Securities.  Mr.
Paulson  previously  held senior  positions  with Becton  Dickinson  and Company
through 1987.  Mr.  Paulson is a director of  bioMerieux  N.A. Inc. and Silliker
Group Inc.

     Kenneth W. Rind,  PhD has been Chairman of Oxford Venture  Corporation,  an
independent  venture  capital  company,  since  1981 and in 1998 was a  founding
General Partner of Israel  Infinity  Venture  Capital Fund.  Previously,  he was
responsible  for   acquisitions   and  venture  capital   investments  at  Xerox
Development  Corporation  and in  charge of  technology  investment  banking  at
Oppenheimer  & Co.,  Inc.  (now  CIBC).  He is a  director  of  several  private
companies.

                                       1
<PAGE>
     Martin Zeiger is an independent consultant to the pharmaceutical  industry.
Mr. Zeiger was Senior Vice President of Strategic Business  Development for Barr
Laboratories,  a drug  manufacturer,  from 1999 through  August 2003.  From 1987
through 1999, Mr. Zeiger was Executive  Vice  President and General  Counsel for
Rugby Laboratories. In 1993 Marion Merrill Dow acquired Rugby Laboratories.  Mr.
Zeiger was a Vice  President  of Marion  Merrill  Dow,  Inc.  and its  successor
Hoechst  Marion  Roussell,  Inc. Mr. Zeiger is a member of the Heritage Board of
Directors of the American Heart  Association in New York and a founding director
of the Larry King Cardiac Foundation.
<TABLE>
<CAPTION>
Executive Officers of the Registrant

        Name of Officer                Age           Position held with the Company
---------------------------------     -------     --------------------------------------
<S>                                     <C>       <C>
Thomas Glover                           52        President and Chief Executive Officer
John C.K. Hui, PhD                      60        Chief Technology Officer
Tricia Efstathiou                       35        Chief Financial Officer
</TABLE>

     Tricia  Efstathiou was appointed Chief Financial  Officer of the Company on
September 20, 2006. Prior thereto,  Ms.  Efstathiou  served as Controller of the
Company since June 2000.


Committees of the Board of Directors

Executive Committee

         Abraham E. Cohen
         Photios T. Paulson
         Kenneth W. Rind

Audit Committee

         Photios T. Paulson
         Martin Zeiger

Compensation Committee

         Photios T. Paulson
         Martin Zeiger

Corporate Governance Committee

         John C. K. Hui
         Kenneth W. Rind
         Martin Zeiger

Compliance  with  Section  16(a)  of  The  Securities  Exchange  Act  of  1934 -
Beneficial Ownership Reporting Compliance

     Section 16(a) of the  Securities  Exchange Act of 1934 requires  directors,
executive  officers and persons who beneficially own more than 10% of our common
stock  (collectively,  "Reporting Persons") to file initial reports of ownership
and reports of changes in ownership of our common stock with the  Securities and
Exchange  Commission.  Reporting  Persons  are  required by SEC  regulations  to
furnish us with copies of all Section 16(a) reports they file. To our knowledge,
based  solely on our review of the copies of such  reports  received  or written
representations  from  certain  Reporting  Persons  that no other  reports  were
required,  we believe that during  fiscal 2006,  all  Reporting  Persons  timely
complied with all applicable filing requirements.

                                       2
<PAGE>

Corporate Governance - Code of Ethics

     We have  adopted a Corporate  Code of Business  Ethics  (the  "Code")  that
applies to all employees,  including our principal executive officer,  principal
financial officer,  and directors of the Company. The Code is broad in scope and
is intended to foster honest and ethical conduct,  including  accurate financial
reporting,  compliance with laws and the like. If any substantive amendments are
made to the Code or if there is any  grant of  waiver,  including  any  implicit
waiver,  from a provision  of the Code to our Chief  Executive  Officer or Chief
Financial Officer,  we will disclose the nature of such amendment or waiver in a
report on Form 8-K.

ITEM 11 - EXECUTIVE COMPENSATION

     The following table sets forth the annual and long-term compensation of our
Chief Executive Officer and each of our most highly  compensated  officers other
than the Chief Executive  Officer who were serving as executive  officers at the
end of the last completed fiscal year, and certain former executive  officers as
required  under SEC rules  (collectively,  the "Named  Executive  Officers") for
services rendered for the fiscal years ended May 31, 2006, 2005 and 2004.
<TABLE>
<CAPTION>
                           Summary Compensation Table

                                                                                     Long-Term Compensation
                                                                             ------------------------------------
                                               Annual Compensation                    Award             Payouts
                                     --------------------------------------- ------------------------- ----------
                                                                   Other                    Shares     Long-Term    All
                                                                   Annual     Restricted  Covered By   Incentive   Other
                                                                 Compensa-       Stock      Option       Plan    Compensation
Name and Principal Position    Year   Salary (2)      Bonus         tion        Awards      Grants      Payout       (1)
---------------------------- --------------------- ------------ ------------ ------------ ------------ ---------- -----------
<S>                            <C>     <C>             <C>              <C>           <C>  <C>               <C>    <C>
Photios T. Paulson (3)         2006          --            --           --           --            -         --         --
Former CEO                     2005    $114,583            --           --           --      100,000         --     $6,006
                               2004     $20,833            --           --           --       25,000         --       $106

Thomas Glover (4)              2006    $260,000            --           --           --      391,228         --    $14,574
President and CEO              2005    $161,667            --           --           --    1,000,000         --     $4,166

John C. K. Hui                 2006    $159,510            --           --           --      269,558               $20,466
Senior VP, CTO                 2005    $155,500            --           --           --       50,000         --    $18,939
                               2004    $150,000       $25,000           --           --           --         --    $16,756

Thomas W. Fry                  2006    $159,510            --           --           --      308,244         --     $2,313
CFO                            2005    $155,500            --           --           --       50,000         --     $2,147
                               2004    $109,712       $33,333           --           --      100,000         --     $3,000
<FN>
     (1)  Represents premiums paid on medical, dental, life and disability group
          benefit  plans,  as well as amounts  matched in the  Company's  401(k)
          Plan.
     (2)  Includes  amounts  deferred in FY2006 under the Deferred  Compensation
          Plan for Mr.  Glover,  Dr. Hui and Mr.  Fry of  $26,667,  $20,000  and
          $13,333, respectively.
     (3)  The Board of Directors appointed Photios T. Paulson as Chief Executive
          Officer in October  2002.  Mr.  Paulson  resigned  his  position as an
          officer on June 30, 2003 and was reappointed  Chief Executive  Officer
          in March 2004 and resigned as of October 2004 upon the  appointment of
          Thomas Glover as President  and Chief  Executive  Officer.  (4) Thomas
          Glover was appointed  President and Chief Executive Officer on October
          4, 2004.
</FN>
</TABLE>
                                       3
<PAGE>
Option/SAR Grants in Last Fiscal Year

         The following table sets forth the number of options granted to our
named executive officers during the fiscal year ended May 31, 2006.
<TABLE>
<CAPTION>
                                                                                            Potential Realizable
                                                                                          Value at Assumed Annual
                                                                                               Rates of Price
                                                 Individual Grants                        Appreciation for Option
                                                                                                    Term
                             ---------------------------------------------------------------------------------------
                                   Total
                                Number of
                               Securities        % of
                               Underlying   Options/SARs to  Exercise or
                               Options/SAR   Employees in    Base Price     Expiration
Name                           Granted (#)  Fiscal Year (3)  ($/Share)        Date            5%          10%
                               -----------  ---------------  ----------     ----------       ----         ---

                                     Share)

<S>                               <C>            <C>            <C>         <C>             <C>           <C>
Thomas Glover (1)                 391,228        11.8%          $0.30       Various         $74,207       $188,058
Thomas W. Fry (2)                 308,244         9.3%          $0.35       Various         $66,975       $169,730
John C. K. Hui (2)                269,558         8.1%          $0.31       Various         $52,855       $133,949
<FN>


     (1)  Represents ten-year,  non-qualified stock options under the 1997 Stock
          Option  Plan and 1999 Stock  Option Plan that vest  equally  over four
          years  commencing  on October 4, 2004,  granted to Mr. Glover upon his
          appointment as the President and Chief Executive Officer. Such vesting
          is dependent upon continued service to the Company.
     (2)  Represents ten-year,  non-qualified stock options under the 1999 Stock
          Option Plan that vest equally over four years  commencing  on July 13,
          2004. Such vesting is dependent upon continued service to the Company.
     (3)  Percentages  based  upon  1,818,000  shares  issued to  employees  and
          officers of the Company during the fiscal year.
</FN>
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and F/Y-End Option Values

     The following table sets forth  information for each of the named executive
officers with respect to the value of options or warrants  exercised  during the
fiscal  year ended May 31,  2006 and the value of  outstanding  and  unexercised
options or warrants held as of May 31, 2006,  based upon the market value of the
common stock of $0.11 per share on that date.
<TABLE>
<CAPTION>
                                                                                       Value of Unexercised
                                                           Number of Options at        In-the-Money Options
                                                             Fiscal Year End          at Fiscal Year End (2)
                             Shares Acquired    Value        ---------------          ----------------------
Name                         on Exercise (#)  Realized (1) Exercisable Unexercisable Exercisable Unexercisable
----                         ---------------  ------------ ------------------------- -------------------------

<S>                                 <C>            <C>       <C>            <C>           <C>          <C>
Thomas Glover                       --             --        1,391,228      --            --           --
John C. K. Hui                      --             --          964,558      --            --           --
Thomas W. Fry                       --             --          458,244      --            --           --
<FN>
     (1) Represents the difference between the closing price of the common stock
         and the exercise price of the options on the date of exercise
         multiplied by the number of shares acquired upon exercise. The
         calculation does not reflect the effects of any income taxes that may
         be due on the value realized.

     (2) Represents the difference between the closing market price of the
         common stock at May 31, 2006 of $0.11 per share and the exercise price
         per share multiplied by the number of in-the-money options at May 31,
         2006.
</FN>
</TABLE>
Deferred Compensation Program

         In April 2006, the Company approved a program to defer compensation of
certain senior executives of the company and provided incentives to them for
these deferrals. The Company agreed to repay monies deferred from zero to six
months at 1.5 times the amount deferred; for deferrals of six months to twelve

                                       4
<PAGE>

months, the repaid amount shall be two times the amount deferred; and for
deferrals in excess of twelve months, the amount shall be 2.5 times the amount
deferred. In addition, payment of board of directors meeting fees were deferred
until a later date.

Employment Agreements

     In December 2005, the Company entered into an agreement with Thomas W. Fry,
Chief  Financial  Officer of the company,  which  entitled him to twelve  months
salary in the event of his termination without cause. On September 20, 2006, Mr.
Fry  resigned  as Chief  Financial  Officer of the  Company  and his  employment
agreement  was  terminated.  Mr. Fry  continues  to act as a  consultant  to the
Company.

     Thomas Glover,  President and Chief Executive of the Company,  entered into
an employment  agreement with us as of June 22, 2006,  which expires on June 21,
2008.  The agreement  provides for an annual  salary of $260,000 plus  incentive
compensation  of up to 50% of the  annual  salary.  In  addition  the  agreement
provides  for a  payment  of  twelve  months  of base  salary  in the event of a
termination  without  cause,  as  defined,   payable  in  twelve  equal  monthly
installments.

Director's Compensation

     It has been our policy to grant fees of $1,500 per meeting to each  outside
director who attends a regularly  scheduled  or special  meeting of its Board of
Directors.  Fees for committee meetings are $1,000 per meeting if the meeting is
held on a  different  day than the Board  meeting.  In  addition,  we  reimburse
out-of-state  directors  for their  cost of travel and  lodging  to attend  such
meetings.

     Our compensation structure for outside directors also includes:

     o    a  one-time  grant of 50,000  non-qualified  stock  options to outside
          directors issued on the date of their initial appointment to our Board
          of  Directors  at the  closing  price on the issue date and vesting in
          three equal annual  increments  commencing on the first anniversary of
          the grant and contingent  upon their  continued  service on our Board;
          and
     o    an automatic  annual grant of 25,000  non-qualified  stock  options to
          outside  directors  issued  on the  date  of  our  Annual  Meeting  of
          Stockholders  at the  closing  price on the issue date and  vesting in
          three equal annual  increments  commencing on the first anniversary of
          the grant and contingent upon their continued service on our Board.

Limitation on Liability of Officers and Directors

     We have entered into  indemnification  agreements  with each of our current
officers and directors pursuant to which we have agreed,  among other things, to
indemnify  these  officers  and  directors  to the fullest  extent  permitted by
Delaware law.

Compensation Committee Interlocks and Insider Participation

     During fiscal 2006, our Compensation  Committee consisted of Messrs. Bearn,
Blumenthal,  Shapiro,  Viscusi,  and  Whittaker.  None of these persons were our
officers or employees during fiscal 2006 or, except as otherwise disclosed,  had
any relationship requiring disclosure in this Proxy Statement.

In accordance with rules promulgated by the Securities and Exchange  Commission,
the information  included under the caption  "Compensation  Committee  Report on
Executive Compensation" will not be deemed to be filed or to be proxy-soliciting
material or  incorporated  by  reference  in any prior or future  filings by the
Company under the Securities Act of 1933 or the Securities Exchange Act.


ITEM 12 - SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

     The following  table sets forth the  beneficial  ownership of shares of our
Series D Convertible  Preferred  Stock and Common Stock as of September 12, 2006
of (i) each person known by us to  beneficially  own 5% or more of the shares of
outstanding  common  stock,  based  solely on filings  with the  Securities  and

                                       5
<PAGE>

Exchange  Commission,  (ii) each of our executive  officers and  directors,  and
(iii)  all of our  executive  officers  and  directors  as a  group.  Except  as
otherwise  indicated,  all shares are  beneficially  owned,  and  investment and
voting power is held by the persons named as owners.
<TABLE>
<CAPTION>
                                                                 Common Stock                 % of
                                                                 Beneficially                Common
              Name of Beneficial Owner                            Owned (2)                 Stock (3)
------------------------------------------------------        -----------------         -----------------
<S>                                                                <C>                          <C>
Abraham E. Cohen.................................                  1,115,650                    1.7%
Thomas W. Fry....................................                    466,244                    *
Thomas Glover....................................                  1,396,228                    2.1%
John C. K. Hui, PhD (4)..........................                  1,753,880                    2.7%
Photios T. Paulson...............................                    486,000                    *
Kenneth W. Rind, PhD.............................                    485,650                    *
Martin Zeiger....................................                    155,000                    *

Directors and executive officers as a group
(7 persons)..............................                          5,858,652                    8.5%
----------
<FN>

     o Less than 1% of the Company's Common Stock

1.   No  officer  or  director  owns more than one  percent  of the  issued  and
     outstanding Common Stock of the Company unless otherwise indicated.

2.   Includes  beneficial  ownership of the following numbers of shares that may
     be  acquired  within 60 days of  September  12,  2006  pursuant to warrants
     awarded under the purchase agreement for the Series D Convertible Preferred
     Stock and stock options awarded under our stock option plans:
</FN>
</TABLE>


<TABLE>
<CAPTION>
        <S>                          <C>             <C>                               <C>
        Abraham E. Cohen               525,650       Photios T. Paulson                  445,000
        Thomas W. Fry                  458,244       Kenneth W. Rind, PhD                110,650
        Thomas Glover                1,391,228       Martin Zeiger                       115,000
        John C. K. Hui, PhD            964,558       Directors and executive
                                                     officers as a group               4,010,330
</TABLE>

3.   Applicable percentages are based on 65,198,592 common shares outstanding on
     September  12,  2006,  adjusted  as required  by rules  promulgated  by the
     Commission.

4.   Includes  789,322  shares  that are held in a trust for the  benefit of Dr.
     Hui's child. Dr. Hui and his wife are the trustees of this trust.
                                       6
<PAGE>
Equity Compensation Plan Information

     The following  chart  summarizes the options and warrants  outstanding  and
available to be issued at May 31, 2006:
<TABLE>
<CAPTION>
                                                                                         Number of securities
                                       Number of securities                            remaining available for
                                        to be issued upon       Weighted-average     future issuance under equity
                                           exercise of         exercise price of    compensation plans (excluding
                                       outstanding options    outstanding options      securities reflected in
           Plan Category                   and warrants           and warrants                column (a)
           -------------                   ------------           ------------                ----------
                                               (a)                    (b)                        (c)
                                               ---                    ---                        ---
<S>                                          <C>                      <C>                        <C>
Equity compensation plans
approved by security holders                 3,700,326                $1.07                      726,619
Equity compensation plans not
approved by security holders                 4,311,749                $1.32                       23,253
                                      ----------------------- --------------------- -------------------------------
    Total                                    8,012,075                $1.20                      749,872
                                      ======================= ===================== ===============================
</TABLE>
Stock Options and Other Plans

     1995 Stock Option Plan

     In May 1995, our  stockholders  approved the 1995 Stock Option Plan for our
officers and employees, for which the Company reserved an aggregate of 1,500,000
shares of common stock. In December 1997, our Board of Directors  terminated the
1995 Stock  Option  Plan with  respect to new option  grants.  At May 31,  2006,
972,000  options had been granted,  of which 416,000 are  outstanding  under the
1995 Option Plan.

     Outside Director Stock Option Plan

     In May 1995,  our  stockholders  approved an Outside  Director Stock Option
Plan for our  non-employee  directors,  for which we  reserved an  aggregate  of
300,000  shares of common  stock.  On June 1,  1997,  1996 and 1995,  options to
purchase an aggregate of 39,550  shares,  31,675  shares,  and 77,418  shares of
common stock,  respectively,  at $1.77, $2.21, and $.78 per share, respectively,
were  granted to outside  directors.  In December  1997,  our Board of Directors
terminated  the Outside  Director  Stock  Option Plan with respect to new option
grants.  At May 31,  2006,  28,250  options  are  outstanding  under the Outside
Director Stock Option Plan.

     1997 Stock Option Plan

     In December 1997, our stockholders approved the 1997 Stock Option Plan (the
"1997 Plan") for our officers,  directors,  employees and consultants, for which
we have reserved,  as amended, an aggregate of 2,800,000 shares of common stock.
The 1997 Plan provides that it will be  administered by a committee of our Board
of Directors  and that the committee  will have full  authority to determine the
identity of the  recipients  of the options and the number of shares  subject to
each option.  Options granted under the 1997 Plan may be either  incentive stock
options or  non-qualified  stock options.  The option price shall be 100% of the
fair market  value of the common  stock on the date of the grant (or in the case
of incentive stock options granted to any individual  principal  stockholder who
owns stock possessing more than 10% of the total combined voting power of all of
our voting stock, 110% of such fair market value). The term of any option may be
fixed by the  committee  but in no event shall exceed ten years from the date of
grant.  Options are  exercisable  upon  payment in full of the  exercise  price,
either in cash or in common  stock  valued at fair  market  value on the date of
exercise of the option. The term for which options may be granted under the 1997
Plan expires August 6, 2007. At May 31, 2006, 2,991,168 options had been granted
(including  options  previously  granted but subsequently  cancelled),  of which
1,404,527 are outstanding under the 1997 Plan.

     1999 Stock Option Plan

     In July 1999, our Board of Directors  authorized the 1999 Stock Option Plan
(the "1999 Plan") for our officers,  directors,  employees and consultants,  for
which we have reserved,  as amended,  an aggregate of 5,000,000 shares of common
stock. The 1999 Plan provides that it will be administered by a committee of our
Board of Directors and that the committee  will have full authority to determine
the identity of the  recipients of the options and the number of shares  subject
to each  option.  Options  granted  under the 1999 Plan may be either  incentive

                                       7
<PAGE>

stock options or non-qualified stock options.  The option price shall be 100% of
the fair  market  value of the common  stock on the date of the grant (or in the
case of incentive stock options granted to any individual principal  stockholder
who owns stock  possessing  more than 10% of the total combined  voting power of
all of our voting stock, 110% of such fair market value). The term of any option
may be fixed by the  committee  but in no event shall  exceed ten years from the
date of grant.  Options are  exercisable  upon  payment in full of the  exercise
price, either in cash or in common stock valued at fair market value on the date
of exercise of the option.  The term for which  options may be granted under the
1999 Plan  expires July 12, 2009.  At May 31, 2006,  8,701,932  options had been
granted,  (including options previously granted but subsequently cancelled),  of
which 4,311,749 are outstanding under the 1999 Plan.

     2004 Stock Option and Stock Issuance Plan

     In October 2004, our stockholders  approved the 2004 Stock Option and Stock
Issuance Plan (the "2004 Stock Plan") for our officers, directors, employees and
consultants [and other independent advisors], for which we reserved an aggregate
of 2,500,000  shares of common stock.  The 2004 Stock Plan is  administered by a
committee of our Board of Directors,  which has full  authority to determine the
identity of the  recipients  of the options and the number of shares  subject to
each option.  The 2004 Stock Plan is divided into two separate equity  programs:
an option grant program and a stock issuance program.  Options granted under the
2004  Stock Plan shall be  non-qualified  or  incentive  stock  options  and the
exercise price is the fair market value of the common stock on the date of grant
except  that for  incentive  stock  options it shall be 110% of the fair  market
value if the participant  owns 10% or more of our common stock.  Under the stock
issuance  program,  the purchase  price per share shall be fixed by the Board of
Directors  or  committee  but cannot be less than the fair  market  value of the
common stock on the issuance date. Payment for the shares may be made in cash or
check  payable  to us, or for past  services  rendered  to us and all  shares of
common  stock  issued  thereunder  shall  vest upon  issuance  unless  otherwise
directed  by the board or  committee.  The  number of  shares  issuable  is also
subject to adjustments  upon the occurrence of certain  events,  including stock
dividends,    stock   splits,    mergers,    consolidations,    reorganizations,
recapitalizations,  or other  capital  adjustments.  At May 31, 2006,  2,118,045
options had been granted, (including options previously granted but subsequently
cancelled), of which 1,851,549 are outstanding under the 2004 Stock Plan.

     401(k) Plan

     In April 1997,  we adopted  the  Vasomedical,  Inc.  401(k) Plan to provide
retirement  benefits for its  employees.  As allowed under Section 401(k) of the
Internal  Revenue Code,  the plan provides  tax-deferred  salary  deductions for
eligible  employees.  Employees are eligible to  participate in the next quarter
enrollment   period   after   employment.   Participants   may  make   voluntary
contributions to the plan up to 100% of their compensation. In fiscal year 2006,
2005 and 2004, the Company made  discretionary  contributions  of  approximately
$26,752,  $34,766 and $35,535,  respectively,  to match a percentage of employee
contributions.


ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Not applicable.


ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

MILLER ELLIN & COMPANY,  LLP are our independent  registered  public  accounting
firm and performed the audit of our consolidated financial statements for fiscal
year 2006. Audits of our consolidated financial statements for fiscal years 2005
and 2004 were  performed by GRANT  THORNTON LLP. The following  table sets forth
all fees for the fiscal years ended May 31, 2006 and May 31, 2005:
<TABLE>
<CAPTION>
                                          2006             2005
                                          ----             ----
          <S>                          <C>               <C>
          Audit Fees (1)               $  264,000        $ 279,000
          Tax Fees (2)                    $51,000          $35,000
---------------
<FN>
(1)  Audit Fees includes fees for professional  services  provided in connection
     with the audits of our  financial  statements,  the review of our quarterly

                                       8
<PAGE>
     financial statements,  Sarbanes-Oxley 404 related services,  consents,  and
     audit services  provided in connection  with other  statutory or regulatory
     filings. All such services were pre-approved by the Audit Committee.
(2)  Tax fees  principally  include fees for tax return  preparation and for tax
     advice  planning fees.  All such services were provided by Grant  Thornton,
     LLP and were pre-approved by the Audit Committee.
</FN>
</TABLE>

The Audit Committee has sole authority to appoint, determine funding for, retain
and oversee our  independent  auditors and to pre-approve all audit services and
permissible  non-audit  services.  The  Audit  Committee  has  delegated  to the
chairman of the audit committee the authority to pre-approve  audit-related  and
non-audit  services not  prohibited  by law to be  performed by our  independent
registered public accounting firm and associated fees,  provided that he reports
any pre-approval of audit-related or non-audit  related services and fees to the
full Audit Committee at its next regular meeting.

MILLER  ELLIN & COMPANY,  LLP did not render any  services  related to financial
information  systems design and  implementation  during fiscal year 2006.  GRANT
THORNTON  LLP did not  render any  services  related  to  financial  information
systems design and implementation during fiscal year 2005.

                                       9
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, we have duly caused this report to be signed on its behalf
by the  undersigned,  thereunto  duly  authorized  on the 28th day of September,
2006.

                                 VASOMEDICAL, INC.

                                 By: /s/ Thomas Glover
                                 -----------------
                                 Thomas Glover
                                 President, Chief Executive Officer and Director
                                 (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on September  28, 2006,  by the  following  persons in the
capacities indicated:


/s/ Thomas Glover          President, Chief Executive Officer and Director
------------------------   (Principal Executive Officer)
Thomas Glover

-----------------------    Chairman of the Board
Abraham E. Cohen

/s/ Tricia Efstathiou      Chief Financial Officer (Principal Financial Officer)
------------------------
Tricia Efstathiou

/s/ John C.K. Hui          Senior Vice President, Chief Technology Officer
------------------------   and Director
John C.K. Hui

/s/ Photios T. Paulson     Director
------------------------
Photios T. Paulson

/s/ Kenneth W. Rind        Director
-----------------------
Kenneth W. Rind

                           Director
-----------------------
Martin Zeiger