UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q


[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934 For the quarterly period ended February 28, 2007

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from _______________ to ______________

Commission File Number: 0-18105

                                VASOMEDICAL, INC.
--------------------------------------------------------------------------------

             (Exact name of registrant as specified in its charter)

         Delaware                                      11-2871434
--------------------------------------------------------------------------------

(State or other jurisdiction of             (IRS Employer Identification Number)
 incorporation or organization)

                    180 Linden Ave., Westbury, New York 11590
--------------------------------------------------------------------------------

                    (Address of principal executive offices)

Registrant's Telephone Number                       (516) 997-4600

     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 [ ]
                                              ---       --

     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]
                                             ---        --

Number of Shares Outstanding of Common Stock, $.001 Par Value, at April 16, 2007
65,198,592

                                     Page 1
<PAGE>
Vasomedical, Inc. and Subsidiaries



                                      INDEX

<TABLE>
<CAPTION>
                                                                                                 Page
                                                                                                 ----
<S>                                                                                              <C>
PART I - FINANCIAL INFORMATION

         Item 1 - Financial Statements (unaudited)

                  Consolidated Condensed Balance Sheets as of
                           February 28, 2007 and May 31, 2006                                     3

                  Consolidated Condensed Statements of Operations for the
                           Nine and Three Months Ended February 28, 2007 and 2006                 4

                  Consolidated Condensed Statement of Changes in Stockholders'
                           Equity for the Period from June 1, 2006 to February 28, 2007           5

                  Consolidated Condensed Statements of Cash Flows for the
                           Nine Months Ended February 28, 2007 and 2006                           6


                  Notes to Consolidated Condensed Financial Statements                            7

         Item 2 - Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                                      13

         Item 3 - Quantitative and Qualitative Disclosures About Market Risk                     29

         Item 4 - Controls and Procedures                                                        29

PART II - OTHER INFORMATION                                                                      30
</TABLE>
                                     Page 2
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS

                       Vasomedical, Inc. and Subsidiaries
                      CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                        February 28,             May 31,
                                                                                            2007                  2006
                                                                                      ----------------      ----------------
                                     ASSETS                                             (Unaudited)          (Derived from
                                                                                                                audited
                                                                                                               financial
                                                                                                              statements)
<S>                                                                                       <C>                   <C>
CURRENT ASSETS
     Cash and cash equivalents                                                            $1,041,890            $2,385,778
     Accounts receivable, net of an allowance for doubtful accounts of $364,809
       at February 28, 2007, and $410,691 at May 31, 2006                                    563,663               843,282
     Inventories, net                                                                      2,229,171             2,699,673
     Other current assets                                                                    170,304               108,049
                                                                                      ----------------      ----------------
         Total current assets                                                              4,005,028             6,036,782

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $2,780,024 at
   February 28, 2007, and $2,613,180 at May 31, 2006                                       1,349,638             1,569,588

OTHER ASSETS                                                                                 271,967               305,670
                                                                                      ----------------      ----------------
                                                                                          $5,626,633            $7,912,040
                                                                                      ================      ================

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable and accrued expenses                                                  $751,955              $938,095
     Current maturities of long-term debt and notes payable                                  104,102                97,309
     Sales tax payable                                                                       135,833               172,646
     Deferred revenue                                                                      1,329,333             1,600,887
     Accrued director and executive compensation                                              79,000               175,000
     Accrued warranty and customer support expenses                                           20,500                30,500
     Accrued professional fees                                                                85,496                61,875
     Accrued commissions                                                                      65,262                93,182
                                                                                      ----------------      ----------------
         Total current liabilities                                                         2,571,481             3,169,494

LONG-TERM DEBT                                                                               802,122               853,189

ACCRUED WARRANTY COSTS                                                                            --                 1,500

DEFERRED REVENUE                                                                             495,196               721,701

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
     Common stock, $.001 par value; 110,000,000 shares authorized; 65,198,592
       shares at February 28, 2007, and May 31, 2006, issued and outstanding                  65,198                65,198
     Additional paid-in capital                                                           46,158,819            46,148,493
     Accumulated deficit                                                                 (44,466,183)          (43,047,535)
                                                                                      ----------------      ----------------
         Total stockholders' equity                                                        1,757,834             3,166,156
                                                                                      ----------------      ----------------
                                                                                          $5,626,633            $7,912,040
                                                                                      ================      ================
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  condensed
financial statements.

                                     Page 3
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                         Nine Months Ended                       Three Months Ended
                                                            February 28,                            February 28,
                                                 -----------------------------------     -----------------------------------
                                                      2007                2006                2007                2006
                                                  ---------------    ----------------     ---------------    ----------------
<S>                                                 <C>                <C>                   <C>               <C>
Revenues
   Equipment sales                                  $2,080,272         $5,998,943             $432,124         $1,807,625
   Equipment rentals and services                    2,906,308          3,059,433              949,377          1,034,196
                                                 ---------------    ----------------     ---------------    ----------------
     Total revenues                                  4,986,580          9,058,376            1,381,501          2,841,821

Cost of Sales and Services
   Cost of sales, equipment                          1,184,307          2,755,419              275,478            898,014
   Cost of equipment rentals and services            1,097,766            993,613              325,377            330,005
                                                 ---------------    ----------------     ---------------    ----------------
     Total cost of sales and services                2,282,073          3,749,032              600,855          1,228,019
                                                 ---------------    ----------------     ---------------    ----------------
Gross Profit                                         2,704,507          5,309,344              780,646          1,613,802

Operating Expenses
   Selling, general and administrative               3,381,852          6,769,946            1,024,688          1,852,173
   Research and development                            722,631          1,528,699              253,346            412,997
   Provision for doubtful accounts                      (1,340)            89,559                2,661             18,984
                                                 ---------------    ----------------     ---------------    ----------------
     Total operating expenses                        4,103,143          8,388,204            1,280,695          2,284,154
                                                 ---------------    ----------------     ---------------    ----------------
LOSS FROM OPERATIONS                                (1,398,636)        (3,078,860)            (500,049)          (670,352)

Other Income (Expense)
   Interest and financing costs                        (54,281)           (64,299)             (16,952)           (19,346)
   Interest and other income, net                       48,269             59,041               12,445             18,251
                                                 ---------------    ----------------     ---------------    ----------------
     Total other income (expense)                       (6,012)            (5,258)              (4,507)            (1,095)
                                                 ---------------    ----------------     ---------------    ----------------
LOSS BEFORE INCOME TAXES                            (1,404,648)        (3,084,118)            (504,556)          (671,447)
   Income tax expense, net                             (14,000)        (7,112,826)              (5,700)                --
                                                 ---------------    ----------------     ---------------    ----------------
NET LOSS                                            (1,418,648)       (10,196,944)            (510,256)          (671,447)
   Preferred Stock Dividend                                 --           (877,870)                  --            (23,334)
                                                 ---------------    ----------------     ---------------    ----------------
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS       $(1,418,648)      $(11,074,814)           $(510,256)         $(694,781)
                                                 ===============    ================     ===============    ================
Net loss per common share
     - basic                                            $(0.02)            $(0.18)              $(0.01)            $(0.01)
                                                 ===============    ================     ===============    ================
     - diluted                                          $(0.02)            $(0.18)              $(0.01)            $(0.01)
                                                 ===============    ================     ===============    ================
Weighted average common shares
  outstanding
     - basic                                        65,198,592         60,063,566           65,198,592         62,162,119
                                                 ===============    ================     ===============    ================
     - diluted                                      65,198,592         60,063,566           65,198,592         62,162,119
                                                 ===============    ================     ===============    ================
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  condensed
financial statements.

                                     Page 4
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

       CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                           Additional                                    Total
                                               Common Stock                  Paid-in            Accumulated          Stockholders'
                                          Shares             Amount          Capital              Deficit               Equity
                                      ---------------    ------------    ----------------    ------------------     ----------------
<S>                                    <C>                 <C>            <C>                  <C>                      <C>
Balance at June 1, 2006                65,198,592          $65,198        $46,148,493          $(43,047,535)            $3,166,156
   Stock options granted for services                                          10,326                                       10,326
   Net loss                                                                                      (1,418,648)            (1,418,648)
                                      ---------------    ------------    ----------------    ------------------     ----------------
Balance at February 28, 2007           65,198,592          $65,198        $46,158,819          $(44,466,183)            $1,757,834
                                      ===============    ============    ================    ==================     ================
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  condensed
financial statements.

                                     Page 5
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                                Nine months ended
                                                                                                   February 28,
                                                                                 -----------------------------------------------
                                                                                         2007                       2006
                                                                                 ----------------------       ------------------
<S>                                                                                     <C>                     <C>
Cash flows from operating activities
     Net loss                                                                           $(1,418,648)            $(10,196,944)
                                                                                 ----------------------       ------------------
     Adjustments to reconcile net loss to net cash used in operating
       activities
         Depreciation and amortization                                                      230,192                  413,038
         Provision for doubtful accounts                                                     (1,340)                  89,559
         Reserve for excess and obsolete inventory                                               --                  (11,509)
         Deferred income taxes                                                                   --                7,093,000
         Common stock issued for services                                                        --                  101,250
         Stock options granted for services                                                  10,326                       --
         Changes in operating assets and liabilities
              Accounts receivable                                                           280,959                 (768,798)
              Inventories                                                                   495,036                  709,765
              Other current assets                                                          129,865                  243,972
              Other assets                                                                   (1,073)                 (19,826)
              Accounts payable, accrued expenses and other current
                liabilities                                                                (604,806)                (244,048)
              Other liabilities                                                            (228,005)                (140,711)
                                                                                 ----------------------       ------------------
                                                                                            311,154                7,465,692
                                                                                 ----------------------       ------------------
     Net cash used in operating activities                                               (1,107,494)              (2,731,252)
                                                                                 ----------------------       ------------------

     Cash flows provided by investing activities
         Redemptions of certificates of deposit                                                  --                  760,156
                                                                                 ----------------------       ------------------
     Net cash provided by investing activities                                                   --                  760,156
                                                                                 ----------------------       ------------------

     Cash flows provided by (used in) financing activities
         Payments on long term debt and notes payable                                      (236,394)                (378,999)
         Payments of preferred stock dividends                                                   --                  (91,623)
         Payments of preferred stock issue costs                                                 --                 (314,383)
         Proceeds from sale of convertible preferred stock                                       --                2,500,000
                                                                                 ----------------------       ------------------
     Net cash provided by (used in) financing activities                                   (236,394)               1,714,995
                                                                                 ----------------------       ------------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     (1,343,888)                (256,101)
     Cash and cash equivalents - beginning of period                                      2,385,778                  989,524
                                                                                 ----------------------       ------------------
     Cash and cash equivalents - end of period                                           $1,041,890                 $733,423
                                                                                 ======================       ==================

Non-cash investing and financing activities were as follows:
     Inventories transferred to (from) property and equipment,  attributable to
       operating leases, net                                                                $24,538                $(189,386)
     Issue of note for purchase of insurance policy                                        $192,120                 $302,052
     Preferred stock dividends                                                                  $--                 $786,247
     Preferred stock issue costs                                                                $--                 $227,087

Supplemental Disclosures
     Interest paid                                                                          $54,281                  $64,299
     Income taxes paid                                                                       $6,534                  $22,923
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  condensed
financial statements.

                                     Page 6
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

          ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



NOTE A - ORGANIZATION AND PLAN OF OPERATIONS

     The Company was incorporated in Delaware in July 1987.  During fiscal 1996,
the  Company   commenced   the   commercialization   of  its  EECP(R)   external
counterpulsation system ("EECP(R)"),  a microprocessor-based  medical device for
the noninvasive,  outpatient treatment of patients with cardiovascular  disease.
EECP(R) is marketed worldwide to hospitals and physician private  practices.  To
date, the Company's revenues have been generated primarily from customers in the
United States.

     The  Company has  incurred  large  declines  in revenue  and has  sustained
significant  operating  losses during the last four fiscal years and its ability
to  continue   operating  as  a  going  concern  is  dependent   upon  achieving
profitability,  a strategic  alliance  within the sales and marketing  areas, or
through additional debt or equity financing.  Achieving profitability is largely
dependent on sufficiently reducing operating costs and halting the current trend
of declining revenue.  The Company's ability to halt the declines in revenue and
restore its revenue base is largely  dependent upon increasing the demand in the
refractory  angina market and operating in a more efficient  manner. To date the
Company has not been able to restore its revenue base and reduce operating costs
significantly  enough to generate an adequate cash inflow,  or raise  additional
capital, so we may not be able to continue as a going concern.

     In order to reduce the  Company's  cash usage and attempt to bring its cost
structure  more into alignment with current  revenue,  the Company  engaged in a
restructuring in January 2006 and March 2007 to  substantially  reduce personnel
and spending on sales,  marketing  and  development  projects.  Additional  cost
reductions are continuing.  However, revenue has continued to materially decline
and the Company has not been able to achieve its goal of profitability.

     The Company  believes that cash flow from operations  together with current
cash reserves will be sufficient to fund projected capital  requirements through
May 2007, assuming the current revenue rate.

     The Company is seeking to raise capital through public or private equity or
debt financings or by other means. If the Company is unable to raise  additional
funds or obtain  funds  through  arrangements  with  collaborative  partners  or
others,  it may be required to license or relinquish its rights to  technologies
and/or products. Future capital funding, if available, may result in dilution to
current  shareholders,  and new investors could have rights superior to existing
stockholders.

     The accompanying  financial  statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.

Reclassifications

Certain  reclassifications have been made to the prior years' amounts to conform
with the current year's presentation.

NOTE B - STOCK-BASED COMPENSATION

     In December 2004, the FASB issued Statement of Financial  Standards No. 123
(revised 2004), Share-Based Payment ("SFAS No. 123 (R)"), which is a revision of
SFAS No. 123. SFAS No. 123 (R)  supersedes  APB Opinion No. 25,  Accounting  for
Stock Issued to Employees,  and amends FASB Statement No. 95,  Statement of Cash
Flows.  Generally,  the approach to accounting for share-based  payments in SFAS
No. 123(R) is similar to the approach  described in SFAS No. 123. However,  SFAS
No. 123(R) requires all share-based  payments to employees,  including grants of
employee stock options,  to be recognized in the financial  statements  based on
their  fair  values.  Pro  forma  disclosure  of the fair  value of  share-based
payments is no longer an alternative to financial statement recognition.

                                     Page 7
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

          ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



     Prior to first quarter of fiscal 2007 the Company accounted for stock-based
compensation  using the  intrinsic  value method in accordance  with  Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related  Interpretations ("APB No. 25") and adopted the disclosure provisions of
Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation  - Transition  and  Disclosure,  an amendment of FASB Statement No.
123." Under APB No. 25, when the exercise price of the Company's  employee stock
options equals the market price of the underlying stock on the date of grant, no
compensation  expense is recognized.  Accordingly,  no compensation  expense has
been  recognized in the  consolidated  financial  statements in connection  with
employee stock option grants prior to fiscal 2007.

     The following  table  illustrates  the proforma effect on net loss and loss
per share had the  Company  applied  the fair value  recognition  provisions  of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation,"  to  stock-based  employee  compensation,  for the nine and three
months ended February 28, 2006.
<TABLE>
<CAPTION>
                                        --------------------    ---------------------
                                          Nine Months Ended       Three Months Ended
                                          February 28, 2006       February 28, 2006
                                        --------------------    ---------------------
<S>                                         <C>                      <C>
Net  loss   attributable   to   common
stockholders, as reported                   $(11,074,814)             $(694,781)
     Deduct: Total stock-based
       employee compensation expense
       determined under fair
       value-based method for all
       awards                                   (618,715)              (184,973)
                                        --------------------    ---------------------
Pro forma net loss                          $(11,693,529)             $(879,754)
                                        ====================    =====================

Loss per share:
    Basic and diluted - as reported               $(0.18)                $(0.01)
                                        ====================    =====================
    Basic and diluted - pro forma                 $(0.19)                $(0.01)
                                        ====================    =====================
</TABLE>
     During  the  nine-month  period  ended  February  28,  2007,  the  Board of
Directors granted  non-qualified stock options under the 1997 Stock Option/Stock
Issuance  Plan to one  director to purchase an  aggregate  of 150,000  shares of
common stock, at an exercise price of $.09 per share, and granted  non-qualified
stock options under the 1999 Stock Option/Stock Issuance Plan to three directors
to purchase an aggregate of 450,000 shares of common stock, at an exercise price
of $.09 per share, and granted  non-qualified stock options under the 2004 Stock
Option/Stock  Issuance  Plan to one officer to purchase an  aggregate of 200,000
shares  of  common  stock,  at an  exercise  price  of  $.11  per  share,  which
represented the fair market value of the underlying  common stock at the time of
the respective grants. These options vest over a two-year period, and expire ten
years from the date of grant.

     Stock-based compensation expense recognized under SFAS 123 (R) for the nine
months ended  February 28, 2007 was $10,326,  which  comprised the fair value of
the stock options discussed above.

     For  purposes  of  estimating  the fair value of each option on the date of
grant,  the  Company  utilized  the  Black-Scholes   option-pricing  model.  The
Black-Scholes  option  valuation  model was developed for use in estimating  the
fair value of traded options,  which have no vesting  restrictions and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
the  Company's  employee  stock  options  have   characteristics   significantly
different  from those of traded  options and because  changes in the  subjective
input assumptions can materially affect the fair value estimate, in management's

                                     Page 8
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

          ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

     The fair value of the Company's  stock-based  awards was estimated assuming
no expected  dividends and the following  weighted-average  assumptions  for the
nine months ended February 28, 2007:

                Expected life (years)                  5
                Expected volatility                    106.17%
                Risk-free interest rate                4.5%
                Expected dividend yield                0.00%

     Equity  instruments issued to non-employees in exchange for goods, fees and
services are accounted for under the fair value-based method of SFAS No. 123(R).

     During the nine-month period ended February 28, 2007,  options and warrants
to purchase  2,270,925  shares of common  stock at an  exercise  price of $.20 -
$5.00 were cancelled.

NOTE C -LOSS PER COMMON SHARE

     Basic  loss per  share is based on the  weighted  average  number of common
shares  outstanding  without  consideration of potential common shares.  Diluted
loss per share is based on the weighted  number of common and  potential  common
shares  outstanding.  The calculation  takes into account the shares that may be
issued upon the exercise of stock  options and  warrants,  reduced by the shares
that may be repurchased with the funds received from the exercise,  based on the
average price during the period, plus conversion of convertible  preferred stock
into common shares based upon the most  advantageous  conversion rate during the
period.

The  following  table sets forth the  computation  of basic and diluted loss per
common share:
<TABLE>
<CAPTION>
                                                          Nine Months Ended                   Three Months Ended
                                                             February 28,                        February 28,
                                                  ----------------------------------    -------------------------------
                                                       2007               2006               2007             2006
                                                  ---------------    ---------------    --------------    -------------
<S>                                                 <C>               <C>                  <C>               <C>
Numerator:
   Net loss                                         $(1,418,648)      $(10,196,944)        $(510,256)        $(671,447)
     Deemed  dividend  related  to  beneficial
     conversion  feature on Series D preferred
     stock                                                   --           (786,247)               --                --
     Series D preferred stock dividends                      --            (91,623)               --           (23,334)
                                                  ---------------    ---------------    --------------    -------------
   Net loss attributable to common
   stockholders - basic and diluted                 $(1,418,648)      $(11,074,814)        $(510,256)        $(694,781)
                                                  ===============    ===============    ==============    =============
Denominator:
   Basic - weighted average common shares            65,198,592         60,063,566        65,198,592        62,162,119
     Stock options                                           --                 --                --                --
     Warrants                                                --                 --                --                --
     Convertible preferred stock                             --                 --                --                --
                                                  ---------------    ---------------    --------------    -------------
   Diluted - weighted average common shares          65,198,592         60,063,566        65,198,592        62,162,119
                                                  ===============    ===============    ==============    =============

Basic and diluted loss per common share                  $(0.02)            $(0.18)           $(0.01)           $(0.01)
                                                  ===============    ===============    ==============    =============
</TABLE>

                                     Page 9
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

          ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



     Options,  warrants,  and convertible preferred stock, presented in with the
following  table,  were excluded from the  computation of diluted loss per share
for the nine and three  months ended  February 28, 2007 and 2006,  respectively,
because the effect of their inclusion would be antidilutive.
<TABLE>
<CAPTION>
                                                                              Nine and three months
                                                                                ended February 28,
                                                                      --------------------------------------
                                                                            2007                 2006
                                                                      ----------------     -----------------
  <S>                                                                     <C>                <C>
  Options to purchase common stock                                        $6,741,150         $7,627,978
  Warrants to purchase common stock                                        2,254,538          2,454,538
                                                                      ----------------     -----------------
                                                                          $8,995,688        $10,082,516
                                                                      ================     =================
</TABLE>
NOTE D - INVENTORIES, NET

         Inventories, net consist of the following:
<TABLE>
<CAPTION>
                                                                       February 28,           May 31,
                                                                           2007                 2006
                                                                     -----------------    -----------------
         <S>                                                            <C>                  <C>
         Raw materials                                                    $848,349             $863,952
         Work in process                                                   982,800            1,243,986
         Finished goods                                                    398,022              591,735
                                                                     -----------------    -----------------
                                                                        $2,229,171           $2,699,673
                                                                     =================    =================
</TABLE>
     At  February  28,  2007  and May 31,  2006,  finished  goods  inventory  is
presented net of reserves for excess and obsolete inventory of $677,166.

NOTE E - PROPERTY AND EQUIPMENT

         Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
                                                                     February 28,           May 31,
                                                                         2007                2006
                                                                    ----------------    ---------------
         <S>                                                           <C>               <C>
         Land                                                           $200,000            $200,000
         Building and improvements                                     1,383,976           1,383,976
         Office, laboratory and other equipment                        1,436,362           1,444,850
         EECP(R) systems under  operating  leases or under loan
            for clinical trials                                          829,453             874,071
         Furniture and fixtures                                          162,068             162,068
         Leasehold improvements                                          117,803             117,803
                                                                    ----------------    ---------------
                                                                       4,129,662           4,182,768
         Less: accumulated depreciation and amortization              (2,780,024)         (2,613,180)
                                                                    ----------------    ---------------
                                                                      $1,349,638          $1,569,588
                                                                    ================    ===============
</TABLE>
NOTE F - NOTES PAYABLE

     The Company  financed the purchase of Director's  and  Officer's  Liability
Insurance through the issuance of a note with a principal value of $192,120. The

                                    Page 10
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

          ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


note,  which  bears  interest at 8.15%,  is payable in ten monthly  installments
consisting  of principal and  interest,  and expires in April 2007.  The balance
outstanding  at February 28, 2007 of $39,471 is  presented  in the  consolidated
condensed  balance  sheet in  current  maturities  of  long-term  debt and notes
payable.

NOTE G - LONG-TERM DEBT

     The following table sets forth the computation of long-term debt:
<TABLE>
<CAPTION>
                                                 February 28,          May 31,
                                                     2007               2006
                                              -----------------    ---------------
        <S>                                        <C>               <C>
        Facility loans (a)                         $866,753          $914,528
        Term loans (b)                                   --            35,970
                                              -----------------    ---------------
                                                    866,753           950,498
        Less: current portion                       (64,631)          (97,309)
                                              -----------------    ---------------
                                                   $802,122          $853,189
                                              =================    ===============
</TABLE>
     (a) The Company  purchased  its  headquarters  and  warehouse  facility and
secured  notes of  $641,667  and  $500,000,  respectively,  under  two  programs
sponsored by New York State.  These notes,  which bear  interest at 7.8% and 6%,
respectively,  are payable in monthly  installments  consisting of principal and
interest  payments  over  fifteen-year  terms,  expiring in  September  2016 and
January 2017, respectively, and are secured by the building.

     (b) In  fiscal  years  2003 and 2004,  the  Company  financed  the cost and
implementation  of a management  information  system and secured  several notes,
aggregating  approximately  $305,219.  The notes,  which bear  interest at rates
ranging from 7.5% through 12.5%, were payable in monthly installments consisting
of principal and interest  payments over four-year terms, and expired at various
times between August and October 2006.


NOTE H - DEFERRED REVENUES

     The changes in the Company's deferred revenues are as follows:
<TABLE>
<CAPTION>
                                                          Nine Months Ended                    Three Months Ended
                                                             February 28,                         February 28,
                                                    ------------------------------       ------------------------------
                                                        2007             2006                2007             2006
                                                    -------------    -------------       -------------    -------------
<S>                                                   <C>              <C>                 <C>              <C>
Deferred Revenue at the beginning of the period       $2,322,588       $2,551,532          $2,051,198       $2,561,030
ADDITIONS
     Deferred extended service contracts               1,483,702        1,713,937             434,241          536,622
     Deferred in-service and training                     35,000          115,000              10,000           30,000
     Deferred service arrangements                       105,000          355,000              30,000           90,000
RECOGNIZED AS REVENUE
     Deferred extended service contracts              (1,882,386)      (1,770,002)           (640,910)        (626,143)
     Deferred in-service and training                    (35,000)        (107,500)            (10,000)         (22,500)
     Deferred service arrangements                      (204,375)        (412,083)            (50,000)        (123,125)
                                                    -------------    -------------       -------------    -------------
Deferred revenue at end of period                      1,824,529        2,445,884           1,824,529        2,445,884
     Less: current portion                            (1,329,333)      (1,629,143)         (1,329,333)      (1,629,143)
                                                    -------------    -------------       -------------    -------------
Long-term deferred revenue at end of period             $495,196         $816,741            $495,196         $816,741
                                                    =============    =============       =============    =============
</TABLE>
                                    Page 11
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

          ITEM 1. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NOTE I - WARRANTY COSTS

     The changes in the Company's product warranty liability are as follows:
<TABLE>
<CAPTION>
                                                          Nine Months Ended                   Three Months Ended
                                                            February 28,                         February 28,
                                                   -------------------------------      ------------------------------
                                                       2007              2006               2007             2006
                                                   -------------     -------------      -------------    -------------
<S>                                                     <C>              <C>                 <C>              <C>
Warranty liability at the beginning of the
   period                                               $32,000          $118,333            $26,500          $65,000
     Expense for new warranties issued                   36,000            24,000              6,000            9,000
     Warranty amortization                              (47,500)          (97,333)           (12,000)         (29,000)
                                                   -------------     -------------      -------------    -------------
Warranty liability at end of period                      20,500            45,000             20,500           45,000
     Less: current portion                              (20,500)          (42,750)           (20,500)         (42,750)
                                                   -------------     -------------      -------------    -------------
Long-term warranty liability at end of period               $--            $2,250                $--           $2,250
                                                   =============     =============      =============    =============
</TABLE>
NOTE J - INCOME TAXES

     During the  nine-months  ended  February  28, 2007 and 2006,  we recorded a
provision for income taxes of $14,000 and $7,112,826,  respectively.  The fiscal
2006 tax expense consists mainly of $7,093,000 in additional valuation allowance
against the deferred tax asset arising in the second fiscal quarter of 2006. The
income tax  expense  for the first nine  months of fiscal  2006 does not include
$7,489,000  added to the  deferred  tax  valuation  allowance  for tax  benefits
associated with prior years' exercises of stock options and warrants,  which was
charged directly to additional paid-in capital.

     As of February 28, 2007 the recorded  deferred tax assets were $20,038,976,
reflecting  an increase of $479,518  during the nine months  ended  February 28,
2007,  which was  offset by the  valuation  allowance  of the same  amount.  The
deferred tax assets primarily  relate to NOL's of  approximately  $48.6 million.
The potential tax benefits of the NOL's expire at various dates through 2027.

     Ultimate  realization  of any or all of  the  deferred  tax  assets  is not
assured, due to significant  uncertainties and material  assumptions  associated
with  estimates of future  taxable  income during the  carryforward  period.  In
February 2006, we concluded that,  based upon the weight of available  evidence,
it was  "more  likely  than not" that the net  deferred  tax asset  would not be
realized and  increased  the  valuation  allowance to bring the net deferred tax
asset carrying value to zero.

NOTE K - COMMITMENTS AND CONTINGENCIES

Employment Agreements

     The approximate  aggregate  minimum  compensation  obligation  under active
employment agreements at February 28, 2007 is summarized as follows:
<TABLE>
<CAPTION>
Twelve months ended February 28,                                 Amount
----------------------------------------                  --------------------
             <S>                                               <C>
             2008                                              $ 260,000
             2009                                                 80,167
                                                          --------------------
                  Total                                        $ 340,167
                                                          ====================
</TABLE>
Litigation

     The  Company is  currently,  and has in the past  been,  a party to various
routine  legal  proceedings  incident to the ordinary  course of  business.  The
Company  believes that the outcome of all such pending legal  proceedings in the
aggregate  is  unlikely  to have a material  adverse  effect on the  business or
consolidated financial condition of the Company.

                                    Page 12
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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




     Except for  historical  information  contained in this report,  the matters
discussed are  forward-looking  statements that involve risks and uncertainties.
When used in this  report,  words such as  "anticipated",  "believes",  "could",
"estimates",  "expects",  "may", "plans",  "potential" and "intends" and similar
expressions,  as  they  relate  to  the  Company  or  its  management,  identify
forward-looking  statements.  Such  forward-looking  statements are based on the
beliefs  of the  Company's  management,  as  well  as  assumptions  made  by and
information currently available to the Company's  management.  Among the factors
that could cause actual  results to differ  materially  are the  following:  the
effect of business and economic  conditions;  the effect of the dramatic changes
taking place in the healthcare environment; the impact of competitive procedures
and  products  and their  pricing;  medical  insurance  reimbursement  policies;
unexpected  manufacturing  or supplier  problems;  unforeseen  difficulties  and
delays in the conduct of clinical trials and other product development programs;
the  actions of  regulatory  authorities  and  third-party  payers in the United
States and overseas;  uncertainties  about the acceptance of a novel therapeutic
modality by the medical  community;  and the risk factors  reported from time to
time in the  Company's  SEC  reports ,  including  the ability of the Company to
continue as a going  concern.  The Company  undertakes  no  obligation to update
forward-looking statements as a result of future events or developments.

General Overview

     Vasomedical,   Inc.  incorporated  in  Delaware  in  July  1987,  develops,
manufactures and markets EECP(R) therapy systems to deliver its proprietary form
of enhanced external counterpulsation therapy. EECP(R) therapy is a noninvasive,
outpatient  therapy used in the treatment of ischemic  cardiovascular  diseases,
currently used to manage  chronic  stable angina and heart failure.  The therapy
increases  blood flow and oxygen supply to the heart muscle and other organs and
decreases  the  heart's  workload  and need for  oxygen,  while  also  improving
function of the  endothelium,  the inner lining of blood vessels  throughout the
body,  lessening  resistance to blood flow.  We provide  hospitals and physician
private  practices  with  EECP(R)  equipment,  treatment  guidance,  and a staff
training and equipment  maintenance  program designed to provide optimal patient
outcomes.  EECP(R) is a registered trademark for Vasomedical's enhanced external
counterpulsation systems. For more information visit www.vasomedical.com.

     We have Food and Drug Administration  (FDA) clearance to market our EECP(R)
therapy for use in the treatment of stable and unstable angina, congestive heart
failure, acute myocardial infarction, and cardiogenic shock, however our current
marketing  efforts are limited to the  treatment  of chronic  stable  angina and
congestive  heart  failure.  Medicare  and other  third-party  payers  currently
reimburse  for the  treatment of angina  symptoms in patients  with  moderate to
severe  symptoms  who are  refractory  to  medications  and not  candidates  for
invasive  procedures,  including  patients with serious  comorbidities,  such as
heart failure, diabetes, peripheral vascular disease, etc. Patients with primary
diagnoses of heart failure, diabetes, peripheral vascular disease, etc. are also
reimbursed  under  the  same  criteria,  provided  the  primary  indication  for
treatment with EECP(R) therapy is angina symptoms.

     We recently sponsored a pivotal,  randomized  clinical trial to demonstrate
the efficacy of EECP(R)  therapy in the most  prevalent  types of heart  failure
patients.  This trial, known as PEECH(TM) (Prospective  Evaluation of EECP(R) in
Congestive Heart Failure),  was intended to provide  additional  evidence of the
safety and  efficacy of EECP(R)  therapy in the  treatment  of  mild-to-moderate
heart  failure and to support our  application  for  expansion  of the  Medicare
national reimbursement coverage policy to include mild-to-moderate heart failure
as a primary  indication.  Results of the trial were initially published on line
by the Journal of the American College of Cardiology  (JACC) on August 25, 2006,
and in print in its  September 19, 2006 issue.  JACC is the official  journal of
the  American  College of  Cardiology.  The PEECH trial was a positive  clinical
trial,  having met the  statistical  requirement  of meeting at least one of its
co-primary  endpoints,  a significant  difference in the  proportion of patients
satisfying a prespecified  threshold of improvement  in exercise  duration.  The
trial also demonstrated  significant improvements in favor of EECP(R) therapy on
several  important   secondary   endpoints,   including  exercise  duration  and
improvement  in symptom  status and quality of life.  Measures of change in peak

                                    Page 13
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



oxygen  consumption  were not  statistically  significant  in the overall  study
population,  though  a trend  favoring  EECP(R)  therapy  was  present  in early
follow-up. Patients in the trial who had an ischemic etiology, i.e. pre-existing
coronary artery disease, demonstrated a greater response to EECP(R) therapy than
those who had an idiopathic (non-ischemic) etiology.

     Very  recently,  a second  report of results from the  PEECH(TM)  trial was
published in the  November-December  2006 issue of the journal  Congestive Heart
Failure,  focusing on the results of a prespecified  subgroup  analysis in trial
patients age 65 and over. This analysis  demonstrated a  statistically  positive
response on both co-primary endpoints of the trial in patients receiving EECP(R)
therapy  versus those who did not,  i.e. a  significantly  larger  proportion of
patients undergoing EECP(R) therapy met or exceeded  prespecified  thresholds of
improvement  in exercise  duration and peak oxygen  consumption.  Moreover,  the
patients age 65 and older who received EECP(R) therapy demonstrated the greatest
differences in exercise  duration,  peak oxygen consumption and functional class
(symptom status) compared with those who did not receive EECP(R) therapy.

     The  preliminary  results  of the  PEECH(TM)  trial were  presented  at the
American  College of Cardiology  scientific  sessions in March 2005. On June 20,
2005,  the Centers  for  Medicare  and  Medicaid  Services  (CMS)  accepted  our
application  for  expansion  of  reimbursement  coverage  of EECP(R)  therapy to
include  patients  with New York Heart  Association  (NYHA) Class II/III  stable
heart failure  symptoms with an ejection  fraction of less than or equal to 35%,
i.e.  chronic,  stable,  mild-to-moderate  systolic  heart  failure as a primary
indication,   as  well  as  patients   with  Canadian   Cardiovascular   Society
Classification (CCSC) II, i.e. chronic, stable mild angina.

     On June 23, 2005, CMS also received a request from a competing manufacturer
of external  counterpulsation therapy equipment, to reconsider the reimbursement
coverage policy. They requested expansion of coverage to include 1) treatment of
congestive heart failure,  to include NYHA Class II, III with a left ventricular
ejection fraction (LVEF) less than or equal to 40%, and acute heart failure;  2)
treatment  of stable  angina to include  CCSC II angina;  3)  treatment of acute
myocardial infarction; 4) treatment of cardiogenic shock. On September 15, 2005,
they amended their request to include NYHA Class IV heart failure.

         On March 20, 2006, the Centers for Medicare and Medicaid Services (CMS)
issued their Decision Memorandum regarding this reconsideration with the opinion
"that the evidence is not adequate to conclude that external counterpulsation
therapy is reasonable and necessary for the treatment of:

     o    Canadian Cardiovascular Society Classification (CCSC) II angina
     o    Heart Failure
          - New  York  Heart  Association  Class  II/III  stable  heart  failure
          symptoms with an ejection fraction of less than or equal to 35%
          - New  York  Heart  Association  Class  II/III  stable  heart  failure
          symptoms with an ejection fraction of less than or equal to 40%
          - New York Heart Association Class IV heart failure
          - Acute heart failure
     o    Cardiogenic shock
     o    Acute myocardial infarction."

     They  commented  in their  decision  memorandum  that they were not able to
apply full weight to the evidence  generated  by the PEECH trial,  as it had not
yet been  published  in a  peer-reviewed  medical  journal by the time they were
required to issue a final decision on this application.  Moreover,  they did not
opine on whether they would  consider the results of the trial when published to
be sufficient  evidence to conclude that  external  counterpulsation  therapy is
reasonable and necessary for the treatment of New York Heart  Association  Class
II/III stable heart failure  symptoms with an ejection  fraction of less than or
equal to 35%.  They did,  however,  reiterate  in the decision  memorandum  that
"Current  coverage  as  described  in  Section  20.20 of the  Medicare  National
Coverage Determination (NCD) manual will remain in effect."

                                    Page 14
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



     We will  continue  to educate the  marketplace  that  EECP(R)  therapy is a
therapy for ischemic  cardiovascular  disease and that  patients  with a primary
diagnosis of heart failure, diabetes, peripheral vascular disease, etc. are also
eligible  for  reimbursement  under the current  coverage  policy,  provided the
primary  indication  for  treatment  with  EECP(R)  therapy  is angina or angina
equivalent   symptoms  and  the  patient   satisfies   other  listed   criteria.
Additionally,   we  will   continue  to  pursue   expansion   of  coverage   for
EECP(R)therapy  with  Medicare and other  third-party  payers as evidence of its
clinical utility develops.

Critical Accounting Policies

     Financial  Reporting  Release No. 60, which was released by the  Securities
and Exchange  Commission,  or SEC, in December  2001,  requires all companies to
include a  discussion  of critical  accounting  policies or methods  used in the
preparation  of  financial  statements.  Note A of  the  Notes  to  Consolidated
Financial  Statements  included  in our Annual  Report on Form 10-K for the year
ended May 31, 2006,  includes a summary of our significant  accounting  policies
and methods used in the  preparation of our financial  statements.  In preparing
these  financial  statements,  we have made our best  estimates and judgments of
certain amounts included in the financial  statements,  giving due consideration
to  materiality.  The  application  of these  accounting  policies  involves the
exercise of judgment and use of assumptions as to future uncertainties and, as a
result,  actual  results  could  differ  from  these  estimates.   Our  critical
accounting policies are as follows:

Revenue Recognition

     We recognize  revenue when  persuasive  evidence of an arrangement  exists,
delivery  has  occurred  or  service  has been  rendered,  the price is fixed or
determinable and collectibility is reasonably  assured. In the United States, we
recognize revenue from the sale of our EECP(R) systems in the period in which we
deliver the system to the customer. Revenue from the sale of our EECP(R) systems
to international markets is recognized upon shipment, during the period in which
we deliver the product to a common  carrier,  as are supplies,  accessories  and
spare parts delivered to both domestic and international customers.  Returns are
accepted prior to the in-service and training subject to a 10% restocking charge
or for normal warranty matters,  and we are not obligated for post-sale upgrades
to these systems.  In addition,  we use the installment method to record revenue
based on cash receipts in situations  where the account  receivable is collected
over an extended period of time and in our judgment the degree of collectibility
is uncertain.

     In most cases, revenue from domestic EECP(R) system sales is generated from
multiple-element  arrangements  that  require  judgment in the areas of customer
acceptance,  collectibility,  the  separability of units of accounting,  and the
fair value of individual  elements.  Effective September 1, 2003, we adopted the
provisions of Emerging  Issues Task Force,  or EITF,  Issue No. 00-21,  "Revenue
Arrangements  with  Multiple  Deliverables",  ("EITF  00-21"),  on a prospective
basis. The principles and guidance outlined in EITF 00-21 provide a framework to
determine (a) how the arrangement  consideration  should be measured (b) whether
the arrangement should be divided into separate units of accounting, and (c) how
the  arrangement  consideration  should be allocated among the separate units of
accounting. We determined that the domestic sale of our EECP(R) systems includes
a combination of three elements that qualify as separate units of accounting:

     i.   EECP(R) equipment sale,
     ii.  provision of in-service and training  support  consisting of equipment
          set-up and training provided at the customer's facilities, and
     iii. a service  arrangement  (usually one year),  consisting of: service by
          factory-trained  service  representatives,  material  and labor costs,
          emergency and remedial service visits,  software  upgrades,  technical
          phone support and preferred response times.

     Each of these  elements  represent  individual  units of  accounting as the
delivered  item has value to a customer on a  stand-alone  basis,  objective and
reliable  evidence of fair value exists for undelivered  items, and arrangements
normally do not  contain a general  right of return  relative  to the  delivered
item. We determine fair value based on the price of the  deliverable  when it is
sold  separately  or based  on  third-party  evidence.  In  accordance  with the
guidance in EITF 00-21,  we use the residual  method to allocate the arrangement
consideration when it does not have fair value of the EECP(R) system sale. Under
the residual method, the amount of consideration allocated to the delivered item
equals the total arrangement  consideration less the aggregate fair value of the

                                    Page 15
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



undelivered items. Assuming all other criteria for revenue recognition have been
met, we recognize revenue for:

     i.   EECP(R)  equipment sales, when delivery and acceptance occurs based on
          delivery  and  acceptance   documentation  received  from  independent
          shipping companies or customers,
     ii.  in-service  and  training,  following  documented  completion  of  the
          training, and
     iii. the service  arrangement,  ratably over the service  period,  which is
          generally one year.

     In-service and training generally occurs within three weeks of shipment and
our return policy states that no returns will be accepted  after  in-service and
training has been  completed.  The amount  related to in-service and training is
recognized as revenue at the time the  in-service  and training is completed and
the amount  related to service  arrangements  is recognized  as service  revenue
ratably over the related  service  period,  which is generally  one year.  Costs
associated  with the  provision  of  in-service  and  training  and the  service
arrangement,  including salaries,  benefits,  travel, spare parts and equipment,
are recognized in cost of sales as incurred.

     We also recognize revenue generated from servicing EECP(R) systems that are
no longer  covered  by the  service  arrangement,  or by  providing  sites  with
additional  training,  in the period that these  services are provided.  Revenue
related  to  future   commitments   under  separately  priced  extended  service
agreements on our EECP(R)  system are deferred and  recognized  ratably over the
service period,  generally ranging from one year to four years. Costs associated
with the provision of service and  maintenance,  including  salaries,  benefits,
travel, spare parts and equipment,  are recognized in cost of sales as incurred.
Amounts billed in excess of revenue  recognized are included as deferred revenue
in the consolidated balance sheets.

     Revenues  from  the  sale of  EECP(R)  systems  through  our  international
distributor  network are generally  covered by a one-year  warranty period.  For
these  customers  we accrue a warranty  reserve for  estimated  costs to provide
warranty parts when the equipment sale is recognized.

     We have  also  entered  into  lease  agreements  for our  EECP(R)  systems,
generally  for  terms of one year or less,  that  are  classified  as  operating
leases.  Revenues from operating leases are generally recognized,  in accordance
with the terms of the lease agreements,  on a straight-line  basis over the life
of the respective  leases.  For certain  operating leases in which payment terms
are  determined on a  "fee-per-use"  basis,  revenues are recognized as incurred
(i.e.,  as actual usage occurs).  The cost of the EECP(R) system  utilized under
operating  leases is recorded as a component  of property and  equipment  and is
amortized to cost of sales over the estimated useful life of the equipment,  not
to exceed five years.  There were no significant  minimum rental  commitments on
these operating leases at February 28, 2007.

Accounts Receivable, net

     The Company's accounts receivable - trade are due from customers engaged in
the provision of medical  services.  Credit is extended based on evaluation of a
customer's  financial  condition  and,  generally,  collateral  is not required.
Accounts receivable are generally due 30 to 90 days from shipment and are stated
at amounts due from customers net of allowances for doubtful accounts,  returns,
term discounts and other  allowances.  Accounts that remain  outstanding  longer
than the contractual  payment terms are considered past due.  Estimates are used
in  determining  the  allowance  for doubtful  accounts  based on the  Company's
historical  collections   experience,   current  trends,  credit  policy  and  a
percentage of our accounts  receivable by aging category.  In determining  these
percentages,  we look at historical  write-offs of our receivables.  The Company
also looks at the credit  quality of its customer base as well as changes in its
credit policies. The Company continuously monitors collections and payments from
its customers.  While credit losses have historically  been within  expectations
and the  provisions  established,  the  Company  cannot  guarantee  that it will
continue to experience the same credit loss rates that it has in the past.

                                    Page 16
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



Inventories, net

     The Company values inventory at the lower of cost or estimated market, cost
being  determined  on a first-in,  first-out  basis.  The Company  often  places
EECP(R)  systems  at  various  field  locations  for  demonstration,   training,
evaluation,  and other similar purposes at no charge.  The cost of these EECP(R)
systems is  transferred to property and equipment and is amortized over the next
two to five years.  The Company  records the cost of  refurbished  components of
EECP(R) systems and critical  components at cost plus the cost of refurbishment.
The Company  regularly reviews  inventory  quantities on hand,  particularly raw
materials  and  components,  and  records a  provision  for excess and  obsolete
inventory  based  primarily on existing and  anticipated  design and engineering
changes to our products as well as forecasts of future product demand.

     Effective June 1, 2005, we adopted the provisions of Statement of Financial
Accounting  Standards No. 151,  "Inventory  Costs", on a prospective  basis. The
statement  clarifies that abnormal  amounts of idle facility  expense,  freight,
handling  costs,  and  wasted  materials  (spoilage)  should  be  recognized  as
current-period charges and requires the allocation of fixed production overheads
to inventory  based on the normal  capacity of the production  facilities.  As a
result of adopting SFAS No. 151, we absorbed approximately $81,000 less in fixed
production overhead into inventory.

Deferred Revenues

     We record revenue on extended  service  contracts  ratably over the term of
the related warranty  contracts.  Effective  September 1, 2003, we prospectively
adopted the  provisions of EITF 00-21.  Upon adoption of the  provisions of EITF
00-21 we began to defer  revenue  related to EECP(R)  system  sales for the fair
value of  installation  and in-service  training to the period when the services
are rendered and for warranty obligations ratably over the service period, which
is generally one year.

Warranty Costs

     Equipment  sold is  generally  covered  by a  warranty  period of one year.
Effective  September  1, 2003,  we  adopted  the  provisions  of EITF 00-21 on a
prospective basis. Under EITF 00-21, for certain arrangements,  a portion of the
overall  system  price  attributable  to the first year service  arrangement  is
deferred and  recognized  as revenue  over the service  period.  As such,  we no
longer accrue  warranty  costs upon delivery but rather  recognize  warranty and
related  service  costs as incurred.  Prior to  September 1, 2003,  we accrued a
warranty  reserve for  estimated  costs to provide  warranty  services  when the
equipment sale was recognized.

     Equipment sold to international  customers through our distributor  network
is  generally  covered by a one-year  warranty  period.  For these  customers we
accrue a warranty reserve for estimated costs of providing a parts only warranty
when the equipment sale is recognized.

     The factors affecting our warranty  liability  included the number of units
sold and historical and anticipated rates of claims and costs per claim.

Net Loss per Common Share

     Basic losses per share are based on the weighted  average  number of common
shares  outstanding  without  consideration of potential  common stock.  Diluted
losses  per share  are based on the  weighted  number  of common  and  potential
dilutive  common  shares  outstanding.  The  calculation  takes into account the
shares that may be issued  upon the  exercise  of stock  options  and  warrants,
reduced by the shares that may be  repurchased  with the funds received from the
exercise, based on the average price during the period.

Income Taxes

     Deferred  income taxes are  recognized  for temporary  differences  between
financial  statement  and income tax bases of assets  and  liabilities  and loss
carryforwards  for which  income tax  benefits  are  expected  to be realized in
future years. A valuation  allowance is established,  when necessary,  to reduce

                                    Page 17
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



deferred tax assets to the amount expected to be realized.  In estimating future
tax consequences, we generally consider all expected future events other than an
enactment  of  changes  in the tax laws or  rates.  The  deferred  tax  asset is
continually  evaluated for  realizability.  To the extent our judgment regarding
the  realization  of the  deferred  tax  assets  change,  an  adjustment  to the
allowance is recorded,  with an offsetting increase or decrease, as appropriate,
in income tax expense.  Such adjustments are recorded in the period in which our
estimate as to the  realizability  of the asset  changed that it is "more likely
than not" that all of the deferred tax assets will be realized. The "more likely
than not"  standard is  subjective,  and is based upon our estimate of a greater
than 50% probability that our long range business plan can be realized.

     Deferred  tax   liabilities   and  assets  are  classified  as  current  or
non-current  based on the  classification  of the related asset or liability for
financial reporting. A deferred tax liability or asset that is not related to an
asset or  liability  for  financial  reporting,  including  deferred  tax assets
related to carryforwards, are classified according to the expected reversal date
of the  temporary  difference.  The  deferred  tax  asset  we  recorded  relates
primarily to the realization of net operating loss  carryforwards,  of which the
allocation of the current portion, if any, reflects the expected  utilization of
such net operating losses in next twelve months. Such allocation is based on our
internal  financial  forecast  and may be subject to revision  based upon actual
results.

Stock-based Employee Compensation

     In December 2004, the FASB issued Statement of Financial  Standards No. 123
(revised 2004), Share-Based Payment ("SFAS No. 123 (R)"), which is a revision of
SFAS No. 123. SFAS No. 123 (R)  supersedes  APB Opinion No. 25,  Accounting  for
Stock Issued to Employees,  and amends FASB Statement No. 95,  Statement of Cash
Flows.  Generally,  the approach to accounting for share-based  payments in SFAS
No. 123(R) is similar to the approach  described in SFAS No. 123. However,  SFAS
No. 123(R) requires all share-based  payments to employees  including  grants of
employee stock options,  to be recognized in the financial  statements  based on
their  fair  values.  Pro  forma  disclosure  of the fair  value of  share-based
payments is no longer an alternative  to financial  statement  recognition.  The
Company has five stock-based employee compensation plans.

     Prior to second quarter of fiscal 2007 the Company accounts for stock-based
compensation  using the  intrinsic  value method in accordance  with  Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related Interpretations ("APB No. 25") and has adopted the disclosure provisions
of  Statement  of  Financial  Accounting  Standards  No.  148,  "Accounting  for
Stock-Based  Compensation  -  Transition  and  Disclosure,  an amendment of FASB
Statement  No. 123." Under APB No. 25, when the exercise  price of the Company's
employee stock options  equals the market price of the  underlying  stock on the
date  of  grant,  no  compensation  expense  is  recognized.   Accordingly,   no
compensation   expense  has  been  recognized  in  the  consolidated   financial
statements in connection with employee stock option grants prior to fiscal 2007.

     In  May  2006,  the  compensation  committee  of  the  board  of  directors
accelerated the vesting  provision of all outstanding stock options and warrants
so that they were fully  vested at May 31,  2006,  and as a result  the  Company
expects that the adoption of SFAS No. 123(R) will not have an immediate material
effect on its financial statements,  however as new stock options are issued the
Company has adopted  SFAS No 123(R) and this will have a material  effect on its
quarterly  and  annual   financial   statements,   in  the  form  of  additional
compensation  expense.  It is not  possible to precisely  determine  the expense
impact of adoption since a portion of the ultimate expense that is recorded will
likely relate to awards that have not yet been granted.  The expense  associated
with these  future  awards can only be  determined  based on factors such as the
price for the Company's  common stock,  volatility of the Company's  stock price
and risk free  interest  rates as measured at the grant date.  However,  the pro
forma  disclosures  related to SFAS No. 123 included in the  Company's  historic
financial statements are relevant data points for gauging the potential level of
expense that might be recorded in future periods.

     For  purposes  of  estimating  the fair value of each option on the date of
grant, the Company utilized the Black-Scholes option-pricing model.

                                    Page 18
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
estimating the fair value of traded options,  which have no vesting restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.  Because the Company's  employee stock options have  characteristics
significantly  different from those of traded options and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

     Equity  instruments issued to non-employees in exchange for goods, fees and
services are  accounted  for under the fair  value-based  method of SFAS No. 123
(R).

Recently Issued Accounting Standards

     Statement of Financial  Accounting  Standards No. 152, "Accounting for Real
Estate Time-Sharing Transactions", an amendment of FASB Statements No. 66 and 67
(SFAS 152) was issued in  December  2004 and  becomes  effective  for  financial
statements for fiscal years  beginning after June 15, 2005. The Company does not
expect that SFAS 152 will have an effect on future financial statements.

         In December 2004, the FASB issued FASB Statement No. 153 ("SFAS No.
153"), "Exchanges of Non-monetary Assets - an amendment of APB Opinion No. 29".
SFAS No. 153 amends Opinion 29 to eliminate the exception for non-monetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of non-monetary assets that do not have commercial substance. A
non-monetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. SFAS
No. 153 is effective for fiscal periods after June 15, 2005. The Company does
not expect the adoption of SFAS No. 153 to have a material impact on the
Company's consolidated financial statements.

     In May 2005, the FASB issued  Statement of Financial  Accounting  Standards
No. 154 ("SFAS No. 154"),  "Accounting  Changes and Error Corrections." SFAS No.
154 replaces APB Opinion No. 20, Accounting  Changes,  and FASB Statement No. 3,
Reporting  Accounting Changes in Interim Financial  Statements,  and changes the
requirements  for the  accounting  for and  reporting of a change in  accounting
principle.  The  Statement  applies  to  all  voluntary  changes  in  accounting
principle. It also applies to changes required by an accounting pronouncement in
the unusual instance that the pronouncement does not include specific transition
provisions. When a pronouncement includes specific transition provisions,  those
provisions should be followed.  SFAS No. 154 is effective for accounting changes
and  corrections  of errors made in fiscal years  beginning  after  December 15,
2005.

     Statement of Financial Accounting Standards No. 155, Accounting for Certain
Hybrid Financial  Instruments--an  amendment of FASB Statements No. 133 and 140,
was issued in  February  2006 and is  effective  for all  financial  instruments
acquired or issued  after the  beginning  of an entity's  first fiscal year that
begins after September 15, 2006.  Certain parts of this Statement may be applied
prior to the adoption of this Statement. Earlier adoption is permitted as of the
beginning  of an entity's  fiscal  year,  provided the entity has not yet issued
financial statements,  including financial statements for any interim period for
that fiscal year.  Provisions of this  Statement  may be applied to  instruments
that an  entity  holds at the date of  adoption  on an  instrument-by-instrument
basis.  The  Company  does not  expect  that SFAS 155 will have any  significant
effect on future financial statements.

     Statement  of  Financial  Accounting  Standards  No.  156,  Accounting  for
Servicing of Financial  Assets--an amendment of FASB Statement No. 140, pertains
to the servicing of financial  assets and was issued in March 2006 and should be
adopted as of the beginning of its first fiscal year that begins after September
15,  2006.  Earlier  adoption is  permitted  as of the  beginning of an entity's
fiscal  year,  provided  the  entity has not yet  issued  financial  statements,
including interim financial statements,  for any period of that fiscal year. The
Company does not expect that SFAS 156 will have any significant effect on future
financial statements.

                                    Page 19
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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




     In March 2005, FASB Interpretation No. 47, Accounting for Conditional Asset
Retirement  Obligations--an  interpretation  of FASB Statement No. 143 (FIN 47).
FIN 47 is effective no later than the end of fiscal years ending after  December
15, 2005  (December  31, 2005,  for  calendar-year  enterprises).  Retrospective
application for interim financial  information is permitted but is not required.
Early adoption of this Interpretation is encouraged. The Company does not expect
that FIN 47 will have any significant effect on future financial statements.

     In December  2004,  the  Accounting  Standards  Executive  Committee of the
American Institute of Certified Public  Accountants  (AcSEC) issued Statement of
Position 04-2, Accounting for Real Estate Time-Sharing  Transactions (SOP 04-2).
SOP 04-2 is effective for financial statements issued for fiscal years beginning
after June 15, 2005, with earlier application  encouraged.  The Company does not
expect that SOP 04-2 will have any effect on future financial statements.

     In September 2005, AcSEC issued  Statement of Position 05-1:  Accounting by
Insurance   Enterprises  for  Deferred  Acquisition  Costs  in  Connection  with
Modifications  or  Exchanges  of  Insurance  Contracts  (SOP 05-1).  SOP 05-1 is
effective  for fiscal years  beginning  after  December  15, 2006,  with earlier
adoption  encouraged.  The  Company  does not expect that SOP 05-1 will have any
effect on future financial statements.

     FASB Staff  Position (FSP) FAS  13-1--Accounting  for Rental Costs Incurred
during a  Construction  Period,  was  issued on October  6,  2005,  and  becomes
effective for new transactions or arrangements  entered into after the beginning
of the first fiscal  quarter  following the date that the final FSP is posted by
the FASB.  The Company  does not expect that FSP 13-1 will have any  significant
effect on future financial statements.

     On June 29,  2005,  the FASB  ratified the  consensus  reached for Emerging
Issues Task Force (EITF)  Issue No. 05-5,  Accounting  for Early  Retirement  or
Postemployment  Programs  with  Specific  Features  (Such As Terms  Specified in
Altersteilzeit  Early  Retirement  Arrangements).  The  consensus  in this Issue
should be applied  to fiscal  years  beginning  after  December  15,  2005,  and
reported as a change in accounting  estimate  effected by a change in accounting
principle as described in paragraph 19 of FASB  Statement  154. The Company does
not expect that EITF 05-5 will have any significant  effect on future  financial
statements.

     On September 28, 2005,  the FASB  ratified the  consensus  reached for EITF
Issue No. 05-7,  Accounting for Modifications to Conversion  Options Embedded in
Debt  Instruments  and Related  Issues.  The  provisions of this Issue should be
applied  to future  modifications  of debt  instruments  beginning  in the first
interim or annual  reporting  period  beginning  after  December 15,  2005.  The
Company  expects  that the  application  of EITF  05-7  could  have an effect on
interest and debt valuations in future financial statements.  It is not possible
to determine the impact, if any, from the application since the Company does not
presently have any convertible debt.

     On July 13, 2006, the FASB issued  Interpretation No. 48 for Uncertainty in
Income  Taxes  and  Interpretation  of FASB  Statement  109.  Interpretation  48
clarifies  the  accounting  for  uncertainty  in income  taxes  recognized  in a
company's  financial  statements  in  accordance  with  Statement  No.  109  and
prescribes a  recognition  threshold  and  measurement  attribute  for financial
statements  disclosure  of tax  position  taken or expected to be taken on a tax
return.  Additionally,  Interpretation No. 48 provides guidance on depreciation,
classification, interest and penalties accounting in interim periods, disclosure
and  transition.  Interpretation  No. 48 is effective for fiscal years beginning
after December 15, 2006, with early adoption permitted. The Company is currently
evaluating  whether the adoption of  Interpretation  No. 48 will have a material
effect on our consolidated  financial  position,  results of operations and cash
flows.

     In July 2006,  the FASB issued  Staff  Position  ("FSB") on FAS 13, FSP FAS
13-2,  Accounting  for a Change or Projected  Change in the Timing of Cash Flows
Relating to Income Taxes  Generated by a Leveraged  Lease  Transaction.  FSP FAS
13-2  addresses  how a change or  projected  change in the  timing of cash flows
relating to income taxes generated by a leveraged lease transaction  affects the
accounting by a lessor for that lease and amends FAS 13  Accounting  for Leases.

                                    Page 20
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



FSP FAS 13-2 is effective  for fiscal years  beginning  December 15, 2006,  with
earlier  application  permitted.  The Company  does not expect that FSP FAS 13-2
will have any significant effect on future financial statements.

     Statement  of  Financial   Accounting   Standards   No.  157,   Fair  Value
Measurements.  This  Statement  defines fair value,  establishes a framework for
measuring fair value,  and expands  disclosures  about fair value  measurements.
This Statement  applies under other  accounting  pronouncements  that require or
permit fair value measurements,  the Board having previously  concluded in those
accounting pronouncements that fair value is the relevant measurement attribute.
Accordingly,  this Statement  does not require any new fair value  measurements.
However,  for some  entities,  the  application  of this  Statement  will change
current  practice.  This Statement is effective for financial  statements issued
for fiscal years  beginning  after November 15, 2007, and interim periods within
those  fiscal  years.  Earlier  application  is  encouraged,  provided  that the
reporting entity has not yet issued  financial  statements for that fiscal year,
including  financial  statements  for an interim period within that fiscal year.
The Company does not expect that this  pronouncement  will have any  significant
effect on future financial statements.

     FASB Staff Position (FSP) No. FIN 46(R)-6,  Determining  the Variability to
Be Considered in Applying FASB  Interpretation  No. 46 (revised  December 2003),
Consolidation  of  Variable  Interest  Entities.  Posted on April 13,  2006.  An
enterprise  shall apply the guidance in this FSP  prospectively  to all entities
(including  newly created  entities)  with which that  enterprise  first becomes
involved  and  to  all  entities   previously  required  to  be  analyzed  under
Interpretation  46(R) when a  reconsideration  event has  occurred  pursuant  to
paragraph  7 of  Interpretation  46(R)  beginning  the  first  day of the  first
reporting period  beginning after June 15, 2006. Early  application is permitted
for  periods  for  which   financial   statements  have  not  yet  been  issued.
Retrospective   application   to  the  date  of  the  initial   application   of
Interpretation 46(R) is permitted but not required.  Retrospective  application,
if  elected,  must be  completed  no  later  than  the end of the  first  annual
reporting  period  ending after July 15, 2006.  The Company does not expect that
this  pronouncement  will  have  any  significant  effect  on  future  financial
statements.

     FASB  Interpretation  No. 47,  Accounting for Conditional  Asset Retirement
Obligations--an  interpretation of FASB Statement No. 143 (FIN 47) was issued in
March 2005.  FIN 47 is  effective  no later than the end of fiscal  years ending
after  December 15, 2005  (December 31, 2005,  for  calendar-year  enterprises).
Retrospective  application for interim financial information is permitted but is
not required.  Early adoption of this Interpretation is encouraged.  The Company
does not expect that FIN 47 will have any significant effect on future financial
statements.

     FASB Staff  Position (FSP) No. FTB 85-4-1,  Accounting for Life  Settlement
Contracts  by  Third-Party  Investors,  was  posted  in  March  27,  2006 and is
effective for fiscal years  beginning  after June 15, 2006. It provides  initial
and subsequent  measurement  guidance and financial  statement  presentation and
disclosure guidance for investments by third-party  investors in life settlement
contracts.  This FSP also amends certain  provisions of FASB Technical  Bulletin
No. 85-4,  Accounting  for Purchases of Life  Insurance,  and FASB Statement No.
133, Accounting for Derivative  Instruments and Hedging Activities.  The Company
does not  expect  that  (FSP) No.  FTB  85-4-1  will  have any  effect on future
financial statements.

Statement of Financial Accounting  Standards No. 158, Employers'  Accounting for
Defined Benefit  Pension and Other  Postretirement  Plans--an  amendment of FASB
Statements  No. 87, 88, 106, and 132(R).  This Statement  requires  employers to
recognize  the   overfunded  or   underfunded   status  of  a  defined   benefit
postretirement  plan (other than a multiemployer  plan) as an asset or liability
in its statement of financial  position and to recognize  changes in that funded
status in the year in which the changes occur through  comprehensive income of a
business  entity or  changes  in  unrestricted  net  assets of a  not-for-profit
organization.  This  Statement  also  requires  employers  to measure the funded
status of a plan as of the date of its year-end statement of financial position,
with limited exceptions.

An employer  with  publicly  traded  equity  securities is required to initially
recognize  the funded  status of a defined  benefit  postretirement  plan and to
provide the required  disclosures  as of the end of the fiscal year ending after
December 15, 2006.

                                    Page 21
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



An employer without  publicly traded equity  securities is required to recognize
the funded status of a defined  benefit  postretirement  plan and to provide the
required  disclosures  as of the end of the fiscal  year  ending  after June 15,
2007. The Company does not expect that SFAS 158 will have any significant effect
on future financial statements.

     Statement of Financial  Accounting Standards No. 159, The Fair Value Option
for Financial Assets and Financial  Liabilities - Including an Amendment to FASB
Statement No. 115.  This  Statement  permits  entities to choose to measure many
financial instruments and certain other items at fair value. The objective is to
improve  financial  reporting  by providing  entities  with the  opportunity  to
mitigate  volatility in reported earnings caused by measuring related assets and
liabilities  differently  without  having  to  apply  complex  hedge  accounting
provisions.  This  Statement  is  expected  to  expand  the  use of  fair  value
measurement,   which  is  consistent  with  the  Board's  long-term  measurement
objectives for accounting for financial instruments. This Statement is effective
as of the beginning of an entity's  first fiscal year that begins after November
15, 2007,  and interim  periods  within those fiscal  years.  Early  adoption is
permitted as of the beginning of a fiscal year that begins on or before November
15,  2007,  provided  the entity  also  elects to apply the  provisions  of FASB
Statement  No. 157,  Fair Value  Measurements.  The Company does not expect that
SFAS 158 will have any significant effect on future financial statements.

     FASB Staff  Position  (FSP) No. AUG AIR-1,  Accounting  for  Planned  Major
Maintenance Activities, was posted on September 8, 2006 and is effective for the
first fiscal year  beginning  after  December 15, 2006.  This FSP  addresses the
accounting  for  planned  major   maintenance   activities  and  amends  certain
provisions  in the AICPA  Industry  Audit  Guide,  Audits of  Airlines  (Airline
Guide), and APB Opinion No. 28, Interim Financial  Reporting.  The Airline Guide
permits four  alternative  methods of accounting  for planned major  maintenance
activities:   direct  expense,   built-in   overhaul,   deferral,   and  accrual
(accrue-in-advance).  Those methods are widely used by other industries. The FSP
prohibits the use of the  accrue-in-advance  method. The Company does not expect
that this  pronouncement  will have any significant  effect on future  financial
statements.

     FASB Staff Position No. FAS 126-1,  Applicability of Certain Disclosure and
Interim  Reporting  Requirements for Obligors for Conduit Debt  Securities,  was
posted on  October  25,  2006.  This FASB Staff  Position  (FSP)  clarifies  the
definition  of a public  entity  in  certain  accounting  standards  to  include
entities  that are conduit bond  obligors for conduit debt  securities  that are
traded  in a  public  market.  The  guidance  in  this  FSP  is  to  be  applied
prospectively  in fiscal periods  beginning after December 15, 2006. The Company
does not expect  that this  pronouncement  will have any  significant  effect on
future financial statements.

     FASB Staff  Position (FSP) No. EITF 00-19-2,  Accounting  for  Registration
Payment  Arrangements.  Posted on December  21, 2006.  This FASB Staff  Position
(FSP) addresses an issuer's  accounting for registration  payment  arrangements.
This FSP specifies  that the  contingent  obligation to make future  payments or
otherwise  transfer  consideration  under a  registration  payment  arrangement,
whether issued as a separate agreement or included as a provision of a financial
instrument or other agreement,  should be separately  recognized and measured in
accordance  with FASB Statement No. 5, Accounting for  Contingencies.  Effective
immediately.  The Company does not expect that this  pronouncement will have any
significant effect on future financial statements.

     EITF Issue 06-8,  Applicability  of the Assessment of a Buyer's  Continuing
Investment under FASB Statement No. 66 for Sales of  Condominiums.  In assessing
the  collectibility  of the sales price pursuant to paragraph 37(d) of Statement
66, an entity should evaluate the adequacy of the buyer's initial and continuing
investment  to  conclude  that the sales  price is  collectible.  This  Issue is
effective for the first annual  reporting period beginning after March 15, 2007.
Earlier  application is permitted as of the beginning of an entity's fiscal year
provided that the entity has not yet issued financial statements for that fiscal
year.  The  Company  does not  expect  that  this  pronouncement  will  have any
significant effect on future financial statements.

                                    Page 22
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



Results of Operations

Three Months Ended February 28, 2007 and 2006

     Net revenue from sales,  leases and service of our EECP(R)  systems for the
three-month  periods  ended  February  28,  2007 and 2006,  was  $1,381,501  and
$2,841,821,  respectively,  which represented a decline of $1,460,320 or 51%. We
reported a net loss of $510,256 compared to $671,447 for the three-month periods
ended  February  28,  2007  and  2006,  respectively.  We  reported  a net  loss
attributable  to common  stockholders  of $510,256  and  $694,781  for the third
quarter of fiscal 2007 and 2006, respectively. Our net loss per common share was
$0.01 for the three-month  period ended February 28, 2007 compared to a net loss
of $0.01 per share for the three-month period ended February 28, 2006.

Revenues

     Revenue from equipment sales declined approximately 76% to $432,124 for the
three-month  period ended  February 28, 2007 as compared to  $1,807,625  for the
same period for the prior year. The decline in equipment  sales is due primarily
to a 70%  decline in the number of  equipment  shipments  and a 28%  decrease in
average sales prices.  The overall decrease in average sales prices is primarily
due to the decline of equipment  sales in both the  domestic  and  international
markets, from the prior fiscal period.

     We believe the decline in domestic units shipped  reflects  weakened demand
in the  refractory  angina market as existing  capacity is more fully  utilized,
coupled with  increased  direct and indirect  competition.  We  anticipate  that
demand for EECP(R)  systems  will remain soft unless  there is greater  clinical
acceptance  for the use of EECP(R)  therapy in treating  patients with angina or
angina equivalent symptoms who meet the current  reimbursement  guidelines or an
expansion  of the current CMS national  reimbursement  policy to include some or
all  Class II & III  heart  failure  patients.  Patients  with  angina or angina
equivalent  symptoms eligible for  reimbursement  under current policies include
many with serious  comorbidities,  such as heart failure,  diabetes,  peripheral
vascular disease and/or others.  Despite this, many cardiology clinicians appear
to be waiting for  approval of  reimbursement  coverage  for heart  failure as a
primary  indication before they will move forward with the treatment of ischemic
heart failure patients with angina equivalent  symptoms.  Reluctance to bill for
ischemic  heart failure  patients  under the current  coverage  guidelines,  and
failure to get or maintain adequate  reimbursement coverage for angina and heart
failure would  adversely  affect our business  prospects.  We anticipate  that a
prevailing  trend of declining  prices will continue in the immediate  future as
our  competition  attempts  to capture  greater  market  share  through  pricing
discounts.  The average price of new systems  sales  declined  slightly,  in the
third quarter of fiscal 2007, compared to the same period in the prior year, but
was offset by an 81% decline in the average sales price of used  systems.  There
was a higher mix of used units sold domestically  during the three-month  period
ended  February  28, 2007 for which there are higher  average  sales prices than
those sold  internationally.  During the  three-month  period ended February 28,
2006 used system  sales  consisted  of mostly  used units sold  internationally,
which  generate  lower average sales prices.  Lastly,  we continue to reorganize
certain territory  responsibilities in our sales department due to vacant and/or
unproductive  territories.  Our  revenue  from the sale of  EECP(R)  systems  to
international  distributors  in the  third  quarter  of  fiscal  2007  decreased
approximately  56% to $137,333  compared to $310,199 in same period of the prior
year reflecting decreased sales volume.

     The above decline in revenue was also a result of an 8% decrease in revenue
from equipment rental and services for the three-month period ended February 28,
2007, from the same three-month period in the prior year. Revenue from equipment
rental and services  represented  69% of total  revenue in the third  quarter of
fiscal 2007 compared to 36% in the third quarter of fiscal 2006. The decrease in
the  absolute  amounts  and the  decrease  in the  percentage  of total  revenue
resulted  primarily  from a 7%  decline in service  related  revenue,  and a 66%
decline in rental  revenue.  The  decline  was due to a  decrease  in the rental
install base from the prior period ended February 28, 2006.

                                    Page 23
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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


Gross Profit

     Gross profit  declined to $780,646 or 57% of revenues  for the  three-month
period ended  February 28, 2007,  compared to  $1,613,802 or 57% of revenues for
the  three-month  period  ended  February 28,  2006.  Gross  profit  margin as a
percentage  of revenue for the  three-month  period  ended  February  28,  2007,
decreased compared to the same period of the prior fiscal year mainly due to the
higher fixed  production unit costs  associated  with reduced  production due to
decreasing sales in the last three fiscal quarters. In addition, the adoption of
SFAS No. 151 lowered the amount of fixed  overhead costs absorbed into inventory
in the third  quarter of fiscal 2007.  The decline in gross profit when compared
to the prior year in  absolute  dollars is  principally  due to the lower  sales
volume.

     Gross profits are dependent on a number of factors, particularly the mix of
EECP(R)  models  sold  domestically  and  internationally  and their  respective
average selling prices,  the mix of EECP(R) units sold,  rented or placed during
the period,  the ongoing costs of servicing such units, and certain fixed period
costs,  including  facilities,  payroll and insurance.  Gross profit margins are
generally less on non-domestic business due to the use of distributors resulting
in lower selling  prices.  Consequently,  the gross profit  realized  during the
current period may not be indicative of future margins.

Selling, General and Administrative

     Selling,  general and administrative ("SG&A") expenses for the three-months
ended  February  28,  2007 and 2006,  were  $1,024,688  or 74% of  revenues  and
$1,852,173 or 65% of revenues, respectively reflecting a decrease of $827,485 or
approximately  45%. The decrease in SG&A  expenditures  in the third  quarter of
fiscal 2007 compared to fiscal 2006 resulted  primarily from decreased sales and
marketing  expenditures  reflecting  lower  sales and  marketing  personnel  and
travel, plus reduced market research and advertising costs.

Research and Development

     Research and  development  ("R&D")  expenses of $253,346 or 18% of revenues
for the three months ended February 28, 2007, decreased by $159,651 or 39%, from
$412,997 or 15% of revenues for the three months  ended  February 28, 2006.  The
decrease is primarily attributable to lower new product development spending and
reduced spending on clinical trials.

Provision for Doubtful Accounts

     During the  three-month  periods  ended  February  28,  2007 and 2006,  the
Company   recorded  a  provision  for  doubtful   accounts  of  $2,661  and  $0,
respectively.  The minimal  change in the  provision  is a direct  result of the
third quarter of fiscal 2007 decrease in accounts receivable and sales.

Interest Expense and Financing Costs

     Interest   expense  and  financing   costs  decreased  to  $16,952  in  the
three-month  period ended February 28, 2007, from $19,346 for the same period in
the prior year. Interest expense primarily reflects interest on loans secured to
refinance the November 2000 purchase of the Company's headquarters and warehouse
facility.

Interest and Other Income, Net

     Interest and other income for the three months ended  February 28, 2007 and
2006, were $12,445 and $18,251 respectively.  Interest income primarily reflects
interest earned on the Company's cash balances.  As cash balances  decline,  the
direct impact is a decrease in interest income.

Income Tax Expense, Net

     During the  three-months  ended  February 28, 2007 and 2006,  we recorded a
provision for state income taxes of $5,700 and $0, respectively.

         As of February 28, 2007, the recorded deferred tax assets were
$20,038,976, reflecting an increase of $173,487 during the three months ended
February 28, 2007, which was offset by the valuation allowance of the same
amount.

                                    Page 24
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



     Ultimate  realization  of any or all of  the  deferred  tax  assets  is not
assured, due to significant  uncertainties and material  assumptions  associated
with  estimates of future  taxable  income during the  carryforward  period.  In
February 2006, we concluded that,  based upon the weight of available  evidence,
it was  "more  likely  than not" that the net  deferred  tax asset  would not be
realized and  increased  the  valuation  allowance to bring the net deferred tax
asset carrying value to zero.

Nine Months Ended February 28, 2007 and 2006

     Net revenue from sales,  leases and service of our EECP(R)  systems for the
nine-month  periods  ended  February  28,  2007 and  2006,  was  $4,986,580  and
$9,058,376,  respectively,  which represented a decline of $4,071,796 or 45%. We
reported a net loss of $1,418,648  compared to  $10,196,944  for the  nine-month
periods ended February 28, 2007 and 2006,  respectively.  We reported a net loss
attributable to common  stockholders of $1,418,648 and $11,074,814 for the third
quarter of fiscal 2007 and 2006, respectively. Our net loss per common share was
$0.02 for the  nine-month  period ended February 28, 2007 compared to a net loss
of $0.18 per share for the  nine-month  period  ended  February  28,  2006.  The
decrease in the net loss per share is due  primarily to a $7,112,826  income tax
valuation  reserve  established in November 2005 for the remaining  value of the
deferred tax asset.

Revenues

     Revenue from equipment sales declined  approximately  65% to $2,080,272 for
the nine-month  period ended February 28, 2007 as compared to $5,998,943 for the
same period for the prior year. The decline in equipment  sales is due primarily
to a 57% decline in the number of  equipment  shipments,  and a 25%  decrease in
average  sales  prices.  A higher mix of used  equipment  sold versus both newer
model  equipment  and new  equipment  was partially the cause of the decrease in
average sales prices,  as well as the overall  decline in equipment sales in the
domestic market.

     We believe the decline in domestic units shipped  reflects  weakened demand
in the  refractory  angina market as existing  capacity is more fully  utilized,
coupled with  increased  direct and indirect  competition.  We  anticipate  that
demand for EECP(R)  systems  will remain soft unless  there is greater  clinical
acceptance  for the use of EECP(R)  therapy in treating  patients with angina or
angina equivalent symptoms who meet the current  reimbursement  guidelines or an
expansion  of the current CMS national  reimbursement  policy to include some or
all  Class II & III  heart  failure  patients.  Patients  with  angina or angina
equivalent  symptoms eligible for  reimbursement  under current policies include
many with serious  comorbidities,  such as heart failure,  diabetes,  peripheral
vascular disease and/or others.  Despite this, many cardiology clinicians appear
to be waiting for  approval of  reimbursement  coverage  for heart  failure as a
primary  indication before they will move forward with the treatment of ischemic
heart failure patients with angina equivalent  symptoms.  Reluctance to bill for
ischemic heart failure patients under the current coverage  guidelines,  failure
to get or maintain adequate  reimbursement coverage for angina and heart failure
would adversely affect our business  prospects.  We anticipate that a prevailing
trend  of  declining  prices  will  continue  in  the  immediate  future  as our
competition  attempts to capture greater market share through pricing discounts.
The average price of new systems sales  decreased  slightly,  in the first three
quarters  of fiscal  2007  compared to the same period in the prior year but was
offset by an 39% decline in the average sales price of used systems. There was a
higher mix of used units  sold  domestically  for the  nine-month  period  ended
February 28, 2007 for which there are higher average sales prices than for those
sold internationally.  During the nine-month period ended February 28, 2006 used
system sales consisted of mostly used units sold internationally, which generate
lower average sales prices.  Lastly, we continue to reorganize certain territory
responsibilities  in our  sales  department  due to vacant  and/or  unproductive
territories.  Our  revenue  from the sale of EECP(R)  systems  to  international
distributors  during the first nine months  ended  February  28, 2007  increased
approximately 12% to $829,288 compared $741,915 in same period of the prior year
reflecting increased sales volume.

     The above  decline in revenue  was also  partially  due to a 5% decrease in
revenue  from  equipment  rental and services  for the  nine-month  period ended
February 28, 2007,  from the same nine-month  period in the prior year.  Revenue
from  equipment  rental and services  represented  58% of total  revenue for the

                                    Page 25
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



first nine months ended  February  28, 2007  compared to 34% for the same period
the prior year.  The  decrease in the  absolute  amounts and the increase in the
percentage of total revenue  resulted  primarily from a less than a 2% change in
service related  revenue,  and a 69% decline in rental revenue.  The decline was
due to a  decrease  in the rental  installed  base from the prior  period  ended
February 28, 2006.

Gross Profit

     Gross profit  declined to $2,704,507 or 54% of revenues for the  nine-month
period ended  February 28, 2007,  compared to  $5,309,344 or 59% of revenues for
the  nine-month  period  ended  February  28,  2006.  Gross  profit  margin as a
percentage  of revenue  for the  nine-month  period  ended  February  28,  2007,
decreased compared to the same period of the prior fiscal year mainly due to the
higher fixed  production unit costs associated with reduced  production,  due to
decreased sales in the last three fiscal quarters. In addition,  the adoption of
SFAS No. 151 lowered the amount of fixed  overhead costs absorbed into inventory
for the nine months ended  February  28, 2007.  The decline in gross profit when
compared to the prior year in absolute  dollars is a direct  result of the lower
sales volume.

     Gross profits are dependent on a number of factors, particularly the mix of
EECP(R)  models  sold  domestically  and  internationally  and their  respective
average selling prices,  the mix of EECP(R) units sold,  rented or placed during
the period,  the ongoing costs of servicing such units, and certain fixed period
costs,  including  facilities,  payroll and insurance.  Gross profit margins are
generally less on non-domestic business due to the use of distributors resulting
in lower selling  prices.  Consequently,  the gross profit  realized  during the
current period may not be indicative of future margins.

Selling, General and Administrative

     Selling,  general and administrative  ("SG&A") expenses for the nine-months
ended  February  28,  2007 and  2006  were  $3,381,852  or 68% of  revenues  and
$6,769,946 or 75% of revenues,  respectively reflecting a decrease of $3,388,094
or  approximately  50%.  The  decrease in SG&A  expenditures  in the first three
quarters  of  fiscal  2007  compared  to fiscal  2006  resulted  primarily  from
decreased sales and marketing expenditures  reflecting fewer sales and marketing
personnel and reduced travel, plus lower market research, and advertising costs.

Research and Development

     Research and  development  ("R&D")  expenses of $722,631 or 14% of revenues
for the nine months ended February 28, 2007,  decreased by $806,068 or 53%, from
the nine months ended  February 28, 2006, of $1,528,699 or 17% of revenues.  The
decrease is primarily attributable to lower new product development spending and
reduced spending on clinical trials.

Provision for Doubtful Accounts

     During the nine-month  period ended February 28, 2007, the Company reversed
$1,340 from its provision for doubtful accounts as compared to recording $89,559
during the  nine-month  period  ended  February  28,  2006.  The decrease in the
provision is a direct result of the first three quarters of fiscal 2007 decrease
in accounts  receivable and sales from the corresponding  quarter ended February
28, 2006.

Interest Expense and Financing Costs

     Interest expense and financing costs decreased to $54,281 in the nine-month
period ended  February  28, 2007,  from $64,299 for the same period in the prior
year. Interest expense primarily reflects interest on loans secured to refinance
the November 2000 purchase of the Company's headquarters and warehouse facility.

Interest and Other Income, Net

     Interest and other  income for the first three  quarters of fiscal 2007 and
fiscal 2006, were $48,269 and $59,041,  respectively.  Interest income primarily
reflects  interest  earned on the  Company's  cash  balances.  As cash  balances
decline, the direct impact is a decrease in interest income.

                                    Page 26
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



Income Tax Expense, Net

     During the  nine-months  ended  February  28, 2007 and 2006,  we recorded a
provision for state income taxes of $14,000 and  $7,112,826,  respectively.  The
fiscal 2006 tax expense  consists  mainly of $7,093,000 in additional  valuation
allowance  provided for the deferred tax asset in the second  fiscal  quarter of
2006.  The income tax  expense for the first nine months of fiscal 2006 does not
include  $7,489,000  added  to the  deferred  tax  valuation  allowance  for tax
benefits  associated with prior years'  exercises of stock options and warrants,
which was charged directly to additional paid-in capital.

     As of February 28, 2007, the recorded deferred tax assets were $20,038,976,
reflecting  an increase of $479,518  during the nine months  ended  February 28,
2007, which was offset by the valuation allowance of the same amount.

Ultimate  realization  of any or all of the  deferred tax assets is not assured,
due to  significant  uncertainties  and  material  assumptions  associated  with
estimates of future taxable income during the carryforward  period.  In February
2006, we concluded  that,  based upon the weight of available  evidence,  it was
"more likely than not" that the net deferred tax asset would not be realized and
increased the valuation  allowance to bring the net deferred tax asset  carrying
value to zero.

Liquidity and Capital Resources

     We have financed our operations in fiscal 2007 and fiscal 2006 from working
capital  mainly  provided by the  issuance of preferred  stock.  At February 28,
2007, we had cash, and cash  equivalents  of $1,041,890  and working  capital of
$1,433,547 as compared to cash, cash  equivalents,  and  certificates of deposit
totaling $2,385,778 and working capital of $2,867,288 at May 31, 2006. Our cash,
cash equivalents,  and certificates of deposit balances decreased  $1,343,888 in
fiscal  year  2007  primarily  due to  cash  used  in  operating  activities  of
$1,107,494 and cash used in financing activities of $236,394.

     The  decrease in cash used in operating  activities  during the first three
quarters of fiscal year 2007 resulted  primarily from the net loss of $1,418,648
plus adjustments to reconcile net loss to net cash used in operating  activities
of $311,154.  Changes in our operating assets and liabilities were $71,976.  The
changes  in the asset  components  primarily  reflect  a  decrease  in  accounts
receivable of $280,959,  lower inventory of $495,036 and other current assets of
$129,865.  The changes in our operating liability  components reflect a decrease
in accounts payable and accrued  liabilities of $604,806 and a decrease in other
liabilities  of  $228,005.  Non-cash  adjustments  amounted to  $239,178,  which
partially offset the above. Net accounts receivable were 11% of revenues for the
nine-month  period ended  February  28, 2007,  compared to 28% at the end of the
nine-month period ended February 28, 2006, and accounts  receivable turnover was
6.4 times as of February 28, 2007, and was 6.2 times as of February 28, 2006.

     Standard payment terms on our domestic equipment sales are generally net 30
to 90 days from  shipment and do not contain  "right of return"  provisions.  We
have  historically  offered a  variety  of  extended  payment  terms,  including
sales-type  leases,  in certain  situations and to certain customers in order to
expand the market for our EECP(R) products in the US and  internationally.  Such
extended payment terms were offered in lieu of price concessions, in competitive
situations,  when opening new markets or geographies  and for repeat  customers.
Extended payment terms cover a variety of negotiated terms, including payment in
full - net 120, net 180 days or some fixed or variable  monthly  payment  amount
for a six to twelve month period followed by a balloon  payment,  if applicable.
During  the  first  three  quarters  of fiscal  2007 and  2006,  less than 1% of
revenues were generated  from sales in which initial  payment terms were greater
than 90 days and we  offered no  sales-type  leases  during  either  period.  In
general,  reserves are calculated on a formula basis considering factors such as
the aging of the receivables,  time past due, and the customer's  credit history
and their  current  financial  status.  In most  instances  where  reserves  are
required, or accounts are ultimately written-off,  customers have been unable to
successfully  implement their EECP(R)  program.  As we are creating a new market
for the EECP(R)  therapy and  recognizing the challenges that some customers may
encounter, we have opted, at times, on a customer-by-customer  basis, to recover

                                    Page 27
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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



our equipment  instead of pursuing other legal  remedies,  which has resulted in
our recording of a reserve or a write-off.

     There were no  investing  activities  during the  nine-month  period  ended
February 28, 2007.

     Our financing activities used cash of $236,394 during the nine-month period
ended February 28, 2007, reflecting payments on our outstanding notes and loans.

     We have  incurred  large  declines  in revenue  and  sustained  significant
operating  losses  during the last four fiscal years and our ability to continue
operating  as a going  concern is  dependent  upon  achieving  profitability,  a
strategic  alliance within the sales and marketing areas, or through  additional
debt or equity  financing.  Achieving  profitability  is  largely  dependent  on
sufficiently reducing operating costs and halting the current trend of declining
revenue.  Our  ability to halt the  declines  in revenue and restore our revenue
base is largely  dependent upon  increasing the demand in the refractory  angina
market and operating in a more efficient  manner. To date, we have not been able
to restore our revenue base and reduce operating costs  significantly  enough to
generate an adequate cash inflow, nor raise additional capital, so we may not be
able to continue as a going concern.

     We believe that our projected cash flow from  operations  together with our
current  cash  reserves  and  working  capital  will be  sufficient  to fund our
business  plan and projected  capital  requirements  through May 2007,  assuming
our current revenue rate.

     The following table presents the Company's  expected cash  requirements for
contractual obligations outstanding as of February 28, 2007.
<TABLE>
<CAPTION>
                                                                     Due as of        Due as of
                                                     Due as of      2/28/09 and      2/28/11 and         Due
                                        Total         2/29/08         2/28/10          2/29/12        Thereafter
--------------------------------------------------------------------------------------------------------------------
<S>                                     <C>               <C>            <C>             <C>              <C>
Long-Term Debt
Notes Payable                           $866,753          $64,631        $144,524        $165,656         $491,942
Employment Agreements                    340,167          260,000          80,167              --               --
                                 -----------------------------------------------------------------------------------
Total Contractual Cash                $1,206,920         $324,631        $224,691        $165,656         $491,942
    Obligations                  ===================================================================================

</TABLE>
Effects of Inflation

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

                                    Page 28

<PAGE>
                       Vasomedical, Inc. and Subsidiaries



ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4 - CONTROLS AND PROCEDURES

     We  carried  out  an  evaluation,   under  the  supervision  and  with  the
participation of our management, including our Chief Executive Officer and Chief
Financial  Officer,  of the  effectiveness  of the design and  operation  of our
disclosure controls and procedures  pursuant to Exchange Act Rule 13a-15.  Based
upon that evaluation,  the Chief Executive  Officer and Chief Financial  Officer
concluded that, as of February 28, 2007, our disclosure  controls and procedures
are effective to provide reasonable assurances that such disclosure controls and
procedures  satisfy their  objectives  and that the  information  required to be
disclosed  by us in the  reports we file  under the  Exchange  Act is  recorded,
processed,  summarized and reported within the required time periods. There were
no changes  during the fiscal  quarter  ended  February 28, 2007 in our internal
controls  or in other  factors  that  could  have  materially  affected,  or are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.

                                    Page 29
<PAGE>
                       Vasomedical, Inc. and Subsidiaries



                           PART II - OTHER INFORMATION

ITEM 6 - EXHIBITS


Exhibits

31   Certifications  pursuant to Rules 13a-14(a) as adopted  pursuant to Section
     302 of the Sarbanes-Oxley Act of 2002.

32   Certifications  pursuant to 18 U.S.C.  Section 1350 as adopted  pursuant to
     Section 906 of the Sarbanes-Oxley Act of 2002.

                                    Page 30
<PAGE>


         In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                VASOMEDICAL, INC.

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

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

Date:  April 16, 2007