UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q


[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended November 30, 2009

[ ] 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 [ ]
                          Smaller Reporting Company [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 January 12,
2010                                            99,843,004

                                     Page 1
<PAGE>
Vasomedical, Inc. and Subsidiaries



                                      INDEX


                                                                            Page
                                                                            ----
PART I - FINANCIAL INFORMATION

         Item 1 - Financial Statements (unaudited)

                  Consolidated Condensed Balance Sheets as of
                           November 30, 2009 and May 31, 2009                  3

                  Consolidated Condensed Statements of Operations for the
                           Three and Six Months Ended November 30, 2009 and
                           November 30, 2008                                   4

                  Consolidated Condensed Statements of Cash Flows for the
                           Six Months Ended November 30, 2009 and
                           November 30, 2008                                   5

                  Notes to Consolidated Condensed Financial Statements         6

         Item 2 - Management's Discussion and Analysis of Financial Condition
                 and Results of Operations                                    12

         Item 3 - Quantitative and Qualitative Disclosures About Market Risk  22

         Item 4T - Controls and Procedures                                    22

PART II - OTHER INFORMATION

         Item 1A - Risk Factors                                               23

         Item 6 - Exhibits                                                    23
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS
                       Vasomedical, Inc. and Subsidiaries

                      CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                      November 30, 2009        May 31, 2009
                                                                      ------------------      ----------------
                              ASSETS                                     (unaudited)
CURRENT ASSETS
<S>                                                                   <C>                   <C>
   Cash and cash equivalents                                          $         353,601             $ 544,057
   Short-term investments, at fair value                                         68,850               370,523
   Accounts receivable, net of an allowance for doubtful accounts of
     $57,765 at November 30, 2009, and $94,973 at May 31, 2009                  626,039               659,551
   Inventories, net                                                           1,699,779             1,479,724
   Other current assets                                                         158,417               175,511
                                                                      ------------------      ----------------
       Total current assets                                                   2,906,686             3,229,366

PROPERTY AND EQUIPMENT, net of accumulated depreciation of
    $1,586,371 at November 30, 2009, and $1,562,891 at May 31, 2009             186,906               180,409
DEFERRED DISTRIBUTOR COSTS, net of accumulated amortization of
    $276,025 at November 30, 2009, and  $213,234 at May 31, 2009                312,851               375,643
OTHER ASSETS                                                                    154,880               178,332
                                                                      ------------------      ----------------
                                                                      $       3,561,323       $     3,963,750
                                                                      ==================      ================

               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable                                                   $         143,162       $       144,467
   Accrued expenses                                                             360,656               360,306
   Sales tax payable                                                            148,133               143,693
   Deferred revenue - current portion                                           871,766               957,258
   Deferred gain on sale-leaseback of building - current portion                 53,245                53,245
   Accrued professional fees                                                     11,175                 9,750
   Trade payable due to related parties                                         240,000               260,000
                                                                      ------------------      ----------------
      Total current liabilities                                               1,828,137             1,928,719
                                                                      ------------------      ----------------

LONG-TERM LIABILITIES
   Deferred revenue, net of current portion                                     251,721               330,449
   Accrued rent expense                                                          17,593                16,040
   Deferred gain on sale-leaseback of building, net of current portion           88,742               115,365
   Other long-term liabilities                                                   11,900                11,900
                                                                      ------------------      ----------------
      Total long-term liabilities                                               369,956               473,754
                                                                      ------------------      ----------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
    Preferred stock, $.01 par value; 1,000,000 shares authorized;
      none issued                                                                     -                     -
    Common stock, $.001 par value; 250,000,000 shares authorized;
      99,843,004 shares at November 30, 2009 and May 31, 2009,
      issued and outstanding                                                     99,843                99,843
    Additional paid-in capital                                               48,281,711            48,281,711
    Accumulated deficit                                                     (46,942,426)          (46,744,379)
    Non-controlling interest                                                    (75,898)              (75,898)
                                                                      ------------------      ----------------
       Total stockholders' equity                                             1,363,230             1,561,277
                                                                      ------------------      ----------------
                                                                      $       3,561,323       $     3,963,750
                                                                      ==================      ================
</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>
                                                       Six months ended November 30,    Three months ended November 30,
                                                     -------------------------------------------------------------------
                                                          2009             2008             2009              2008
                                                     ---------------   --------------   --------------    --------------
Revenues
<S>                                                     <C>               <C>              <C>               <C>
  Equipment sales                                       $ 1,111,157       $ 1,244,794      $   316,509       $   588,298
  Equipment rentals and services                          1,044,344         1,225,752          522,908           570,527
                                                     ---------------   --------------   --------------    --------------
    Total revenues                                        2,155,501         2,470,546          839,417         1,158,825
                                                     ---------------   --------------   --------------    --------------

Cost of Sales and Services
  Cost of sales, equipment                                  510,066           891,345          184,098           363,064
  Cost of equipment rentals and services                    468,935           542,875          216,392           259,997
                                                     ---------------   --------------   --------------    --------------
    Total cost of sales and services                        979,001         1,434,220          400,490           623,061
                                                     ---------------   --------------   --------------    --------------
Gross profit                                              1,176,500         1,036,326          438,927           535,764
                                                     ---------------   --------------   --------------    --------------

Operating Expenses
  Selling, general and administrative                     1,299,032         1,629,143          650,705           685,384
  Research and development                                  204,393           279,954          102,322           147,607
                                                     ---------------   --------------   --------------    --------------
    Total operating expenses                              1,503,425         1,909,097          753,027           832,991
                                                     ---------------   --------------   --------------    --------------
Loss from operations                                       (326,925)         (872,771)        (314,100)         (297,227)
                                                     ---------------   --------------   --------------    --------------

Other Income (Expenses)
  Interest and other income, net                             86,452            36,535            2,480            20,523
  Amortization of deferred gain on
    sale-leaseback of building                               26,623            26,623           13,312            13,312
                                                     ---------------   --------------   --------------    --------------
    Total other income, net                                 113,075             63,158          15,792            33,835
                                                     ---------------   --------------   --------------    --------------

Loss before income taxes                                   (213,850)         (809,613)        (298,308)         (263,392)
  Income tax benefit/(expense), net                          15,804            (7,602)          (1,500)           (3,852)
                                                     ---------------   --------------   --------------    --------------
Net loss applicable to common stockholders              $  (198,046)     $   (817,215)     $  (299,808)      $  (267,244)
                                                     ===============   ==============   ==============    ==============

Net loss per common share
     - basic and diluted                                $     (0.00)     $      (0.01)           (0.00)            (0.00)
                                                     ===============   ==============   ==============    ==============

Weighted average common shares outstanding
     - basic and diluted                                 99,843,004        94,261,960       99,843,004        94,766,893
                                                     ===============   ==============   ==============    ==============
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  condensed
financial statements.

                                     Page 4
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                       Six months ended November 30,
                                                                                   -------------------------------------
                                                                                         2009                2008
                                                                                   -----------------   -----------------
Cash flows from operating activities
<S>                                                                                   <C>                 <C>
  Net loss                                                                            $ (198,046)         $ (817,215)
  Adjustments to reconcile net loss to net cash
     used in operating activities
   Depreciation and amortization                                                          54,851              51,179
   Amortization of deferred gain on sale-leaseback of building                           (26,623)            (26,623)
   Provision for doubtful accounts                                                       (37,208)                  -
   Amortization of deferred distributor costs                                             62,792              50,888
   Stock-based compensation                                                                    -             141,357
   Changes in operating assets and liabilities:
      Accounts receivable                                                                 70,720             214,525
      Inventories, net                                                                  (238,297)           (145,351)
      Other assets                                                                        17,094             (46,333)
      Accounts payable, accrued expenses and other current liabilities                     4,909            (326,431)
      Deferred revenue                                                                  (164,220)           (131,253)
      Accrued rent expense                                                                 1,553               4,385
      Trade payable due to related party                                                 (20,000)            260,000
                                                                                   -----------------   -----------------
  Net cash used in operating activities                                                 (472,475)           (770,872)
                                                                                   -----------------   -----------------

  Cash flows from investing activities
     Purchases of property and equipment                                                 (19,654)             (9,438)
     Purchase of short-term investments                                                  (68,850)                  -
     Redemption of short-term investments                                                370,523                   -
                                                                                   -----------------   -----------------
  Net cash provided by (used in) investing activities                                    282,019              (9,438)
                                                                                   -----------------   -----------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                               (190,456)           (780,310)
                                                                                   -----------------   -----------------
  Cash and cash equivalents - beginning of period                                        544,057           2,653,999
                                                                                   -----------------   -----------------
  Cash and cash equivalents - end of period                                            $ 353,601         $ 1,873,689
                                                                                   =================   =================

Non-cash investing and financing activities were as follows:
   Inventories transferred to property and equipment, attributable
     to operating leases, net                                                           $ 18,242            $ 95,921
                                                                                   =================   =================

Supplemental Disclosures
   Income taxes paid                                                                    $  3,202               $ 790
                                                                                   =================   =================
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  condensed
financial statements.

                                     Page 5
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                November 30, 2009

NOTE A - ORGANIZATION AND PLAN OF OPERATIONS

     Vasomedical,  Inc. was  incorporated  in Delaware in July 1987.  Unless the
context requires  otherwise,  all references to "we",  "our",  "us",  "Company",
"registrant",  "Vasomedical" or "management" refer to Vasomedical,  Inc. and its
subsidiaries.   Since  1995,  we  have  been  primarily  engaged  in  designing,
manufacturing,    marketing   and   supporting    EECP(R)   enhanced    external
counterpulsation  systems based on our unique proprietary  technology  currently
indicated  for use in cases of stable or unstable  angina  (i.e.,  chest  pain),
congestive heart failure (CHF), acute myocardial infarction (i.e., heart attack,
(MI)) and cardiogenic shock.

NOTE B - BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES

Basis of Presentation and Use of Estimates

     The  accompanying  consolidated  condensed  financial  statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States of America  ("U.S.  GAAP") and  pursuant  to the  accounting  and
disclosure rules and regulations of the Securities and Exchange  Commission (the
"SEC").   Certain   information  and  disclosures   normally   included  in  the
consolidated  condensed  financial  statements  prepared in accordance with U.S.
GAAP have been  condensed  or omitted  pursuant  to such rules and  regulations.
Accordingly, these consolidated condensed financial statements should be read in
connection with the audited consolidated  financial statements and related notes
thereto included in the Company's Annual Report for the year ended May 31, 2009,
as filed  with the SEC on Form  10-K.  These  consolidated  condensed  financial
statements  include the accounts of the Company over which it exercises control.
In the opinion of management,  the accompanying consolidated condensed financial
statements reflect all adjustments  (consisting of normal recurring adjustments)
considered necessary for a fair presentation of interim results for the Company.
The results of operations for any interim period are not necessarily  indicative
of results to be expected for the full year.

     The  preparation  of financial  statements  in  conformity  with U.S.  GAAP
requires  management to make estimates and assumptions  that affect the reported
amounts of assets and liabilities as of the date of the  consolidated  condensed
financial statements, the disclosure of contingent assets and liabilities in the
consolidated  condensed financial statements and the accompanying notes, and the
reported  amounts of revenue  and  expenses  and cash flows  during the  periods
presented.  Actual  amounts and results could differ from those  estimates.  The
estimates  the  Company  makes  are  based  on   historical   factors,   current
circumstances and the experience and judgment of the Company's  management.  The
Company  evaluates  its  assumptions  and  estimates on an ongoing basis and may
employ third party experts to assist in the Company's evaluations.

Reclassification

     Certain  account  balances  have been  reclassified  to  conform to current
reporting formats.

Critical Accounting Policies

     Note B of the Notes to Consolidated  Financial Statements,  included in the
Annual  Report on Form 10-K for the year ended May 31, 2009,  includes a summary
of the critical  accounting  policies used in the  preparation  of  consolidated
financial  statements.  The following  policies are effective as of June 1, 2009
and have been  implemented  by the company for the six months ended November 30,
2009.

     Effective  June 1,  2009,  the  Company  implemented  Accounting  Standards
Codification ("ASC") 810, formally Financial Accounting Standards Board ("FASB")
SFAS No. 160,  "Noncontrolling  Interests in Consolidated Financial Statements",
which  changes  the way the  consolidated  income  statement  is  presented.  It
requires  consolidated  net income to be  reported at amounts  that  include the
amounts attributable to both the parent and the noncontrolling interest. It also
requires disclosure, on the face of the consolidated statement of income, of the
amounts  of  consolidated  net  income  attributable  to the  parent  and to the
noncontrolling   interest.   Previously,   net   income   attributable   to  the

                                     Page 6
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                November 30, 2009

noncontrolling  interest generally was reported as an expense or other deduction
in  arriving  at  consolidated  net  income.  It also  was  often  presented  in
combination with other financial statement amounts.

     Effective  June 1, 2009,  the Company  implemented  ASC 825,  formally FASB
Staff Position  ("FSP") SFAS No. 107-1 and Accounting  Principles  Board ("APB")
Opinion  No. 28-1 ("APB No.  28-1"),  "Interim  Disclosures  about Fair Value of
Financial Instruments," which amends SFAS No. 107, "Disclosures about Fair Value
of Financial  Instruments." The ASC requires disclosures about the fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements.

     Effective  June 1, 2009,  the Company  implemented  ASC 855,  formally FASB
Statement  of  Financial  Accounting  Standards  ("SFAS")  No. 165,  "Subsequent
Events" ("SFAS 165").  This standard is intended to establish  general standards
of  accounting  for and  disclosure of events that occur after the balance sheet
date but before  financial  statements are issued or are available to be issued.
Specifically,  this  standard sets forth the period after the balance sheet date
during  which  management  of a  reporting  entity  should  evaluate  events  or
transactions  that may occur for  potential  recognition  or  disclosure  in the
financial  statements,  the circumstances under which an entity should recognize
events or  transactions  occurring after the balance sheet date in its financial
statements,  and the  disclosures  that an entity  should  make about  events or
transactions that occurred after the balance sheet date.

     Effective  July 1,  2009,  the FASB  confirmed  that  the  FASB  Accounting
Standards  Codification  (the  "Codification")  will become the single  official
source of  authoritative  U.S.  GAAP  (other than  guidance  issued by the SEC),
superseding  existing FASB,  American Institute of Certified Public Accountants,
Emerging Issues Task Force ("EITF"),  and related  literature.  After that date,
only one level of authoritative  U.S. GAAP will exist. All other literature will
be considered  non-authoritative.  The  Codification  does not change U.S. GAAP;
instead,  it  introduces  a  new  structure  that  is  organized  in  an  easily
accessible,  user-friendly  online  research  system.  The  Codification,  which
changes the referencing of financial  standards,  becomes  effective for interim
and annual periods ending on or after September 15, 2009.

NOTE C - LIQUIDITY

     During the last several years, the Company has incurred  operating  losses.
The  Company  has  attempted  to halt the trend of  declining  revenue  by;  (i)
expanding  their  international  market by  enlisting  new  distributors  in new
markets,  (ii)  expanding  their  domestic  sales force with the addition of new
personnel  and  independent  representatives,  and  (iii)  the  introduction  of
e-commerce  to our website.  Additionally,  the Comany is also in the process of
diversifying  its product line and intends to introduce new products in the near
future.  The Company has also reduced operating costs by reducing  personnel and
related benefit costs,  professional  fees,  business  operating  expenses,  and
renegotiated contract terms for leases and services.

NOTE D - STOCK-BASED COMPENSATION

     The Company complies with U.S. GAAP, which requires all share-based  awards
to employees,  including  grants of employee stock options,  to be recognized in
the consolidated  condensed  financial  statements based on their estimated fair
values.

     During the six-month period ended November 30, 2009, the Company's Board of
Directors did not grant any non-qualified stock options.

     During the six-month period ended November 30, 2009, the Company's Board of
Directors  did not  grant  any  shares of  common  stock to  employees,  outside
directors, or outside consultants.

     Stock-based  compensation  expense  recognized under U.S. GAAP was $141,357
for the six months  ended  November  30,  2008.  These  expenses are included in
selling, general, and administrative in the consolidated condensed statements of
operations.  The  stock-based  compensation  expenses  for such  period  reflect

                                     Page 7
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                November 30, 2009

share-based awards outstanding during such period, including awards granted both
prior and during such period.  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-pricing model was developed for
use in estimating the fair value of share-based awards. The Black-Scholes option
pricing model requires 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.

     Share-based  awards issued to non-employees in exchange for goods, fees and
services are accounted for under the fair value-based method of U.S. GAAP.

NOTE E - LOSS PER COMMON SHARE

     Basic  loss per  common  share is  computed  as loss  applicable  to common
stockholders divided by the weighted-average number of common shares outstanding
for the period.  Diluted loss per common share  reflects the potential  dilution
that could occur if  securities  or other  contracts to issue common shares were
exercised or converted to common stock.

     Stock options and warrants,  in accordance with the following  table,  were
excluded  from the  computation  of diluted loss per share for the six and three
months ended November 30, 2009 and November 30, 2008.
<TABLE>
<CAPTION>

                                    November 30, 2009           November 30, 2008
                                 ------------------------     ----------------------
<S>                                     <C>                           <C>
Stock options                           2,598,239                     5,134,877
Warrants                                6,540,252                     6,540,252
                                 ------------------------     ----------------------
                                        9,138,491                    11,675,129
                                 ========================     ======================
</TABLE>
NOTE F - FAIR VALUE MEASUREMENTS

     The Company's  assets  recorded at fair value have been  categorized  based
upon a fair value hierarchy in accordance with U.S. GAAP.

     The following  table presents  information  about the Company's  assets and
liabilities  measured at fair value as of November 30, 2009:
<TABLE>
<CAPTION>

                                            Quoted Prices         Significant                              Balance
                                               in Active             Other            Significant           as of
                                             Markets for           Observable         Unobservable       November 30,
                                           Identical Assets          Inputs              Inputs              2009
                                          -------------------   -----------------   -----------------  -----------------

Assets

  <S>                                         <C>                  <C>                 <C>                 <C>
  Cash equivalents invested in
  money market fund (included in
  cash and cash equivalents)                  $ 166,828            $      -            $       -           $ 166,828

  Investments in certificates of
  deposit (included in short-term
  investments)                                   68,850                   -                    -              68,850
                                          -------------------   -----------------   -----------------  -----------------
                                              $ 235,678            $      -            $       -           $ 235,678
                                          ===================   =================   =================  =================
</TABLE>
     The fair values of the Company's cash equivalents  invested in money market
fund are determined through market, observable and corroborated sources.

                                     Page 8
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                November 30, 2009

NOTE G - INVENTORIES

         Inventories, net of reserves, consist of the following:
<TABLE>
<CAPTION>
                                         November 30, 2009            May 31, 2009
                                        ---------------------     ---------------------
     <S>                                    <C>                       <C>
     Raw materials                          $   574,480               $   646,775
     Work in process                            591,541                   522,823
     Finished goods                             533,758                   310,126
                                        ---------------------     ---------------------
                                            $ 1,699,779               $ 1,479,724
                                        =====================     =====================
</TABLE>
     At November 30, 2009 and May 31, 2009,  the Company had reserves for excess
and obsolete inventory of $358,972 and $393,972, respectively.

NOTE H - DEFERRED REVENUE

The changes in the Company's deferred revenues are as follows:
<TABLE>
<CAPTION>
                                            Six months ended   Six months ended   Three months ended    Three months ended
                                              November 30        November 30          November 30          November 30
                                                 2009               2008                 2009                  2008
                                            ----------------   ----------------   -------------------   -------------------
<S>                                             <C>                <C>                   <C>                   <C>
Deferred revenue at the beginning of the period $ 1,268,834        $ 1,618,053           $ 1,176,761           $ 1,662,682
Additions:
  Deferred extended service contracts               542,894            632,893               308,217               186,058
  Deferred in-service and training                   12,500             22,500                 2,500                 5,000
  Deferred service arrangements                      52,500             79,500                10,000                27,000
  Deferred service arrangement obligations                -                600                     -                     -
Recognized as revenue:
  Deferred extended service contracts              (666,437)          (732,218)             (331,982)             (322,091)
  Deferred in-service and training                  (20,000)           (25,000)              (10,000)              (12,500)
  Deferred service arrangements                     (66,804)          (108,328)              (32,009)              (58,749)
  Deferred service arrangement obligations                -             (1,200)                    -                  (600)
                                            ----------------   ----------------   -------------------   -------------------
Deferred revenue at end of period                 1,123,487          1,486,800             1,123,487             1,486,800
  Less: current portion                             871,766          1,067,069               871,766             1,067,069
                                            ----------------   ----------------   -------------------   -------------------
Long-term deferred revenue at end of period       $ 251,721          $ 419,731             $ 251,721             $ 419,731
                                            ================   ================   ===================   ===================
</TABLE>
NOTE I - RELATED-PARTY TRANSACTIONS

     On June 21,  2007,  we entered into a Securities  Purchase  Agreement  with
Kerns  Manufacturing  Corp.  (Kerns).  Concurrently  with  our  entry  into  the
Securities Purchase Agreement, we also entered into a Distribution Agreement and
a Supplier Agreement with Living Data Technology  Corporation  (Living Data), an
affiliate of Kerns.

     We sold to Kerns, pursuant to the Securities Purchase Agreement, 21,428,572
shares  of our  common  stock at $.07 per share  for a total  purchase  price of
$1,500,000,  as well as a five-year warrant to purchase  4,285,714 shares of our
common stock at an initial  exercise price of $.08 per share (the Warrant).  The
agreement  further provided for the appointment to our Board of Directors of two
representatives  from Kerns.  In furtherance  thereof,  Dr. Jun Ma and Mr. Simon
Srybnik,  Chairman of both Kerns and Living Data, were appointed  members of our
Board of  Directors.  On  October  15,  2008,  Dr.  Jun Ma was  appointed  Chief
Executive Officer.  Pursuant to the Distribution  Agreement,  we have become the
exclusive  distributor  in  the  United  States  of  the  AngioNew  ECP  systems
manufactured by Living Data. As additional  consideration for such agreement, we
agreed to issue an  additional  6,990,840  shares of our common  stock to Living
Data.  Pursuant to the  Supplier  Agreement,  Living  Data now is the  exclusive

                                     Page 9
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                November 30, 2009

supplier to us of the ECP therapy  systems that we market  under the  registered
trademark  EECP(R).  The Distribution  Agreement and the Supplier Agreement each
have an initial term extending through May 31, 2012.

     On  November  20,  2008,  the  Company  entered  into an  Amendment  to the
Distribution  Agreement with Living Data to expand the territory  covered in the
Distribution  Agreement to provide for exclusive  distribution rights worldwide.
In  consideration  for these  rights,  the Company  agreed to issue  Living Data
3,000,000  restricted  shares of its common  stock having a fair market value of
$60,000 at time of issue.

     Pursuant to a Registration Rights Agreement, we granted to Kerns and Living
Data, subject to certain restrictions,  "piggyback registration rights" covering
the shares  sold to Kerns as well as the shares  issuable  upon  exercise of the
Warrant and the shares issued to Living Data.

     On July 10, 2007,  the Board of Directors  appointed Mr. Behnam  Movaseghi,
Treasurer and Chief Financial Officer of Kerns Manufacturing Corporation, to our
Board of Directors.

     As  affiliates  of Living  Data and Kerns,  Dr. Ma, Mr.  Movaseghi  and Mr.
Srybnik were each directly involved in the transactions  between Living Data and
Kerns, and the Company,  with respect to the Securities Purchase Agreement,  the
Distribution  Agreement  and the  Supplier  Agreement,  as  well  as  consulting
services to the Company with no compensation.

     During Fiscal 2008,  the Company  purchased  ECP therapy  systems under the
Supplier  Agreement for $120,000 from Living Data, which was paid in full by the
Company as of June 2008. In addition,  Living Data purchased $5,000 worth of ECP
therapy  system  components  from the company,  which was paid in full by Living
Data as of June 2008.

     During fiscal 2009,  the Company  purchased  ECP therapy  systems under the
Supplier  Agreement  for $595,000  from Living  Data.  During  fiscal 2010,  the
Company  purchased  additional ECP therapy systems under the Supplier  Agreement
for $40,000 from Living Data. Payment terms on certain purchases leave a balance
of $240,000 in Trade payable to related party on the  accompanying  consolidated
condensed balance sheet as of November 30, 2009.

     During fiscal 2009,  Living Data assigned to  Vasomedical,  Inc. all of its
rights and  interests  under its  distributorship  Agreement  with a corporation
organized  and existing  under the laws of the  People's  Republic of China that
manufactures  Ambulatory Blood Pressure  Monitors,  Ambulatory ECG Recorders and
Holter & ABPM Combiner  Recorders,  for $20,000  payable to Living Data based on
certain terms and conditions. The Company must also pay to Living Data 5% of the
selling price or 5% of the cost of all goods sold (whichever is higher),  and 5%
of the cost of all goods transferred but not sold under the Assignment Agreement
to Living Data based on sales of this  equipment.  The  Company  will sell these
systems in the United States and other countries now that  regulatory  clearance
had been obtained.

     During fiscal 2009,  Living Data assigned to  Vasomedical,  Inc. all of its
rights and  interests  under its  Distributorship  Agreement  with a corporation
organized and existing  under the laws of the People's  Republic of China,  that
manufactures  Ultrasound  Scanners,  for $20,000 payable to Living Data based on
certain terms and conditions. The Company must also pay to Living Data 5% of the
selling price or 5% of the cost of all goods sold (whichever is higher),  and 5%
of the cost of all goods transferred but not sold under the Assignment Agreement
to Living Data based on sales of this  equipment.  The  Company  intends to sell
these  systems in the United  States and other  countries  subject to  obtaining
regulatory clearance.

     Further,  Kerns provides the Company, free of charge,  part-time use of one
of its Information Technology (IT) employees as well one of their IT consultants
to provide the Company with IT and database support services.

                                    Page 10
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                November 30, 2009


NOTE J - COMMITMENTS

Leases

     On August  15,  2007,  the  Company  sold its  facility  under a  five-year
sale-leaseback  agreement.  Future rental payments under the operating lease are
as follows:
<TABLE>
For the years ended:

                <S>                      <C>
                May 31, 2010             $         74,965
                May 31, 2011                      154,427
                May 31, 2012                      160,604
                May 31, 2013                       40,541
                                         ------------------
                Total                    $        430,537
                                         ==================
</TABLE>
NOTE K - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET EFFECTIVE

     As  of  November  30,  2009,  there  are  no  recently  issued   accounting
pronouncements  that  have an  impact on the  Company's  consolidated  condensed
financial statements.

NOTE L - SUBSEQUENT EVENTS

     The company has evaluated  subsequent  events through  January 12, 2010, as
required by US GAAP.

     On December 17, 2009 a meeting of the Company's  compensation committee was
held and the following stock options were granted:

     Behnam  Movaseghi,  a member of the board of  directors  was granted  fully
vested  options  with a term of five  years to  purchase  200,000  shares of the
Company's common stock at an exercise price of $0.08 per share.

     Jun Ma,  president  and chief  executive  officer of the company was grated
fully vested shares with a term of five years to purchase  250,000 shares of the
Company's common stock at an exercise price of $0.08 per share.

     On December 17, 2009,  the Company  started  negotiations  to purchase from
Living Data its inventory of AngioNew 5 and AngioNew 6 model ECP therapy systems
in exchange for shares of the Company's common stock.

                                    Page 11
<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  "anticipates",  "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.  The Company  undertakes  no  obligation to
update forward-looking statements as a result of future events or developments.

General Overview

     Vasomedical,  Inc. was  incorporated  in Delaware in July 1987.  Unless the
context requires  otherwise,  all references to "we",  "our",  "us",  "Company",
"registrant",  "Vasomedical" or "management" refer to Vasomedical,  Inc. and its
subsidiaries.   Since  1995,  we  have  been  primarily  engaged  in  designing,
manufacturing,    marketing   and   supporting    EECP(R)   Enhanced    External
Counterpulsation  systems based on our unique proprietary  technology  currently
indicated  for use in cases of  stable  or  unstable  angina,  congestive  heart
failure  (CHF),  acute  myocardial  infarction  (i.e.,  heart attack,  (MI)) and
cardiogenic shock. The EECP(R) therapy is a non-invasive,  outpatient  treatment
of  diseases  of the  cardiovascular  system.  The  therapy  serves to  increase
circulation in areas of the heart with less than adequate blood supply and helps
restore systemic  vascular  function.  The therapy also increases blood flow and
oxygen  supply to the heart  muscle and other organs and  decreases  the heart's
workload  and  reduces  oxygen  demand,  while also  improving  function  of the
endothelium,  the  lining  of  blood  vessels  throughout  the  body,  lessening
resistance to blood flow. We provide  hospitals,  clinics 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   therapy   and   systems.   For   more   information,    visit
www.vasomedical.com.

     Cardiovascular disease (CVD) is the leading cause of death in the world and
is among the top three diseases in terms of healthcare  spending in nearly every
country.  CVD claimed  approximately  2.4 million  lives in the United States in
2005 and was  responsible  for 1 of every 5 deaths,  according  to The  American
Heart Association (AHA) Heart and Stroke  Statistical 2009 Update (2009 Update).
Approximately  80  million  Americans  suffer  from some form of  cardiovascular
disease. Among these, 16.8 million have coronary heart disease (CHD).

     We  have  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  mostly to the  treatment  of  chronic  stable  angina and
congestive  heart  failure.  Medicare  and other  third-party  payers  currently
reimburse for the treatment of angina pectoris  patients with moderate to severe
symptoms who are  refractory  to  medications  and not  candidates  for invasive
procedures.  Patients with co-morbidities of heart failure, diabetes, peripheral
vascular  disease,  etc., are also reimbursed under the same criteria,  provided
the primary  diagnosis  and  indication  for treatment  with EECP(R)  therapy is
angina symptoms.

     During the last several years, the Company has incurred  operating  losses.
The  Company  has  attempted  to halt the trend of  declining  revenue  by;  (i)
expanding  their  international  market by  enlisting  new  distributors  in new
markets,  (ii)  expanding  their  domestic  sales force with the addition of new
personnel  and  independent  representatives,  and  (iii)  the  introduction  of

                                    Page 12
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

e-commerce  to our website.  Additionally,  the Comany is also in the process of
diversifying  its product line and intends to introduce new products in the near
future.  The Company has also reduced operating costs by reducing  personnel and
related benefit costs,  professional  fees,  business  operating  expenses,  and
renegotiated contract terms for leases and services.

Market Overview

Angina

     Angina  pectoris is the medical term for a recurring  pain or discomfort in
the  chest due to  coronary  artery  disease  (CAD).  Angina  is a symptom  of a
condition  called  myocardial  ischemia,  which  occurs when the heart muscle or
myocardium  doesn't receive sufficient blood, hence as much oxygen, as it needs.
This  usually  happens  because one or more of the heart's  arteries,  the blood
vessels  that  supply  blood  to  the  heart  muscle,   is  narrow  or  blocked.
Insufficient  blood  supply to meet the need of the organ to  function is called
ischemia.

     The  cardinal  symptom of stable CAD is  anginal  chest pain or  equivalent
symptoms,  such as  exertional  dyspnea  or  fatigue.  Angina  is  uncomfortable
pressure,  fullness,  squeezing or pain,  usually occurring in the center of the
chest under the  breastbone.  The discomfort  also may be felt in the neck, jaw,
shoulder,  back or arm, and  shortness of breath and fatigue.  Often the patient
suffers not only from the  discomfort  of the  symptom  itself but also from the
accompanying  limitations  on  activities  and the  associated  anxiety that the
symptoms may produce. Uncertainty about prognosis may be an additional source of
anxiety.  For some patients,  the  predominant  symptoms may be  palpitations or
syncope that is caused by arrhythmias or fatigue,  edema, or orthopnea caused by
heart  failure.  Episodes  of angina  occur  when the  heart's  need for  oxygen
increases  beyond  the oxygen  available  from the blood  nourishing  the heart.
Physical  exertion is the most common trigger,  but not the only one for angina.
For  example,  running to catch a bus could  trigger  an attack of angina  while
walking  might not.  Angina may happen  during  exercise,  periods of  emotional
stress,  exposure to extreme cold or heat, heavy meals,  alcohol  consumption or
cigarette smoking.  Some people, such as those with a coronary artery spasm, may
have angina when they are resting.

     There are  approximately  6.4 million angina  patients in the United States
and our EECP(R) therapy currently competes with other technologies in the market
for approximately 100,000 to 150,000 new refractory angina patients annually who
do not adequately respond to or are not amenable to medical and surgical therapy
and have the  potential  to meet the  guidelines  for  reimbursement  of EECP(R)
therapy.  Most angina  patients are treated  with  medications,  including  beta
blockers  to slow and  protect  the  heart,  and  vasodilators  which  are often
prescribed to increase blood flow to the coronary  arteries.  When drugs fail or
inadequately  correct the problem,  the patients are considered  unresponsive to
medical  therapy.   Most  angina  patients  are  readily  amenable  to  invasive
revascularization  procedures such as angioplasty and coronary stent  placement,
as  well  as  coronary  artery  bypass  grafting  (CABG).   However,  there  are
approximately  100,000 to 150,000 angina  patients each year whose angina cannot
be stopped by medication and they are no longer  readily  amenable to palliative
invasive procedures.

     In February 1999, the Centers for Medicare and Medicaid Services (CMS), the
federal agency that  administers  the Medicare  program for more than 44 million
beneficiaries  now,  issued a national  coverage  policy for the use of external
counterpulsation  therapy  in  the  treatment  of  refractory  angina.  Medicare
reimbursement  guidelines have a significant impact in determining the available
market for  EECP(R)  therapy.  We  believe  that over 65% of the  patients  that
receive  EECP(R)  therapy  are  Medicare  patient,  and many of the  balance are
covered by third-party  payers.  Medicare  guidelines,  limit  reimbursement for
EECP(R) therapy to patients who do not adequately respond to medical therapy and
are not readily amenable to invasive therapy.  As a result, an important element
of our  strategy  is to  grow  the  market  for  EECP(R)  therapy  by  expanding
reimbursement  coverage to include a broader  range of angina  patients than the
current coverage policy provides and enable EECP(R) therapy to compete more with
other   therapies   for  ischemic   heart   disease.   Please  see  the  heading
"Reimbursement"  in the "Item-1  Business"  section of this Form 10-K for a more
detailed discussion of reimbursement issues.

                                    Page 13
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

Congestive Heart Failure (CHF)

     CHF is a condition in which the heart loses its pumping  capacity to supply
the metabolic needs of all other organs. The condition affects both sexes and is
most common in people over age 50. Symptoms include angina, shortness of breath,
weakness,  fatigue, swelling of the abdomen, legs and ankles, rapid or irregular
heartbeat and low blood pressure. Causes range from chronic high blood pressure,
heart-valve   disease,   heart  attack,   coronary  artery  disease,   heartbeat
irregularities,  severe lung  disease  such as  emphysema,  congenital  disease,
cardiomyopathy, hyperthyroidism, severe anemia and others.

     CHF is treated with medication and,  sometimes,  surgery on heart valves or
the coronary  arteries and, in certain  severe cases,  heart  transplants.  Left
ventricular assist devices (LVADs) and the use of cardiac  resynchronization and
implantable  defibrillators  are useful in selected patients with heart failure.
Still, no consensus therapy currently exists for CHF and patients must currently
suffer their symptoms chronically and have a reduced life expectancy.

     According to the 2010 Update, in 2006 approximately 3.1 million men and 2.7
million  women in the United  States had CHF and about  670,000 new cases of the
disease occur each year. The prevalence of the disease is growing as a result of
the aging of the population and the improved survival rate of people after heart
attacks.  Because the condition  frequently entails visits to the emergency room
and in-patient treatment centers,  two-thirds of all hospitalizations for people
over age 65 are due to CHF. The economic  burden of congestive  heart failure is
enormous with an estimated  cost to the health care system in 2006 in the United
States of $39.2  billion.  Congestive  heart failure offers a good strategic fit
with our current angina business and offers an expanded  market  opportunity for
EECP(R) therapy.  Unmet clinical needs in CHF are greater than those for angina,
as there are few  consensus  therapies,  invasive or otherwise,  beyond  medical
management  for the  condition.  It is noteworthy  that data  collected from the
International   EECP(R)  Patient   Registry(TM)  (IEPR)  at  the  University  of
Pittsburgh  Graduate School of Public Health shows that approximately  one-third
of angina  patients  treated  with EECP(R) also have a history of CHF and 70% to
80% have demonstrated positive outcomes from EECP(R) therapy.

     We  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.  The PEECH(TM)  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  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.

     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, 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 March 20, 2006,  CMS issued their  Decision  Memorandum  regarding  this
reconsideration  with the opinion  that the evidence was not adequate to support
an extension of coverage.

                                    Page 14
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

     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"  for  refractory  angina
patients.

     On August 25,  2006 the  results  of the  PEECH(TM)  trial  were  initially
published online by the Journal of the American College of Cardiology (JACC) and
in print in its  September 19, 2006 issue.  JACC is the official  journal of the
American College of Cardiology.

     In the  November-December  2006  issue  of  the  journal  Congestive  Heart
Failure,  a second  report of results from the  PEECH(TM)  trial was  published,
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.

     These  papers  were  submitted  to CMS and we were  advised to  continue to
gather more clinical evidence for future submission.

     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.

The EECP(R) Therapy Systems

     The EECP(R)  therapy systems are noninvasive  treatment  systems  utilizing
fundamental  hemodynamic  principles to augment  coronary blood flow and, at the
same time, reduce the workload of the heart while improving the overall vascular
function.  The  treatment  is  completely  noninvasive  and is  administered  to
patients on an outpatient basis,  usually in daily one-hour sessions,  five days
per week over seven weeks for a total of 35  treatments.  The  procedure is well
tolerated  and most  patients  begin to  experience  relief of chest pain due to
their coronary  artery disease after 15 to 20 hours of therapy.  As demonstrated
in our clinical  studies,  positive  effects have been shown in most patients to
continue for years following a full course of therapy.

     During EECP(R)  therapy,  the patient lies on a contoured  treatment  table
while  three sets of  inflatable  pressure  cuffs,  resembling  oversized  blood
pressure cuffs,  are wrapped around the calves,  and the lower and upper thighs,
including the buttocks.  The system is synchronized to the individual  patient's
cardiac  cycle   triggering   the  system  to  inflate  the  cuffs  rapidly  and
sequentially -- via computer-interpreted ECG signals -- starting from the calves
and  proceeding  upward to the  buttocks  during  the  relaxation  phase of each
heartbeat  (diastole).  This has the  effect  of  creating  a strong  retrograde
arterial wave in the arterial system,  forcing freshly  oxygenated blood towards
the heart and coronary arteries at a time when resistance to coronary blood flow
is at its lowest level. The inflation of cuffs also simultaneously increases the
volume of venous  blood that is  returned to the heart when the heart is filling
up for ejection in the contracting  phase. Just prior to the next heartbeat when
the heart  begins  to eject  blood by  contracting  (systole),  all three  cuffs
simultaneously  deflate,  leaving  an  empty  vascular  space to  receive  blood
ejecting  from the heart,  thereby  significantly  reducing  the workload of the
heart.  This is achieved because the vascular beds in the lower  extremities are

                                    Page 15
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

relatively  empty  when the  cuffs  are  deflated,  significantly  lowering  the
resistance,  and  provide  vascular  space to receive  the blood  ejected by the
heart, reducing the amount of work the heart must do to pump oxygenated blood to
the rest of the body. The  inflation/deflation  activity is monitored constantly
and  coordinated by a  computerized  console that  interprets  electrocardiogram
signals from the patient's  heart,  monitors heart rhythm and rate  information,
and actuates the  inflation and  deflation in  synchronization  with the cardiac
cycles. The end result of this sequential "squeezing" of the legs is to create a
pressure wave that significantly  increases peak diastolic  pressure  benefiting
circulation  to the heart muscle and other  organs,  increases  venous return so
that the heart has more blood volume to eject out, and increases cardiac output.
The release of  external  pressure  produces  reduction  of  systolic  pressure,
thereby  reducing  the  workload  of  the  heart.  This  reduction  of  vascular
resistance  insures  that the heart  does not have to work as hard to pump large
amounts of blood through the body to help supply its metabolic needs.

     While  scientific  and  clinical  studies are  continued to be published to
explain the precise  scientific  means by which  EECP(R)  therapy  achieves  its
long-term  beneficial  effects,  there is evidence  to suggest  that the EECP(R)
therapy triggers a neurohormonal  response that induces the production of growth
and vasodilatation factors that promotes recruitment of new arteries and dilates
existing  blood  vessels.  The  recruitment of new arteries known as "collateral
blood  vessels"  bypass  blocked or narrowed  vessels and increase blood flow to
ischemic  areas of the heart muscle that are receiving an  inadequate  supply of
blood.  There is also  evidence  to  support a  mechanism  related  to  improved
function  of the  endothelium  (the inner  lining of the blood  vessels),  which
regulates  the luminal  size of the  arteries  and  controls the dilation of the
arteries to insure adequate blood flow to all organs, thus reducing constriction
of blood vessels that supply  oxygenated  blood to the body's organs and tissues
and as a result the required workload of the heart.

Critical Accounting Policies and Estimates

     Our  discussion  and  analysis of our  financial  condition  and results of
operations  are based upon the  accompanying  unaudited  consolidated  condensed
financial  statements,  which have been prepared in accordance  with  accounting
principles   generally  accepted  in  the  United  States  ("U.S.   GAAP").  The
preparation  of financial  statements  in  conformity  with U.S.  GAAP  requires
management to make judgments, estimates and assumptions that affect the reported
amounts of assets,  liabilities,  revenue, expenses, and the related disclosures
at the  date of the  financial  statements  and  during  the  reporting  period.
Although  these  estimates  are based on our  knowledge of current  events,  our
actual amounts and results could differ from those estimates. The estimates made
are based on historical factors,  current circumstances,  and the experience and
judgment of our management,  who continually  evaluate the judgments,  estimates
and assumptions and may employ outside experts to assist in the evaluations.

     Certain of our accounting policies are deemed "critical",  as they are both
most important to the financial statement  presentation and require management's
most difficult,  subjective or complex judgments as a result of the need to make
estimates  about the  effect of matters  that are  inherently  uncertain.  For a
discussion of our critical accounting policies, see "Management's Discussion and
Analysis of Financial  Condition and Results of Operations" in our Annual Report
on Form 10-K for the year ended May 31, 2009. The following  accounting policies
are effective for the current interim reporting period.

     Effective  June 1,  2009,  the  Company  implemented  Accounting  Standards
Codification ("ASC") 810, formally Financial Accounting Standards Board ("FASB")
SFAS No. 160,  "Noncontrolling  Interests in Consolidated Financial Statements",
which  changes  the way the  consolidated  income  statement  is  presented.  It
requires  consolidated  net income to be  reported at amounts  that  include the
amounts attributable to both the parent and the noncontrolling interest. It also
requires disclosure, on the face of the consolidated statement of income, of the
amounts  of  consolidated  net  income  attributable  to the  parent  and to the
noncontrolling   interest.   Previously,   net   income   attributable   to  the
noncontrolling  interest generally was reported as an expense or other deduction
in  arriving  at  consolidated  net  income.  It also  was  often  presented  in
combination with other financial statement amounts.

     Effective  June 1, 2009,  the Company  implemented  ASC 825,  formally FASB
Staff Position  ("FSP") SFAS No. 107-1 and Accounting  Principles  Board ("APB")
Opinion  No. 28-1 ("APB No.  28-1"),  "Interim  Disclosures  about Fair Value of
Financial Instruments," which amends SFAS No. 107, "Disclosures about Fair Value

                                    Page 16
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

of Financial  Instruments." The ASC requires disclosures about the fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements.

     Effective  June 1, 2009,  the Company  implemented  ASC 855,  formally FASB
Statement  of  Financial  Accounting  Standards  ("SFAS")  No. 165,  "Subsequent
Events" ("SFAS 165").  This standard is intended to establish  general standards
of  accounting  for and  disclosure of events that occur after the balance sheet
date but before  financial  statements are issued or are available to be issued.
Specifically,  this  standard sets forth the period after the balance sheet date
during  which  management  of a  reporting  entity  should  evaluate  events  or
transactions  that may occur for  potential  recognition  or  disclosure  in the
financial  statements,  the circumstances under which an entity should recognize
events or  transactions  occurring after the balance sheet date in its financial
statements,  and the  disclosures  that an entity  should  make about  events or
transactions that occurred after the balance sheet date.

     Effective  July 1,  2009,  the FASB  confirmed  that  the  FASB  Accounting
Standards  Codification  (the  "Codification")  will become the single  official
source of  authoritative  U.S.  GAAP  (other than  guidance  issued by the SEC),
superseding  existing FASB,  American Institute of Certified Public Accountants,
Emerging Issues Task Force ("EITF"),  and related  literature.  After that date,
only one level of authoritative  U.S. GAAP will exist. All other literature will
be considered  non-authoritative.  The  Codification  does not change U.S. GAAP;
instead,  it  introduces  a  new  structure  that  is  organized  in  an  easily
accessible,  user-friendly  online  research  system.  The  Codification,  which
changes the referencing of financial  standards,  becomes  effective for interim
and annual periods ending on or after September 15, 2009.

New Accounting Pronouncements

     See  Footnote  K,  "Recently  Issued  Accounting   Pronouncements  Not  Yet
Effective" to our unaudited  consolidated  condensed financial  statements for a
full description of recently issued accounting pronouncements including the date
of adoption and effects on our results of  operations  and  financial  position,
where applicable.

Consolidated Results of Operations

Three Months Ended November 30, 2009 and November 30, 2008

     Net revenue from sales,  leases and service of our EECP(R)  systems for the
three  months ended  November  30, 2009 and November 30, 2008,  was $839,417 and
$1,158,825,   respectively,   which  represented  a  decrease  of  $319,408,  or
approximately 28%. We reported a net loss attributable to common stockholders of
$299,808  for the second  quarter  of fiscal  year 2010  compared  to a net loss
attributable to common stockholders of $267,244 for the second quarter of fiscal
2009.  The increase in the net loss is  attributed to lower  revenues  offset by
decreases in operating expenses.

Revenues

     Revenue from equipment  sales decreased  approximately  46% to $316,509 for
the  three-month  period ended November 30, 2009 as compared to $588,298 for the
same  period in the  prior  year.  The  decrease  in  equipment  sales  reflects
decreased sales volume.

     The  increase in the sales  price per unit  reflects a shift in the product
mix  towards  newer  models  in  the  domestic  and  international  markets.  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.

                                    Page 17
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

     Our  revenue  from the sale of EECP(R)  systems  and  related  products  to
international  distributors  in the  second  quarter  of fiscal  2010  decreased
approximately $333,426 compared to the same three-month period in the prior year
reflecting decreased sales volume.

     Our revenue from equipment rental and services  decreased 8% to $522,908 in
the second  quarter of fiscal 2010 from $570,527 in the second quarter of fiscal
year 2009.  Revenue from equipment rental and services  represented 62% of total
revenue in the  second  quarter  of fiscal  2010 and 49% in the same  quarter of
fiscal  2009.  The  decrease in revenue  generated  from  equipment  rentals and
services is due to a decrease in the service  business,  with respect to service
related income  generated from units not under contract,  as well as, a decrease
in  accessories  and service parts  shipped  compared to the same quarter of the
prior fiscal year.

Gross Profit

     Gross  profit  decreased to  $438,927,  or 52% of revenues,  for the second
quarter of fiscal 2010  compared to $535,764,  or 46% of revenues,  for the same
quarter of fiscal  2009.  Gross  profits are  dependent  on a number of factors,
particularly the mix of new and used EECP(R) systems and the mix of models sold,
their respective  average selling prices,  the mix of EECP(R) units sold, rented
or placed during the period, the ongoing costs of servicing EECP(R) systems, and
certain fixed period costs, including facilities, payroll and insurance.

Selling, General and Administrative

     Selling,  general  and  administrative  ("SG&A")  expenses  for the  second
quarter of fiscal 2010 and 2009 were $650,705, or 78% of revenues, and $685,384,
or  59%  of  revenues,  respectively,   reflecting  a  decrease  of  $34,679  or
approximately  5%. The decrease in SG&A  expenditures  in the second  quarter of
fiscal 2010 resulted primarily from decreased  administrative  expenses in wages
and benefits, professional fees, and insurance expenses.

     During  the second  quarter of fiscal  2010 and 2009 there was no change in
the Company's provision for doubtful accounts.

Research and Development

     Research and development ("R&D") expenses of $102,322,  or 12% of revenues,
for the  second  quarter of fiscal  2010  decreased  by  $45,285,  or 31%,  from
$147,607,  or 13% of  revenues,  for the  second  quarter  of fiscal  2009.  The
decrease  is  primarily  attributable  to a decrease in  regulatory  affairs and
personnel expenses.

Interest and Other Income, Net

     Interest  and other  income for the second  quarter of 2010 and 2009,  were
$2,480 and $20,523,  respectively.  Interest income reflects  interest earned on
the Company's cash balances.

Amortization of Deferred Gain on Sale-leaseback of Building

     The  amortization  of deferred gain on  sale-leaseback  of building for the
second  quarter of fiscal years 2010 and 2009,  were $13,312.  The gain resulted
from the Company's sale-leaseback of its facility.

Income Tax Expense

     During the second  quarter of fiscal year 2010 we recorded a provision  for
income  taxes of  $1,500.  During the second  quarter  of fiscal  year 2009,  we
recorded a  provision  for income  taxes of $3,750 and  incurred  an  additional
expense of $102.

                                    Page 18
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

Six Months Ended November 30, 2009 and November 30, 2008

     Net revenue from sales,  leases and service of our EECP(R)  systems for the
six months ended  November 30, 2009 and November 30, 2008,  was  $2,155,501  and
$2,470,546,   respectively,   which  represented  a  decrease  of  $315,045,  or
approximately  13%. We reported net loss attributable to common  stockholders of
$198,046 for the first two  quarters of fiscal year 2010  compared to a net loss
attributable  to common  stockholders  of $817,215 for the first two quarters of
fiscal  2009.  The  decrease  in the net loss was  primarily  attributed  to the
decrease in operating expenses, and an increase in other income.

Revenues

     Revenue from equipment sales decreased  approximately 11% to $1,111,157 for
the six-month  period ended  November 30, 2009 as compared to $1,244,794 for the
same  period in the  prior  year.  The  decrease  in  equipment  sales  reflects
decreased sales volume.

     The  increase in the sales  price per unit  reflects a shift in the product
mix  towards  newer  models  in  the  domestic  and  international  markets.  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.

     Our  revenue  from the sale of EECP(R)  systems  and  related  products  to
international  distributors  in the first two quarters of fiscal 2010  decreased
approximately  $375,440  compared to the same six-month period in the prior year
reflecting decreased sales volume.

     Our revenue from equipment rental and services  decreased 15% to $1,044,344
in the  first two  quarters  of fiscal  2010  from  $1,225,752  in the first two
quarters  of fiscal  year 2009.  Revenue  from  equipment  rental  and  services
represented  48% of total  revenue in the first two  quarters of fiscal 2010 and
50% in the same two quarters of fiscal 2009.  The decrease in revenue  generated
from  equipment  rentals  and  services  is due  to a  decrease  in the  service
business,  with respect to service  contract  sale,  and service  related income
generated from units not under  contract,  as well as, a decrease in accessories
and service parts shipped compared to the same quarter of the prior fiscal year.

Gross Profit

     Gross profit increased to $1,176,500, or 55% of revenues, for the first two
quarters of fiscal 2010 compared to $1,036,326, or 42% of revenues, for the same
two quarters of fiscal 2009. Gross profits are dependent on a number of factors,
particularly the mix of new and used EECP(R) systems and the mix of models sold,
their respective  average selling prices,  the mix of EECP(R) units sold, rented
or placed during the period, the ongoing costs of servicing EECP(R) systems, and
certain fixed period costs, including facilities, payroll and insurance.


Selling, General and Administrative

     Selling,  general and  administrative  ("SG&A")  expenses for the first two
quarters  of  fiscal  2010 and 2009 were  $1,299,032,  or 60% of  revenues,  and
$1,629,143, or 66% of revenues, respectively,  reflecting a decrease of $330,111
or  approximately  20%.  The  decrease  in SG&A  expenditures  in the  first two
quarters  of  fiscal  2010  resulted  primarily  from  decreased  administrative
expenses in wages and benefits, professional fees, and insurance expenses.

                                    Page 19
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

     During the first two quarters of fiscal 2010 the  Company's  provision  for
doubtful  accounts  was reduced by $31,000 as compared to the first two quarters
of fiscal  year 2009 when  there was no change in the  Company's  provision  for
doubtful accounts.

Research and Development

     Research and development  ("R&D") expenses of $204,393,  or 9% of revenues,
for the first two  quarters of fiscal 2010  decreased by $75,561,  or 27%,  from
$279,954,  or 11% of revenues,  for the first two  quarters of fiscal 2009.  The
decrease  is  primarily  attributable  to a decrease in  regulatory  affairs and
personnel expenses.

Interest and Other Income, Net

     Interest and other income for the first two quarters of 2010 and 2009, were
$86,452 and $36,535, respectively. In the first two quarters of fiscal year 2010
other income  primarily  consisted of a cash settlement of a lawsuit against one
of the Company's  competitors.  Interest income reflects  interest earned on the
Company's cash balances.

Amortization of Deferred Gain on Sale-leaseback of Building

     The  amortization  of deferred gain on  sale-leaseback  of building for the
first  two  quarters  of fiscal  years  2010 and 2009,  were  $26,623.  The gain
resulted from the Company's sale-leaseback of its facility.

Income Tax Expense

     During the first two quarters of fiscal year 2010 we reversed the provision
for income taxes by $15,833 and the Company  incurred an  additional  expense of
$29.  During the first  quarter of fiscal year 2009, we recorded a provision for
income taxes of $7,500 and the Company incurred an additional expense of $102.

Liquidity and Capital Resources

Cash and Cash Flow

     We have financed our operations primarily from working capital. At November
30, 2009, we had cash and cash equivalents of $353,601,  short-term  investments
of  $68,850  and  working  capital  of  $1,078,549  compared  to cash  and  cash
equivalents of $544,057,  short-term investments of $370,523 and working capital
of $1,300,647 at May 31, 2009.

     Cash used in operating  activities was $472,475 during the first six months
of fiscal year 2010, which consisted of a net loss after non-cash adjustments of
$144,234  and cash used by operating  assets and  liabilities  of $328,241.  The
changes in the  accounts  balances  primarily  reflects  decreases  in  accounts
receivable  of $70,720,  Other  assets of  $17,094,  and an increase in accounts
payable of $4,909 and accrued  rent  expense of 1,553,  offset by an increase in
inventories of $238,297, and decreases in deferred revenue of $164,220 and trade
payable due to related  party of $20,000.  Net accounts  receivable  were 29% of
revenues for the  six-month  period ended  November 30, 2009, as compared to 27%
for the  six-month  period  ended  November 30,  2008,  and accounts  receivable
turnover was 2.41 times for the six months  ended  November 30, 2009 as compared
to 2.84 times for the six months ended November 30, 2008.

     Investing  activities  during the six-month  period ended November 30, 2009
provided  cash  of  $282,019  and  consisted  of  the  redemption  of  six-month
certificates  of deposit in the amount of $370,523  offset by the  purchase of a
twelve-month  certificate of deposit for $68,850,  and purchases of property and
equipment of $19,654.

                                    Page 20
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

       The Company had no financing activities during the six-month period ended
November 30, 2009.

     The following table presents the Company's  expected cash  requirements for
contractual obligations outstanding as of November 30, 2009.
<TABLE>
<CAPTION>

                                                  Due thru         Due thru         Due thru
                                               12/1/2009 and    12/1/2010 and    12/1/2012 and         Due
                                   Total         11/30/2010       11/30/2012       11/30/2014       Thereafter
                              ------------------------------------------------------------------------------------
<S>                                 <C>              <C>              <C>             <C>              <C>
Operating Leases                    $ 430,537       $ 151,429        $ 279,108       $ -              $ -
                              ------------------------------------------------------------------------------------
Total Contractual Cash
 Obligations                        $ 430,537       $ 151,429        $ 279,108       $ -              $ -
                              ====================================================================================
</TABLE>
Liquidity

     During the last several years, the Company has incurred  operating  losses.
The  Company  has  attempted  to halt the trend of  declining  revenue  by;  (i)
expanding  their  international  market by  enlisting  new  distributors  in new
markets,  (ii)  expanding  their  domestic  sales force with the addition of new
personnel  and  independent  representatives,  and  (iii)  the  introduction  of
e-commerce  to our website.  Additionally,  the Comany is also in the process of
diversifying  its product line and intends to introduce new products in the near
future.  The Company has also reduced operating costs by reducing  personnel and
related benefit costs,  professional  fees,  business  operating  expenses,  and
renegotiated contract terms for leases and services.

Effects of Current Economic Conditions

     We do not believe that the current  lack of credit  available in the market
will have a significant impact on our revenue or on our results of operations.

                                    Page 21
<PAGE>
                       Vasomedical, Inc. and Subsidiaries


ITEM 3. - QUANITATIVE AND QUALATATIVE DISCLOSURES ABOUT MARKET RISKS

     See  Item  7A in  the  Company's  2009  Annual  Report  on  Form  10-K  for
information  regarding  quantitative  and qualitative  disclosures  about market
risk. No material  change  regarding  this  information  has occurred since that
filing.

ITEM 4T. - 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 November 30, 2009, 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  November 30, 2009 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 22
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1A - RISK FACTORS

     There have been no material changes in the most significant risk factors in
the six months ended  November 30, 2009 from those risk factor set forth in Item
1A.,  "Risk  Factors," to the Company's  Annual Report on Form 10-K for the year
ended May 31, 2009.

ITEM 6 - EXHIBITS:


Exhibits

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

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


                                    Page 23
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

         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/ Jun Ma
                                   --------------------------------------
                                   Jun Ma
                                   President & Chief Executive Officer
                                  (Principal Executive Officer)

                                   /s/ Tarachand Singh
                                   --------------------------------------
                                   Tarachand Singh
                                   Chief Financial Officer

Date:  January 14, 2010