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 August 31, 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
October 12, 2009                                       99,843,004
<PAGE>
Vasomedical, Inc. and Subsidiaries


<TABLE>
<CAPTION>
                                      INDEX


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

         Item 1 -  Financial Statements (unaudited)

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

                   Consolidated Condensed Statements of Operations for the
                           Three Months Ended August 31, 2009 and
                           August 31, 2008                                                   4

                   Consolidated Condensed Statements of Cash Flows for the
                           Three Months Ended August 31, 2009 and August 31, 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               20

         Item 4T - Controls and Procedures                                                  20

PART II - OTHER INFORMATION

         Item 1A - Risk Factors                                                             21

         Item 4 -  Submission of Matters to a Vote of Security Holders                      21

         Item 6 -  Exhibits                                                                 22
</TABLE>
                                     Page 2
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS
                       Vasomedical, Inc. and Subsidiaries

                      CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                        August 31, 2009          May 31, 2009
                                                                      -------------------     -----------------
                              ASSETS                                      (unaudited)
CURRENT ASSETS
<S>                                                                           <C>                   <C>
   Cash and cash equivalents                                                  $ 682,800             $ 544,057
   Short-term investments, at fair value                                        139,651               370,523
   Accounts receivable, net of an allowance for doubtful accounts of
     $63,838 at August 31, 2009, and $94,973 at May 31, 2009                    874,051               659,551
   Inventories, net                                                           1,592,889             1,479,724
   Other current assets                                                         105,371               175,511
                                                                      ------------------      ----------------
       Total current assets                                                   3,394,762             3,229,366

PROPERTY AND EQUIPMENT, net of accumulated depreciation of
    $1,569,222 at August 31, 2009, and $1,562,891 at May 31, 2009               183,665               180,409
DEFERRED DISTRIBUTOR COSTS, net of accumulated amortization of
    $244,629 at August 31, 2009, and  $213,234 at May 31, 2009                  344,247               375,643
OTHER ASSETS                                                                    166,606               178,332
                                                                      ------------------      ----------------
                                                                            $ 4,089,280           $ 3,963,750
                                                                      ==================      ================

               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                          $ 247,712             $ 144,467
    Accrued expenses                                                            385,349               360,306
    Sales tax payable                                                           144,610               143,693
    Deferred revenue - current portion                                          865,185               957,258
    Deferred gain on sale-leaseback of building - current portion                53,245                53,245
    Accrued professional fees                                                    37,072                 9,750
    Trade payable due to related parties                                        250,000               260,000
                                                                      ------------------      ----------------
        Total current liabilities                                             1,983,173             1,928,719
                                                                      ------------------      ----------------

LONG-TERM LIABILITIES
   Deferred revenue, less current portion                                       311,576               330,449
   Accrued rent expense                                                          17,539                16,040
   Deferred gain on sale-leaseback of building, net of current portion          102,054               115,365
   Other long-term liabilities                                                   11,900                11,900
                                                                      ------------------      ----------------
       Total long-term liabilities                                              443,069               473,754
                                                                      ------------------      ----------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
    Preferred stock, $.01 par value; 1,000,000 shares authorized;
       none issued                                                                    -                     -
    Common stock, $.001 par value; 110,000,000 shares authorized;
       99,843,004 shares at August 31, 2009 and May 31, 2009,
       issued and outstanding                                                    99,843                99,843
    Additional paid-in capital                                               48,281,711            48,281,711
    Accumulated deficit                                                     (46,642,618)          (46,744,379)
    Non-controlling interest                                                    (75,898)              (75,898)
                                                                      ------------------      ----------------
       Total stockholders' equity                                             1,663,038             1,561,277
                                                                      ------------------      ----------------
                                                                            $ 4,089,280           $ 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>
                                                           Three months ended August 31,
                                                         ----------------------------------
                                                              2009               2008
                                                         ---------------    ---------------
Revenues
<S>                                                          <C>                <C>
  Equipment sales                                            $ 794,648          $ 656,496
  Equipment rentals and services                               521,436            655,225
                                                         ---------------    ---------------
   Total revenues                                            1,316,084          1,311,721
                                                         ---------------    ---------------

Cost of Sales and Services
  Cost of sales, equipment                                     325,968            528,281
  Cost of equipment rentals and services                       252,543            282,878
                                                         ---------------    ---------------
   Total cost of sales and services                            578,511            811,159
                                                         ---------------    ---------------
Gross profit                                                   737,573            500,562
                                                         ---------------    ---------------

Operating Expenses
  Selling, general and administrative                          648,327            943,759
  Research and development                                     102,071            132,347
                                                         ---------------    ---------------
   Total operating expenses                                    750,398          1,076,106
                                                         ---------------    ---------------
Loss from operations                                           (12,825)          (575,544)
                                                         ---------------    ---------------

Other Income (Expenses)
  Interest and other income, net                                83,970             16,012
  Amortization of deferred gain on
   sale-leaseback of building                                   13,311             13,311
                                                         ---------------    ---------------
   Total other income, net                                      97,281             29,323
                                                         ---------------    ---------------

Income/(loss) before income taxes                               84,456           (546,221)
  Income tax benefit/(expense), net                             17,306             (3,750)
                                                         ---------------    ---------------
Net income/(loss) applicable to common stockholders       $    101,762       $   (549,971)
                                                         ===============    ===============

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

Weighted average common shares outstanding
     - basic and diluted                                    99,843,004         93,768,004
                                                         ===============    ===============
</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>
                                                                                         Three months ended August 31,
                                                                                    -------------------------------------
                                                                                           2009                2008
                                                                                    -----------------   -----------------
Cash flows from operating activities
<S>                                                                                       <C>               <C>
   Net income/(loss)                                                                      $ 101,762         $  (549,971)
   Adjustments to reconcile net income/(loss) to net cash
      used in operating activities
     Depreciation and amortization of property and equipment                                 25,976              29,497
     Amortization of deferred gain on sale-leaseback of building                            (13,311)            (13,311)
     Provision for doubtful accounts                                                        (31,135)                  -
     Amortization of deferred distributor costs                                              31,396              25,444
     Stock-based compensation                                                                    -                5,314
     Changes in operating assets and liabilities:
         Accounts receivable                                                               (183,365)           (163,836)
         Inventories, net                                                                  (111,408)           (193,041)
         Other assets                                                                        70,140             (76,377)
         Accounts payable, accrued expenses and other current liabilities                   156,527             296,549
         Deferred revenue                                                                  (110,947)             44,629
         Other liabilities                                                                    1,499              82,866
         Trade payable due to related party                                                 (10,000)                  -
                                                                                   -----------------   -----------------
     Net cash used in operating activities                                                  (72,866)           (512,237)
                                                                                   -----------------   -----------------

     Cash flows from investing activities
         Purchases of property and equipment                                                (19,263)             (1,379)
         Purchase of short-term investments                                                 (68,850)                  -
         Redemption of short-term investments                                               299,722                   -
                                                                                   -----------------   -----------------
     Net cash provided by (used in) investing activities                                    211,609              (1,379)
                                                                                   -----------------   -----------------

     NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                   138,743            (513,616)
                                                                                   -----------------   -----------------
         Cash and cash equivalents - beginning of period                                    544,057           2,653,999
                                                                                   -----------------   -----------------
         Cash and cash equivalents - end of period                                        $ 682,800         $ 2,140,383
                                                                                   =================   =================

Non-cash investing and financing activities were as follows:
   Inventories transferred to property and equipment, attributable
     to operating leases, net                                                             $  (1,758)        $    19,274
                                                                                   =================   =================
</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)
                                 August 31, 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.

Significant 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  significant  accounting  policies used in the  preparation  of financial
statements.  The  following  policies are  effective as of June 1, 2009 and have
been implemented by the company for the three months ended August 31, 2009.

     Effective June 1, 2009, the Company adopted Financial  Accoutning 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.

                                     Page 6
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                 August 31, 2009

     Effective  June 1, 2009, the Company  adopted 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,"  and  requires  disclosures  about  the fair  value  of  financial
instruments for interim  reporting  periods of publicly traded companies as well
as in annual  financial  statements.  FSP SFAS No.  107-1 and APB No.  28-1 also
amends APB Opinion  No. 28,  "Interim  Financial  Reporting,"  to require  those
disclosures in summarized financial information for interim reporting periods.

     Effective  June 1, 2009,  the Company  adopted 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.

NOTE C - LIQUIDITY

     During the last  several  years,  we  incurred  operating  losses.  We have
attempted to achieve  profitability by reducing  operating costs and halting the
trend of declining  revenue,  and to reduce cash usage through bringing our cost
structure more into alignment with current and projected  revenues.  The Company
has reduced  personnel costs by  reorganization.  The Company has negotiated new
terms on professional fees,  facility  expenses,  and shipping and supply costs.
The  Company  is also  looking  to  obtain a  revolving  line of  credit to help
stabilize  cash flow and to respond to customers  requests for flexible  payment
terms on our EECP(R) therapy systems.

NOTE D - STOCK-BASED COMPENSATION

     The Company complies with Statement of Financial Standards No. 123 (revised
2004),  Share-Based  Payment ("SFAS No. 123 (R)"),  SFAS No. 123(R) 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 three-month period ended August 31, 2009, the Company's Board of
Directors did not grant any non-qualified stock options.

     During the three-month period ended August 31, 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  SFAS No.  123(R) was
$5,314 for the three months ended August 31, 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
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.

                                     Page 7
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                 August 31, 2009

     Share-based  awards 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).

NOTE E - INCOME/(LOSS) PER COMMON SHARE

     Basic   income/(loss)   per  common  share  is  computed  as  income/(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.

     Basic and diluted  income/(loss)  per common share were income of less than
$0.01 and a loss of $0.01 for the three  months ended August 31, 2009 and August
31, 2008, respectively.

     Stock options and warrants,  in accordance with the following  table,  were
excluded from the computation of diluted  income/(loss)  per share for the three
months ended August 31, 2009 and August 31, 2008.
<TABLE>
<CAPTION>
                                  Three months ended        Three months ended
                                      August 31,                August 31
                                         2009                     2008
                                 ---------------------     --------------------
     <S>                               <C>                        <C>
     Stock options                     2,983,239                  5,460,210
     Warrants                          6,540,252                  6,540,252
                                 ---------------------     --------------------
                                       9,523,491                 12,000,462
                                 =====================     ====================
</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 SFAS No. 157.


         The following table presents information about the Company's assets and
liabilities measured at fair value as of August 31, 2009:
<TABLE>
<CAPTION>
                                           Quoted Prices         Significant                             Balance
                                             in Active              Other           Significant           as of
                                            Markets for          Observable         Unobservable        August 31,
                                         Identical Assets          Inputs              Inputs              2009
                                        --------------------  ------------------  -----------------  -----------------
<S>                                       <C>                    <C>                  <C>              <C>
Assets

Cash equivalents invested in
money market fund (included
in cash and cash equivalents)
                                          $    166,797           $      -             $      -         $    166,797

Investments in certificates of
deposit (included in short term
investments)                                   139,651                  -                    -              139,651
                                        --------------------  ------------------  -----------------  -----------------

                                          $    306,448           $      -             $      -         $    306,448
                                        ====================  ==================  =================  =================

</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)
                                 August 31, 2009


NOTE G - INVENTORIES

         Inventories, net of reserves, consist of the following:
<TABLE>
<CAPTION>
                                          August 31, 2009             May 31, 2009
                                        ---------------------     ---------------------
     <S>                                         <C>                       <C>
     Raw materials                               $   636,792               $   646,775
     Work in process                                 545,086                   522,823
     Finished goods                                  411,011                   310,126
                                        ---------------------     ---------------------
                                                 $ 1,592,889               $ 1,479,724
                                        =====================     =====================
</TABLE>
     At August 31, 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>
                                                           Three months               Three months
                                                         ended August 31,            ended August 31,
                                                               2009                       2008
                                                        --------------------       ------------------
<S>                                                             <C>                     <C>
Deferred revenue at the beginning of the period                 $ 1,268,834             $ 1,618,053
Additions:
   Deferred extended service contracts                              234,677                 446,834
   Deferred in-service and training                                  10,000                  17,500
   Deferred service arrangements                                     42,500                  52,500
   Deferred service arrangement obligations                              -                      600
Recognized as revenue:
   Deferred extended service contracts                             (334,455)               (410,126)
   Deferred in-service and training                                 (10,000)                (12,500)
   Deferred service arrangements                                    (34,795)                (49,579)
   Deferred service arrangement obligations                             -                      (600)
                                                        --------------------    --------------------
Deferred revenue at end of period                                 1,176,761               1,662,682
   Less: current portion                                            865,185               1,151,556
                                                        --------------------    --------------------
Long-term deferred revenue at end of period                       $ 311,576               $ 511,126
                                                        ====================    ====================
</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

                                     Page 9
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                 August 31, 2009

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
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.  Payment  terms on certain
purchases  leave a balance of  $250,000  in Trade  payable  to  related  party -
current portion on the accompanying  consolidated  condensed balance sheet as of
August 31, 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)
                                 August 31, 2009

NOTE J - COMMITMENTS

Leases

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

        <S>                                     <C>
        May 31, 2010                            $    112,447
        May 31, 2011                                 154,427
        May 31, 2012                                 160,604
        May 31, 2013                                  40,541
                                               ------------------
        Total                                   $    468,019
                                               ==================
</TABLE>
NOTE K - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET EFFECTIVE

     SFAS  No.  168,  The  FASB  Accounting  Standards  Codification  TM and the
Hierarchy of Generally  Accepted  Accounting  Principles--a  replacement of FASB
Statement No. 162 ("SFAS 168"). The statement 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.  We will apply the
Codification  beginning in the second  quarter of fiscal  2010.  The adoption of
SFAS  168 is not  expected  to have  any  substantive  impact  on our  condensed
consolidated financial statements or related footnotes.

NOTE L - SUBSEQUENT EVENTS

     The company has evaluated  subsequent  events through October 15, 2009, the
date of issuance of these financial statements as required by SFAS 165.

     On September 30, 2009 the Annual Meeting of  Stockholders  of  Vasomedical,
Inc. was held. At this meeting the  shareholders  voted in favor of amending the
Company's  certificate  of  incorporation  to increase the number of  authorized
shares of common stock to 250,000,000.

                                    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.
We have  attempted  to achieve  profitability  by halting the trend of declining
revenue and reducing  operating costs, and to reduce cash usage through bringing
our cost structure more into alignment with current and projected  revenues.  We
have  started to see the effect of these  efforts as  evidenced  by the improved
results of the current quarter.

                                    Page 12
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

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.

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,

                                    Page 13
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

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 2009 Update, in 2005 approximately 3.2 million men and 2.5
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 2005 in the United
States of $37.2  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.

     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.

                                    Page 14
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

     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
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

                                    Page 15
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

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.

     Since June 1, 2009 the Company adopted 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.

     Since June 1, 2009 the Company adopted 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,"  and
requires  disclosures about the fair value of financial  instruments for interim
reporting  periods of publicly traded  companies as well as in annual  financial
statements.  FSP SFAS No. 107-1 and APB No. 28-1 also amends APB Opinion No. 28,
"Interim  Financial  Reporting,"  to require  those  disclosures  in  summarized
financial  information for interim reporting periods. FSP SFAS No. 107-1 and APB
No. 28-1 is effective for interim reporting periods ending after June 15, 2009.

                                    Page 16
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

     The Company  adopted  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.

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 August 31, 2009 and August 31, 2008

     Net revenue from sales,  leases and service of our EECP(R)  systems for the
three  months  ended August 31, 2009 and August 31,  2008,  was  $1,316,084  and
$1,311,721,  respectively, which represented an increase of $4,363, or less than
1%. We reported net income  attributable to common  stockholders of $101,762 for
the first  quarter of fiscal year 2010  compared to a net loss  attributable  to
common stockholders of $549,971 for the first quarter of fiscal 2009. The change
from a net loss to net  income  was  primarily  attributed  to the  increase  in
equipment  revenues,  decrease in operating  expenses,  and an increase in other
income.

Revenues

     Revenue from equipment  sales increased  approximately  21% to $794,648 for
the  three-month  period  ended  August 31, 2009 as compared to $656,496 for the
same period in the prior year. The increase in equipment  sales is due primarily
to an increase in the average blended per unit sale price.

     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  quarter  of  fiscal  2010  decreased
approximately  $43,063 compared to the same three-month period in the prior year
reflecting decreased sales volume.

     Our revenue from equipment rental and services decreased 20% to $521,436 in
the first  quarter of fiscal 2010 from  $655,225 in the first  quarter of fiscal
year 2009.  Revenue from equipment rental and services  represented 40% of total
revenue  in the first  quarter  of fiscal  2010 and 50% 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

                                    Page 17
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

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  $737,573,  or 56% of  revenues,  for the first
quarter of fiscal 2010  compared to $500,562,  or 38% 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 first quarter
of fiscal 2010 and 2009 were $648,327, or 49% of revenues,  and $943,759, or 72%
of revenues,  respectively,  reflecting a decrease of $295,432 or  approximately
31%.  The  decrease  in SG&A  expenditures  in the first  quarter of fiscal 2010
resulted primarily from decreased administrative expenses in wages and benefits,
professional fees, and insurance expenses.

     During  the  first  quarter  of fiscal  2010 the  Company's  provision  for
doubtful  accounts  was reduced by $31,000 as  compared to the first  quarter 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 $102,071,  or 8% of revenues,
for the  first  quarter  of fiscal  2010  decreased  by  $30,276,  or 23%,  from
$132,347, or 10% of revenues, for the first quarter of fiscal 2009. The decrease
is primarily attributable to a decrease in regulatory affairs expenses.

Interest and Other Income, Net

     Interest  and other  income for the first  quarter  of 2010 and 2009,  were
$83,970  and  $16,012,  respectively.  In the first  quarter 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  quarter  of  fiscal  years  2010 and  2009,  were  $13,311  and  $13,311,
respectively.  The  gain  resulted  from  the  Company's  sale-leaseback  of its
facility.

Income Tax Expense

     During the first  quarter of fiscal year 2010 we reversed the provision for
income taxes by $17,335 and the Company  incurred an expense of $29.  During the
first  quarter of fiscal year 2009,  we recorded a provision for income taxes of
$3,750.

Liquidity and Capital Resources

Cash and Cash Flow

     We have financed our operations  primarily from working capital.  At August
31, 2009, we had cash and cash equivalents of $682,800,  short-term  investments
of  $139,651  and  working  capital  of  $1,411,589  compared  to cash  and cash

                                    Page 18
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

equivalents of $544,057,  short-term investments of $370,523 and working capital
of $1,300,645 at May 31, 2009.

     Cash used in operating activities was $72,866 during the first three months
of fiscal year 2010, which consisted of a net gain after non-cash adjustments of
$114,688  and cash used by operating  assets and  liabilities  of $187,554.  The
changes  in the  accounts  balances  primarily  reflect  increases  in  accounts
receivable of $183,365, inventories of $111,408, including $1,758 of inventories
transferred  from  property  and  equipment,  decreases  in deferred  revenue of
$110,947,  and trade payable due to related party of $10,000 partially offset by
a decrease in other assets of $70,140, an increase in accounts payable,  accrued
expenses and other  current  liabilities  of $156,527,  and an increase in other
liabilities  of $1,499.  Net  accounts  receivable  were 66% of revenues for the
three-month period ended August 31, 2009, as compared to 67% for the three-month
period ended August 31, 2008, and accounts receivable turnover was 5.8 times for
the three  months  ended  August 31, 2009 as compared to 6.5 times for the three
months ended August 31, 2008.

     Investing  activities  during the three-month  period ended August 31, 2009
provided  cash  of  $211,609  and  consisted  of  the  redemption  of  six-month
certificates  of deposit in the amount of $299,722  offset by the  purchase of a
twelve-month  certificate of deposit for $68,850,  and purchases of property and
equipment of $19,263.

     The Company had no financing activities during the three-month period ended
August 31, 2009.

     The following table presents the Company's  expected cash  requirements for
contractual obligations outstanding as of August 31, 2009.
<TABLE>
<CAPTION>
                                                  Due thru         Due thru         Due thru
                                                9/1/2009 and     9/1/2010 and     9/1/2012 and         Due
                                   Total         8/31/2010        8/31/2012        8/31/2014        Thereafter
                               ------------------------------------------------------------------------------------
<S>                                 <C>              <C>              <C>             <C>              <C>
Operating Leases                    $ 468,019        $ 149,929        $ 318,090       $ -              $ -
                              ------------------------------------------------------------------------------------
Total Contractual Cash
 Obligations                        $ 468,019        $ 149,929        $ 318,090       $ -              $ -
                              ====================================================================================
</TABLE>
Liquidity

     During the last several years, the Company has incurred  operating  losses.
We have  attempted  to achieve  profitability  by halting the trend of declining
revenue and reducing  operating costs, and to reduce cash usage through bringing
our cost structure more into alignment with current revenues. We have started to
see the effect of these  efforts as  evidenced  by the  improved  results of the
current quarter.

     Based on our current operations, we believe that we have sufficient working
capital to continue our operations through at least May 31, 2010.

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 19
<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 August 31, 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  August 31,  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 20
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1A - RISK FACTORS

     There have been no material changes in the most significant risk factors in
the three  months ended August 31, 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 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)  The  Registrant  held its Annual Meeting of  Stockholders  on September 30,
     2009.

(b)  Eight  directors  were elected at the Annual Meeting to serve for a term of
     one year.  The names of these  directors  and votes  cast in favor of their
     election and shares withheld are as follows:
<TABLE>
<CAPTION>
          Name                         Votes For         Votes Withheld
          ----                         ---------         --------------
          <S>                          <C>                  <C>
          Abraham E. Cohen             80,798,427           3,235,728
          Derek Enlander               81,173,101           2,861,054
          John C. K. Hui               79,807,243           4,226,912
          Jun Ma                       80,350,036           3,684,119
          Behnam Movaseghi             80,282,700           3,751,455
          Photios T. Paulson           46,553,391          37,480,764
          Simon Srybnik                80,431,574           3,602,581
          Martin Zeiger                80,502,231           3,531,924
</TABLE>
       There were no broker non-votes as to the election of directors.

(c)  (i) An amendment to the Company's  Certificate of Incorporation to increase
     the  number of  authorized  shares  of common  stock  from  110,000,000  to
     250,000,000 was approved at the Annual Meeting by the following vote:

              Votes For              Votes Against               Abstained
              ---------              -------------               ---------
              72,781,064              10,668,400                  584,691

     There were no broker non-votes as to this matter.

     (ii)  Ratification of the  appointment of Rothstein,  Kass & Company as the
     Company's independent registered public accountants for the year ending May
     31, 2010 was approved at the Annual Meeting by the following vote:

              Votes For            Votes Against                 Abstained
              ---------            -------------                 ---------
              80,944,270             1,242,910                   1,846,975

     There were no broker non-votes as to this matter.

          (d) Not applicable.

                                    Page 21
<PAGE>
ITEM 6 - EXHIBITS:


Exhibits

3    Certificate of Amendment of the Certificate of  Incorporation as filed with
     the Secretary of State of Delaware on October 2, 2009.

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 22
<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:  October 15, 2009

                                    Page 23