UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q


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

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

Number of Shares Outstanding of Common Stock, $.001 Par Value, at April 10, 2009
99,843,004

                                     Page 1
<PAGE>
Vasomedical, Inc. and Subsidiaries


                                      INDEX


                                                                            Page
                                                                            ----
PART I - FINANCIAL INFORMATION

        Item 1 - Financial Statements

                 Consolidated Condensed Balance Sheets as of
                    February 28, 2009 and May 31, 2008                         3

                 Consolidated Condensed Statements of Operations for the
                    Nine and Three Months Ended February 28, 2009 and
                    February 29 2008                                           4

                 Consolidated Condensed Statements of Cash Flows for the
                    Nine Months Ended February 28, 2009, and February 29,
                    2008                                                       5


                 Notes to Consolidated Condensed Financial Statements          6

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

        Item 3 - Quantitative and Qualitative Disclosures About Market Risk   23

        Item 4T - Controls and Procedures                                     23

PART II - OTHER INFORMATION

        Item 1A - Risk Factors                                                24

        Item 6 - Exhibits                                                     24

                                     Page 2
<PAGE>
ITEM 1.  FINANCIAL STATEMENTS
                       Vasomedical, Inc. and Subsidiaries

                      CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                   February 28, 2009            May 31, 2008
                                                                                  ---------------------       ------------------
                                    ASSETS                                            (Unaudited)
CURRENT ASSETS
<S>                                                                                          <C>                    <C>
   Cash and cash equivalents                                                                 $ 997,592              $ 2,653,999
   Short-term investment                                                                       299,074                        -
   Accounts receivable, net of an allowance for doubtful accounts of
     $101,453 at February 28, 2009, and $270,183 at May 31, 2008                               684,657                  717,849
   Inventories, net                                                                          1,645,922                1,652,678
   Other current assets                                                                        153,988                   58,933
                                                                                  ---------------------       ------------------
      Total current assets                                                                   3,781,233                5,083,459

PROPERTY AND EQUIPMENT, net of accumulated depreciation of
   $1,882,625 at February 28, 2009, and $2,178,566 at May 31, 2008                             144,703                   57,170
DEFERRED DISTRIBUTOR COSTS, net of accumulated amortization of
    $182,392 at February 28, 2009, and  $101,775 at May 31, 2008                               386,484                  407,101
OTHER ASSETS                                                                                   190,058                  213,336
                                                                                  ---------------------       ------------------
                                                                                           $ 4,502,478              $ 5,761,066
                                                                                  =====================       ==================

                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable and accrued expenses                                                     $ 594,277                $ 822,244
   Sales tax payable                                                                           134,202                  149,304
   Deferred revenue - current portion                                                        1,046,664                1,132,445
   Deferred gain on sale-leaseback of building - current portion                                53,245                   53,245
   Accrued professional fees                                                                    41,200                   74,320
   Due to related parties                                                                      200,000                        -
                                                                                  ---------------------       ------------------
     Total current liabilities                                                               2,069,588                2,231,558
                                                                                  ---------------------       ------------------

LONG-TERM LIABILITIES
   Deferred revenue                                                                            396,437                  485,608
   Accrued rent expense                                                                         14,541                    8,656
   Deferred gain on sale-leaseback of building                                                 128,676                  168,610
   Other long-term liabilities                                                                  11,900                        -
                                                                                  ---------------------       ------------------
     Total long term liabilities                                                               551,554                  662,874
                                                                                  ---------------------       ------------------

COMMITMENTS

STOCKHOLDERS' EQUITY
   Preferred stock, $.01 par value; 1,000,000 shares authorized;
      none issued                                                                                    -                        -
   Common stock, $.001 par value; 200,000,000 shares authorized;
     98,943,004 shares at February 28, 2009, and 93,768,004 at
      May 31, 2008, issued and outstanding                                                      98,943                   93,768
   Additional paid-in capital                                                               48,264,612               48,068,432
   Accumulated deficit                                                                     (46,482,219)             (45,295,566)
                                                                                  ---------------------       ------------------
     Total stockholders' equity                                                              1,881,336                2,866,634
                                                                                  ---------------------       ------------------
                                                                                           $ 4,502,478              $ 5,761,066
                                                                                  =====================       ==================
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  condensed
financial statements

                                     Page 3
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                     Nine months       Nine months        Three months      Three months
                                                    ended February    ended February     ended February     ended February
                                                          28,               29,                28,                29,
                                                         2009              2008               2009               2008
                                                    ---------------   ----------------   ---------------    ---------------
Revenues
<S>                                                   <C>               <C>                 <C>                <C>
  Equipment sales                                     $ 1,742,093       $ 1,517,985         $ 497,299          $ 427,445
  Equipment rentals and services                        1,717,770         2,397,600           492,018            760,249
                                                    ---------------   ----------------   ---------------    ---------------
     Total revenues                                     3,459,863         3,915,585           989,317          1,187,694
                                                    ---------------   ----------------   ---------------    ---------------

Cost of Sales and Services
  Cost of sales, equipment                              1,245,601         1,174,214           354,256            409,160
  Cost of equipment rentals and services                  769,525           873,411           226,650            247,088
                                                    ---------------   ----------------   ---------------    ---------------
     Total cost of sales and services                   2,015,126         2,047,625           580,906            656,248
                                                    ---------------   ----------------   ---------------    ---------------
Gross profit                                            1,444,737         1,867,960           408,411            531,446
                                                    ---------------   ----------------   ---------------    ---------------

Operating Expenses
  Selling, general and administrative                   2,297,189         1,932,645           668,046            732,351
  Research and development                                415,108           362,315           135,154            117,313
                                                    ---------------   ----------------   ---------------    ---------------
     Total operating expenses                           2,712,297         2,294,960           803,200            849,664
                                                    ---------------   ----------------   ---------------    ---------------
Loss from operations                                   (1,267,560)         (427,000)         (394,789)          (318,218)
                                                    ---------------   ----------------   ---------------    ---------------

Other Income (Expenses)
  Interest and financing costs                                  -           (16,605)                -                  -
  Interest and other income, net                           48,670            47,513            12,135             12,275
  Amortization of deferred gain on
     sale-leaseback of building                            39,934            31,060            13,311             13,312
                                                    ---------------   ----------------   ---------------    ---------------
     Total other income, net                               88,604            61,968            25,446             25,587
                                                    ---------------   ----------------   ---------------    ---------------
Loss before income taxes                               (1,178,956)         (365,032)         (369,343)          (292,631)
  Income tax expense, net                                  (7,697)          (14,197)              (95)            (3,750)
                                                    ---------------   ----------------   ---------------    ---------------
Net loss applicable to common stockholders           $ (1,186,653)      $  (379,229)        $(369,438)        $ (296,381)
                                                    ===============   ================   ===============    ===============

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

Weighted average common shares outstanding
     - basic and diluted                               95,468,923        91,687,349        97,931,768         93,761,337
                                                    ===============   ================   ===============    ===============
</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
<TABLE>
<CAPTION>
                                                                                     Nine Months         Nine Months
                                                                                    Ended February      Ended February
                                                                                          28,                 29,
                                                                                   -----------------   -----------------
                                                                                         2009                2008
                                                                                   -----------------   -----------------
  Cash flows used in operating activities
<S>                                                                                    <C>                   <C>
   Net loss                                                                            $ (1,186,653)         $ (379,229)
   Adjustments to reconcile net loss to net cash
    used in operating activities
     Depreciation and amortization of property and equipment                                 74,939             149,582
     Amortization of deferred gain on sale-leaseback of building                            (39,934)            (31,060)
     Provision for doubtful accounts                                                              -             (27,524)
     Amortization of deferred distributor costs                                              80,617              76,333
     Expenses paid for distributor agreement                                                      -             (40,490)
     Stock-based compensation                                                               141,357              81,414
     Changes in operating assets and liabilities:
        Accounts receivable, net                                                             33,192             (16,645)
        Inventories, net                                                                   (110,222)            468,248
        Other current assets                                                                (95,055)            (80,487)
        Accounts payable, deferred revenue accrued expenses and other
          current liabilities                                                              (356,085)           (210,119)
        Other liabilities                                                                   (89,175)            (90,643)
        Due to related party                                                                200,000                   -
                                                                                   -----------------   -----------------
   Net cash used in operating activities                                                 (1,347,019)           (100,620)
                                                                                   -----------------   -----------------
   Cash flows provided by (used in) investing activities
        Proceeds from the building sale-leaseback                                                 -           1,400,000
        Expenses paid for sale-leaseback of building                                              -             (89,143)
        Purchases of property and equipment                                                 (10,314)                  -
        Purchases of short-term investments                                                (299,074)                  -
                                                                                   -----------------   -----------------
   Net cash provided by (used in) investing activities                                     (309,388)          1,310,857
                                                                                   -----------------   -----------------

   Cash flows provided by financing activities
        Payments on long term debt and notes payable                                              -            (851,015)
        Proceeds from Securities Purchase agreement                                               -           1,500,000
        Expenses paid in relation to Securities Purchase Agreement                                -            (124,110)
                                                                                   -----------------   -----------------
   Net cash provided by financing activities                                                      -             524,875
                                                                                   -----------------   -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     (1,656,407)          1,735,112
                                                                                   -----------------   -----------------
   Cash and cash equivalents - beginning of period                                        2,653,999             850,288
                                                                                   -----------------   -----------------
   Cash and cash equivalents - end of period                                              $ 997,592         $ 2,585,400
                                                                                   =================   =================

Non-cash investing and financing activities were as follows:
   Inventories transferred to property and equipment, attributable
     to operating leases, net                                                             $ 116,978            $ 14,672
                                                                                   =================   =================
   Common stock issued for distribution agreement                                          $ 60,000           $ 468,386
                                                                                   =================   =================
</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)
                                February 28, 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

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, 2008,
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.

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   revenues.   By  engaging  in
restructurings  the  Company  has  reduced  personnel  costs.  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 generate sales by offering  potential  customers
extended payment terms on our EECP(R) therapy systems.

     During the first quarter of fiscal year 2008, we raised  capital  through a
private  equity  financing  and by the sale of our  facility  under a  leaseback
agreement.

     o    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.

                                     Page 6

<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                February 28, 2009


          We sold to  Kerns,  pursuant  to the  Securities  Purchase  Agreement,
          21,428,572  shares  of our  common  stock  at $.07  per  share  for an
          aggregate 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 of Kerns.
          In furtherance  thereof,  Jun Ma and Simon  Srybnik,  Chairman of both
          Kerns and Living  Data,  have been  appointed  members of our Board of
          Directors. On October 16, 2008, Mr. Jun Ma was appointed President and
          Chief Executive  Officer of the Company.  Pursuant to the Distribution
          Agreement,  we have  become the  exclusive  distributor  in the United
          States of the AngioNew(R) 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 is now 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.

          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.

     o    On August 15, 2007, we sold our facility  under a five-year  leaseback
          agreement  for $1.4  million.  The net  proceeds  from  the sale  were
          approximately $425,000, after payment in full of the two secured notes
          on our facility,  brokers fees,  closing  costs,  and the opening of a
          certificate  of deposit in accordance  with the  provisions of the new
          lease.

     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.

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 nine-month  period ended February 28, 2009, the Company's  Board
of Directors did not grant any non-qualified stock options.

     During the nine-month  period ended February 28, 2009, the Company's  Board
of  Directors  granted  100,000  shares of common  stock to one  employee of the
Company  having  a fair  market  value  of  $0.08  per  share at the time of the
respective grant.

     During the nine-month  period ended February 28, 2009, the Company's  Board
of Directors granted 2,000,000 shares of common stock to eight outside directors
of the Company  having a fair market value of $0.06 per share at the time of the
respective grant.

     During the nine-month  period ended February 28, 2009, the Company's  Board
of Directors  granted  75,000 shares of common stock to one outside  director of
the  Company  having a fair  market  value of $0.06 per share at the time of the
respective grant.

     Stock-based  compensation  expense  recognized  under  SFAS No.  123(R) was
$141,357  and $81,414 for the nine months  ended  February 28, 2009 and February
29, 2008,  respectively.  These expenses are included in selling,  general,  and
administrative in the consolidated condensed statements of operations. The stock

                                     Page 7

<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                February 28, 2009


based  compensation   expenses  for  each  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.  In addition,  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 SFAS No. 123(R).

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.  However,  since the company had net
losses for all  periods  presented,  diluted  loss per common  share is equal to
basic loss per  common  share for those  periods,  as any  potentially  dilutive
securities would become antidilutive.

     Basic and  diluted  losses per common  share were less than $0.01 and $0.01
for the three and nine months  ended  February  28, 2009 and less than $0.01 for
the three and nine months ended February 29, 2008.

     Stock options and warrants,  in accordance with the following  table,  were
excluded  from the  computation  of diluted loss per share for the tree and nine
months ended February 28, 2009 and February 29 2008, because the effect of their
inclusion would be antidilutive.
<TABLE>
<CAPTION>
                                   Three and Nine         Three and Nine
                                    Months Ended           Months Ended
                                    February 28,           February 29,
                                 ----------------------------------------
                                       2009                   2008
                                 ------------------     -----------------
<S>                                  <C>                    <C>
Stock options                        4,847,977              5,886,710
Warrants                             6,540,252              6,540,252
                                 ------------------     -----------------
                                    11,388,229             12,426,962
                                 ==================     =================
</TABLE>
                                     Page 8
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                February 28, 2009


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 February 29, 2009:
<TABLE>
<CAPTION>
                                           Quoted Prices         Significant
                                             in Active              Other           Significant          Balance
                                            Markets for          Observable         Unobservable          as of
                                         Identical Assets          Inputs              Inputs          February 28,
                                             (Level 1)            (Level 2)           (Level 3)            2009
                                        --------------------  ------------------  -----------------  ----------------
  Assets
  <S>                                        <C>                  <C>                 <C>               <C>
    Cash equivalents invested in
    money market fund                        $ 313,751            $     -             $      -          $ 313,751

                                        --------------------  ------------------  -----------------  ----------------
                                             $ 313,751            $     -             $      -          $ 313,751
                                        ====================  ==================  =================  ================
</TABLE>
     The fair values of the Company's cash equivalents  unvested in money market
fund are determined through market, observable and corroborated sources.

NOTE G - INVENTORIES

         Inventories, net of reserves, consist of the following:

     At February 28, 2009 and May 31, 2008,  the Company had reserves for excess
and obsolete inventory of $581,725 and $594,042, respectively.
<TABLE>
<CAPTION>
                                          February 28, 2009           May 31, 2008
                                        ---------------------     ---------------------

   <S>                                      <C>                       <C>
   Raw materials                            $   758,352               $   936,035
   Work in process                              519,558                   603,925
   Finished goods                               368,012                   112,718
                                        ---------------------     ---------------------
                                            $ 1,645,922               $ 1,652,678
                                        =====================     =====================
</TABLE>

                                     Page 9
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                February 28, 2009


NOTE H - DEFERRED REVENUE

The changes in the Company's deferred revenues are as follows:
<TABLE>
<CAPTION>

                                                           Nine months          Nine months        Three months        Three months
                                                          ended February      ended February      ended February      ended February
                                                               28,                 29,                  28,                  29,
                                                              2009                2008                 2009                 2008
                                                        -----------------   ------------------   -----------------    --------------
<S>                                                       <C>                  <C>                 <C>                  <C>
Deferred revenue at the beginning of the period           $ 1,618,053          $ 1,756,352         $ 1,486,800          $ 1,598,241
Additions:
   Deferred extended service contracts                        926,241            1,334,506             293,348              427,067
   Deferred in-service and training                            27,500               30,000               5,000               12,500
   Deferred service arrangements                               93,000              143,750              22,500               63,750
   Deferred service arrangement obligations                       600                8,850                   -                1,050
Recognized as revenue:
   Deferred extended service contracts                     (1,046,066)          (1,575,282)           (313,848)            (497,751)
   Deferred in-service and training                           (27,500)             (17,500)             (2,500)              (7,500)
   Deferred service arrangements                             (146,327)            (110,796)            (46,999)             (38,877)
   Deferred service arrangement obligations                    (2,400)             (13,350)             (1,200)              (1,950)
                                                        -----------------   ------------------   -----------------    --------------
Deferred revenue at end of period                           1,443,101            1,556,530           1,443,101            1,556,530
   Less: current portion                                    1,046,664            1,177,547           1,046,664            1,177,547
                                                        -----------------   ------------------   -----------------    --------------
Long-term deferred revenue at end of period                 $ 396,437            $ 378,983           $ 396,437            $ 378,983
                                                        =================   ==================   =================    ==============
</TABLE>
NOTE I - RELATED-PARTY TRANSACTIONS

     On June 21,  2007,  we entered into a Securities  Purchase  Agreement  with
Kerns.  Concurrently with our entry into the Securities Purchase  Agreement,  we
also entered into a Distribution  Agreement and a Supplier Agreement with 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 an aggregate of $1,500,000,  as
well 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 of
Kerns. In furtherance thereof, Jun Ma and Simon Srybnik,  Chairman of both Kerns
and Living Data, have been appointed members of our Board of Directors. 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 is now 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.

                                    Page 10
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                February 28, 2009


     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  Behnam  Movaseghi,
Treasurer and Chief Financial Officer of Kerns Manufacturing Corporation, to our
Board of Directors.

     As affiliates of Living Data and Kerns,  Mr. Movaseghi and Mr. Srybnik have
each been directly involved in the transactions between Living Data or Kerns, on
the one hand, and the Company, on the other hand, with respect to the Securities
Purchase Agreement,  the Distribution  Agreement and the Supplier Agreement,  as
well as providing consulting services to the Company without compensation.

     During the nine-month period ended February 28, 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 $200,000 in due to related
party - current portion on the accompanying consolidated condensed balance sheet
as of February 28, 2009.  During the nine-month  period ended February 29, 2008,
the Company  purchased  ECP therapy  systems  under the Supplier  Agreement  for
$120,000. In addition, during the nine-month periods ended February 28, 2009 and
February 29, 2008, Living Data purchased $3,162, and $5,289 worth of ECP therapy
system components from the Company, respectively.

     During the nine-month  period ended February 28, 2009, Living Data assigned
to the  Company  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 (Holter)  Recorders  and Holter & ABPM Combiner  Recorders,  for
$20,000  payable  to Living  Data  based on certain  terms and  conditions.  The
Company has also  agreed to 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.

     During the nine-month  period ended February 28, 2009, Living Data assigned
to the  Company  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 has
also agreed to 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.  In addition,  a
clinical applications support specialist and a service engineer from Living Data
may were used by the Company to provide  customers  with  clinical  training and
technical  service.  The  Company  was  charged  $3,900 for the  services of the
clinical  applications  support  specialist  and $2,700 for the  services of the
service engineer during the nine-month period ended February 28, 2009.

                                    Page 11
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (unaudited)
                                February 28, 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:

For the years ended:
<TABLE>
        <S>                               <C>
        May 31, 2009                      $     36,040
        May 31, 2010                           148,488
        May 31, 2011                           154,427
        May 31, 2012                           160,604
        May 31, 2013                            40,541
                                       ------------------
        Total                             $    540,100
                                       ==================
</TABLE>
NOTE K - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET EFFECTIVE

     SFAS  No.  160,   "Noncontrolling   Interests  in  Consolidated   Financial
Statements" -- 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 for fiscal years
beginning after December 15, 2008.

     FSP APB 14-1,  "Accounting for  Convertible  Debt  Instruments  That May Be
Settled  in  Cash  upon  Conversion  (Including  Partial  Cash  Settlement)"  --
clarifies that  convertible  debt  instruments  that may be settled in cash upon
conversion (including partial cash settlement) are not addressed by paragraph 12
of APB  Opinion No. 14,  Accounting  for  Convertible  Debt and Debt Issued with
Stock Purchase Warrants.  Additionally,  this FSP specifies that issuers of such
instruments should separately account for the liability and equity components in
a manner that will reflect the entity's  nonconvertible debt borrowing rate when
interest cost is recognized  in  subsequent  periods.  This FSP is effective for
financial  statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years.

     FSP FAS 142-3,  "Determination of the Useful Life of Intangible  Assets" --
amends the factors that should be considered in developing  renewal or extension
assumptions  used to determine the useful life of a recognized  intangible asset
under FASB Statement No. 142,  Goodwill and Other Intangible  Assets.  Paragraph
11(d) of Statement 142 precluded an entity from using its own assumptions  about
renewal or extension of an  arrangement  where there is likely to be substantial
cost or material modifications. This FSP amends paragraph 11(d) of Statement 142
so that an entity will use its own assumptions  about renewal or extension of an
arrangement,  adjusted  for  the  entity-specific  factors  in  paragraph  11 of
Statement  142,  even when there is likely to be  substantial  cost or  material
modifications.  Therefore,  in  determining  the  useful  life of the  asset for
amortization  purposes,  an entity shall  consider  the period of expected  cash
flows  used to  measure  the fair  value  of the  recognized  intangible  asset,
adjusted for the entity-specific factors including,  but are not limited to, the
entity's  expected use of the asset and the entity's  historical  experience  in
renewing or extending  similar  arrangements.  This FSP shall be  effective  for
financial  statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Early adoption is prohibited.

                                    Page 12
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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


     Except for  historical  information  contained in this report,  the matters
discussed are  forward-looking  statements that involve risks and uncertainties.
When used in this  report,  words such as  "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  (i.e.,  chest  pain),
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 to 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.

     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 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,  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   revenues.   By  engaging  in
restructurings  the  Company  has  reduced  personnel  costs.  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 generate sales by offering  potential  customers
extended payment terms on our EECP(R) therapy systems.

                                    Page 13
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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


Market Overview

     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  mostly  limited to the  treatment  of  chronic  stable  angina and
congestive  heart  failure.  Medicare  and other  third-party  payers  currently
reimburse for the treatment of angina pectoris  patients with moderate to severe
symptoms  who are  refractory  to  medications  and  who,  in the  opinion  of a
cardiologist  or  cardiothoracic   surgeon,  are  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
refractory angina symptoms.

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. 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 can not
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 39 million
beneficiaries,  issued  a  national  coverage  policy  for the  use of  external

                                    Page 14
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

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 patients and many of the third-party payers
follow Medicare  guidelines,  which 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-KSB  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,
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.

                                    Page 15
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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


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

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

     o    CCSC II angina
     o    Heart Failure
          o    NYHA Class II/III stable heart failure  symptoms with an ejection
               fraction of less than or equal to 35%
          o    NYHA Class II/III stable heart failure  symptoms with an ejection
               fraction of less than or equal to 40%
          o    NYHA Class IV heart failure
          o    Acute heart failure
     o    Cardiogenic shock
     o    Acute myocardial infarction."

     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  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.

                                    Page 16
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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

     We will  continue  to educate the  marketplace  that  EECP(R)  therapy is a
therapy for ischemic  cardiovascular  disease and that patients with a secondary
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 refractory  angina or
angina  equivalent  symptoms and the patient  satisfies  other listed  criteria.
Additionally,  we intend to continue to pursue expansion of coverage for EECP(R)
therapy with Medicare and other  third-party  payers as evidence of its clinical
utility develops.

Critical Accounting Policies 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, 2008, as management  believes that there
have been no  significant  changes  regarding our critical  accounting  policies
since such time.

Fair Value Measurements

     Since May 31, 2008 the Company has adopted the  provisions  of Statement of
Financial  Accounting  Standards  ("SFAS")  No. 157,  "Fair Value  Measurements"
("SFAS No. 157"),  effective December 1, 2007. Under SFAS No. 157, fair value is
defined as the price that would be received to sell an asset or paid to transfer
a liability  (i.e., the "exit price") in an orderly  transaction  between market
participants at the measurement date.

     In determining fair value, the Company uses various  valuation  approaches.
SFAS No. 157  establishes  a fair value  hierarchy  for inputs used in measuring
fair value that maximizes the use of observable  inputs and minimizes the use of
unobservable  inputs by requiring that the most  observable  inputs be used when
available.  Observable  inputs are those that market  participants  would use in
pricing  the asset or  liability  based on market  data  obtained  from  sources
independent   of  the  Company.   Unobservable   inputs  reflect  the  Company's
assumptions about the inputs market  participants would use in pricing the asset
or  liability  developed  based  on  the  best  information   available  in  the
circumstances.  The fair value hierarchy is categorized  into three levels based
on the inputs as follows:

     Level 1 - Valuations  based on unadjusted  quoted prices in active  markets
     for  identical  assets or  liabilities  that the Company has the ability to
     access.  Valuation adjustments and block discounts are not applied to Level
     1 securities.  Since valuations are based on quoted prices that are readily
     and regularly available in an active market,  valuation of these securities
     does not entail a significant degree of judgment.

     Level 2 - Valuations  based on quoted prices in markets that are not active
     or for which all  significant  inputs are  observable,  either  directly or
     indirectly.

     Level 3 - Valuations  based on inputs that are unobservable and significant
     to the overall fair value measurement.

                                    Page 17
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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


Short-term Investments

     Since May 31, 2008 the Company has  invested in six-month  certificates  of
deposit.  These  investments  are  reported  on  the  accompanying  consolidated
condensed balance sheet as "Short-term investment".

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 February 28, 2009 and February 29, 2008

     Net revenue from sales,  leases and service of our EECP(R)  systems for the
three  months ended  February  28, 2009 and February 29, 2008,  was $989,317 and
$1,187,694,  respectively,  which represented a decrease of $198,377, or 17%. We
reported a net loss attributable to common stockholders of $369,438 and $296,381
for the third quarter of fiscal 2009 and 2008, respectively. The increase in the
net loss was primarily due to a decrease in service related revenues compared to
the same period of the prior year.

Revenues

     Revenue from equipment  sales increased  approximately  16% to $497,299 for
the  three-month  period ended February 28, 2009 as compared to $427,445 for the
same period in the prior year. The increase in equipment  sales is due primarily
to a 9% decrease in the average  blended per unit sale price  offset by a slight
increase in the number of equipment shipments.

     We  believe  the  decline  in the sales  price per unit  reflects  weakened
domestic demand in the refractory  angina market,  coupled with increased direct
and indirect  competition.  We anticipate  that demand for EECP(R)  systems will
remain soft unless there is greater  clinical  acceptance for the use of EECP(R)
therapy in treating patients with angina or angina equivalent  symptoms who meet
the current reimbursement guidelines or an expansion of the current CMS national
reimbursement  policy  to  include  some or all  Class  II & III  heart  failure
patients.  Patients  with  angina or angina  equivalent  symptoms  eligible  for
reimbursement  under current policies  include many with serious  comorbidities,
such as heart failure, diabetes, peripheral vascular disease and/or others.

     Our  revenue  from the sale of EECP(R)  systems  and  related  products  to
international  distributors  in the  third  quarter  of  fiscal  2009  increased
approximately $348,895 compared to the same three-month period in the prior year
reflecting  increased sales volume. We believe this reflects an expansion of our
international market.

     Our revenue from equipment rental and services decreased 35% to $492,018 in
the third  quarter of fiscal 2009 from  $760,249 in the third  quarter of fiscal
year 2008.  Revenue from equipment rental and services  represented 50% of total
revenue  in the third  quarter  of fiscal  2009 and 64% in the same  quarter  of
fiscal  2008.  The  decrease in revenue  generated  from  equipment  rentals and
services is due to a decrease in the service  business,  with respect to service
contract  sales,  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.

                                    Page 18
<PAGE>

Gross Profit

     Gross  profit  declined  to  $408,411,  or 41% of  revenues,  for the third
quarter of fiscal 2009  compared to $531,446,  or 45% of revenues,  for the same
quarter of fiscal  2008.  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 third quarter
of fiscal 2009 and 2008 were $668,046, or 68% of revenues,  and $732,351, or 62%
of revenues,  respectively,  reflecting an decrease of $64,305 or  approximately
9%. The  decrease  in SG&A  expenditures  in the third  quarter  of fiscal  2009
resulted primarily from decreased administrative expenses in wages and benefits,
professional fees, and insurance expenses.

     During the third quarter of fiscal 2009 and 2008,  there were no changes in
the Company's  provision for doubtful accounts.  The dollar amount change in the
provision  is the  result  of bad debt  that was  written-off  during  the third
quarter of fiscal year 2009.

Research and Development

     Research and development ("R&D") expenses of $135,154,  or 14% of revenues,
for the  third  quarter  of fiscal  2009  increased  by  $17,841,  or 15%,  from
$117,313, or 10% of revenues, for the third quarter of fiscal 2008. The increase
is  primarily  attributable  to an increase in  expenses  paid to fund  clinical
research  studies,  and  product  development  costs,  offset by a  decrease  in
regulatory affairs expenses.

Interest and Other Income, Net

     Interest  and other  income for the third  quarter  of 2009 and 2008,  were
$12,135 and $12,275,  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
third quarter of 2009 and 2008, were $13,311 and $13,312, respectively. The gain
resulted from the Company's sale-leaseback of its facility.

Income Tax Expense

     During the third  quarter of fiscal 2009 we did not record a provision  for
income  taxes and The  Company  incurred  an  expense  of $95.  During the third
quarter of fiscal 2008, we recorded a provision for income taxes of $3,750.

Nine Months Ended February 28, 2009 and February 29, 2008

     Net revenue from sales,  leases and service of our EECP(R)  systems for the
nine months ended  February 28, 2009 and February 29, 2008,  was  $3,459,863 and
$3,915,585,  respectively,  which represented a decrease of $455,722, or 12%. We
reported  a net loss  attributable  to common  stockholders  of  $1,186,653  and
$379,229  for the first nine months of fiscal 2009 and 2008,  respectively.  The
increase  in the net  loss  was  primarily  due to  increases  in our  operating
expenses, and decreases in revenue from the comparative prior period.

     Revenues Revenue from equipment sales increased $224,108,  or approximately
15% to $1,742,093 for the nine-month  period ended February 28, 2009 as compared
to $1,517,985  for the same period in the prior year.  The increase in equipment

                                    Page 19
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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


sales is due  primarily to a 23%  increase in the number of equipment  shipments
offset by a moderate decrease in the average blended per unit sale price.

     Our  revenue  from the sale of EECP(R)  systems  and  related  products  to
international  distributors  in the first nine months of fiscal  2009  increased
approximately  94%  compared  to the same  nine-month  period in the prior  year
reflecting  increased sales volume. We believe this reflects an expansion of our
international market.

     Our revenue from equipment rental and services  decreased 28% to $1,717,770
in the first nine months of fiscal 2009 from $2,397,600 in the first nine months
of fiscal year 2008. Revenue from equipment rental and services  represented 50%
of total  revenue  in the first nine  months of fiscal  2009 and 61% in the same
quarters of fiscal  2008.  The  decrease  in revenue  generated  from  equipment
rentals and services is due to a decrease in the service business,  with respect
to service  contract sales,  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 declined to $1,444,737, or 42% of revenues, for the first nine
months of fiscal 2009 compared to $1,867,960,  or 48% of revenues,  for the same
period of fiscal  2008.  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 nine
months  of  fiscal  2009 and  2008  were  $2,297,189,  or 66% of  revenues,  and
$1,932,645, or 49% of revenues, respectively, reflecting an increase of $364,544
or approximately 19%. The increase in SG&A expenditures in the first nine months
of fiscal 2009 resulted  primarily from increased  direct  expenditures in sales
and  marketing.  Administrative  expenses  increased  as a result  of  increased
expenditures in professional fees, and corporate expenses.

     During  the first nine  months of fiscal  2009 there were no changes in the
Company's  provision  for doubtful  accounts.  The dollar  amount  change in the
provision is the result of bad debt that was  written-off  during the first nine
months of fiscal year 2009.  In the first nine months of fiscal 2008 we reversed
the provision for doubtful accounts by $27,524.

Research and Development

     Research and development ("R&D") expenses of $415,108,  or 12% of revenues,
for the first nine months of fiscal 2009  increased  by  $52,793,  or 15%,  from
$362,315,  or 9% of  revenues,  for the first nine  months of fiscal  2008.  The
increase is  primarily  attributable  to an  increase  in expenses  paid to fund
clinical research studies, and product development costs.

Interest Expense and Financing Costs

     The Company had no interest  expense and financing costs for the first nine
months of fiscal 2009 and $16,605 in the same period of 2008.  Interest  expense
primarily  reflects  interest on loans  secured to refinance  the November  2000
purchase of the Company's headquarters and warehouse facility. The decrease is a
direct result of the  sale-leaseback  agreements for the Company's  headquarters
and warehouse facility, which occurred during the first quarter of fiscal 2008.

                                    Page 20
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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


Interest and Other Income, Net

     Interest and other income for the first nine months of 2009 and 2008,  were
$48,670 and $47,513,  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
first nine months of 2009 and 2008, were $39,934 and $31,060,  respectively. The
gain resulted from the Company's sale-leaseback of its facility.

Income Tax Expense

     During the first nine months of fiscal 2009 and 2008, we recorded provision
for income taxes of $7,697 and $14,197, respectively.

Liquidity and Capital Resources

Cash and Cash Flow

     We have financed our operations  primarily from working capital,  a private
equity financing,  and by the sale of our facility under a leaseback  agreement.
At February 28, 2009, we had cash and cash  equivalents  of $997,592 and working
capital of $1,711,645  compared to cash and cash  equivalents  of $2,653,999 and
working capital of $2,851,901 at May 31, 2008.

     Cash used in  operating  activities  was  $1,347,019  during the first nine
months of fiscal 2009, which consisted of a net loss after non-cash  adjustments
of $929,674 and cash used by operating  assets and liabilities of $417,345.  The
changes in the accounts  balances  primarily reflect increases in inventories of
$110,222,   including  $116,978  of  inventories  transferred  to  property  and
equipment,  and other current assets of $95,055, a decrease in accounts payable,
accrued expenses,  and other current liabilities of $356,085,  and a decrease in
other  liabilities  of $89,175  which  were  primarily  offset by a decrease  in
accounts  receivable  of $33,192  and an  increase  in due to  related  party of
$200,000. Net accounts receivable were 20% of revenues for the nine-month period
ended  February 28,  2009,  as compared to 18% for the  nine-month  period ended
February 29, 2008,  and  accounts  receivable  turnover was 5 times for the nine
months ended February 28, 2009 and February 29, 2008.

     Standard payment terms on our domestic equipment sales are generally net 30
to 90 days from  shipment and do not contain  "right of return"  provisions.  We
have  historically  offered a  variety  of  extended  payment  terms,  including
sales-type  leases,  in certain  situations and to certain customers in order to
expand  the  market  for  our  EECP(R)  therapy  system  products  in the US and
internationally.  Such  extended  payment  terms  were  offered in lieu of price
concessions,  in competitive situations, when opening new markets or geographies
and for repeat  customers.  Extended payment terms cover a variety of negotiated
terms,  including  payment  in full - net  120,  net 180  days or some  fixed or
variable  monthly  payment amount for a six to twelve month period followed by a
balloon payment, if applicable.  During the nine-month period ended February 28,
2009 there were no revenues  generated from sales in which initial payment terms
were greater than 90 days, and during the nine-month  period  February 29, 2008,
there were no revenues  generated from sales in which initial payment terms were
greater than 90 days and we offered no sales-type  leases during either  period.
In general,  reserves are calculated on a formula basis considering factors such
as the  aging of the  receivables,  time  past due,  and the  customer's  credit
history and their current financial status. In most instances where reserves are
required, or accounts are ultimately written-off,  customers have been unable to
successfully  implement their EECP(R) therapy program.  As we are creating a new
market  for the  EECP(R)  therapy  and  recognizing  the  challenges  that  some
customers may  encounter,  we have opted,  at times,  on a  customer-by-customer
basis, to recover our equipment instead of pursuing other legal remedies,  which
has resulted in our recording of a reserve or a write-off.


                                    Page 21
<PAGE>
                       Vasomedical, Inc. and Subsidiaries

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


     Investing  activities  during the nine-month period ended February 28, 2009
was $309,388 and  consisted of a purchase of six-month  certificates  of deposit
for $299,074, and purchases of property and equipment of $10,314.

     The Company had no financing  activities during the nine-month period ended
February 28, 2009.

         The following table presents the Company's expected cash requirements
for contractual obligations outstanding as of February 28, 2009.
<TABLE>
<CAPTION>
                                             Due thru         Due thru          Due thru
                                           3/1/2009 and     3/1/2010 and      3/1/2012 and         Due
                                Total       2/28/2010         2/29/2012        2/28/2014        Thereafter
                              ----------------------------------------------------------------------------
   <S>                         <C>           <C>               <C>               <C>             <C>
   Operating Leases            $ 540,100     $ 147,046         $ 311,973         $ 81,082        $    -
                              ----------------------------------------------------------------------------
   Total Contractual Cash
      Obligations              $ 540,100     $ 147,046         $ 311,973         $ 81,082        $    -
                              ============================================================================
</TABLE>
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   revenues.   By  engaging  in
restructurings  the  Company  has  reduced  personnel  costs.  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 generate sales by offering  potential  customers
extended payment terms on our EECP(R) therapy systems.

     Based  on  our  current  operations  and  the  amounts  received  from  the
transactions  described  in Note C, we believe that we have  sufficient  working
capital to continue our operations through at least February 28, 2010.

Effects of Current Economic Conditions

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

                                    Page 22
<PAGE>
                       Vasomedical, Inc. and Subsidiaries


         ITEM 3. - QUANITATIVE AND QUALATATIVE DISCLOSURES ABOUT MARKET RISKS

     See  Item  7A in  the  Company's  2008  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 February 28, 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  February 28, 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 23
<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  February  28, 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, 2008.

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 24
<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:  April 14, 2009