VASOMEDICAL, INC (Form: 10-K, Received: 04/01/2013 16:03:01)

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”), made and entered into as of March 16, 2011, by and between VASOMEDICAL, INC., a Delaware corporation, with its principal office located at 180 Linden Avenue, Westbury, New York 11590 (together with its successors and assigns permitted under this Agreement, “Vasomedical”) and JUN MA residing at 214 Riverside Drive, New York, New York 10025 (“Employee”).

WITNESSETH:

WHEREAS, Vasomedical has employed Employee as its Chief Executive Officer and President; and

WHEREAS, Vasomedical wishes to assure itself of the services of Employee for the period hereinafter provided, and Employee is willing to continue to be employed by Vasomedical for said period, upon the terms and conditions provided in this Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, Vasomedical and Employee (individually a “Party” and together the “Parties” ) agree as follows:

1.	DEFINITIONS.

(a) “Beneficiary” shall mean the person or persons named by Employee pursuant to Section 17 below or, in the event that no such person is named who survives Employee, his estate.

(b)	“Board” shall mean the Board of Directors of Vasomedical.

(c)	“Cause” shall mean:

(i) Employee’s conviction of, or pleading guilty to, a felony or nolo contender to a charge of any felony or of any lesser crime involving fraud or moral turpitude, excluding DWI (or other similar offense);

(ii) willful refusal of Employee to perform his material duties under this Agreement, resulting in material economic harm to Vasomedical, or

(iii) a material breach by Employee of the provisions of Sections 14 or 15 of this Agreement.

Notwithstanding the foregoing, no act or failure to act (to the extent curable) shall constitute Cause unless Vasomedical gives Employee written notice after becoming aware of the occurrence of the act or failure to act which Vasomedical believes constitutes the basis for Cause, specifying the particular act or failure to act which Vasomedical believes constitutes the basis for Cause. If Employee fails to cure such act or failure to act within thirty (30) days after receipt of such notice, Employee’s employment shall be deemed terminated for Cause.

Further, any act or failure to act based upon authority given pursuant to a resolution adopted by the Board or based upon the written advice of counsel for Vasomedical shall be conclusively presumed to be done, or omitted to be done, by Employee in good faith and in the best interests of Vasomedical.

(d) “Change in Control” shall mean the occurrence of any of the following events during the Employment Term:

(i) any person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires ownership of stock of Vasomedical that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of Vasomedical; provided, however, that for purposes of this subsection (i), the following acquisitions shall not be deemed to result in a Change in Control: (A) any acquisition directly from Vasomedical, (B) any acquisition by Vasomedical or any Affiliate, or (C) any acquisition by (x) any employee benefit plan (or related trust) intended to be qualified under Section 401(a) of the Code or (y) any trust established in connection with any broad-based employee benefit plan sponsored or maintained, in each case, by Vasomedical or any corporation controlled by Vasomedical;

(ii) a majority of the members of the Board is replaced during any 30-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election, but excluding any new director whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of any individual, entity or group.

(iii) the consummation of a reorganization, merger, consolidation or similar form of transaction involving Vasomedical or any of its subsidiaries (“Business Combination”); excluding, however, such a Business Combination (A) pursuant to which all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Vasomedical Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than seventy percent (70%) of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business combination in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Outstanding Vasomedical Voting Securities, or (B) effected to implement a recapitalization or reorganization of Vasomedical (or similar transaction) in which no Person acquires more than thirty percent (30%) of the combined voting power of Vasomedical’s then outstanding securities; or

(iv) a complete liquidation or dissolution of Vasomedical or sale or other disposition of all or substantially all of the assets of Vasomedical, other than to any Subsidiary or any Affiliate.

Notwithstanding the foregoing, a Change of Control shall not include any event, circumstance or transaction that results from any action of any Person, entity or group which includes, is affiliated with or is wholly or partly controlled by one or more executive officers of Vasomedical and in which Employee participates directly or actively (other than renegotiation of his employment arrangements or in his capacity as an employee of Vasomedical or any successor entity thereto or to the business of Vasomedical).

(e) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

(f) “Committee” shall mean the Compensation Committee of the Board.

(g) “Disability” shall mean the illness or other mental or physical disability of Employee, as determined by a physician acceptable to Vasomedical and Employee, resulting in his failure during the Employment Term to perform substantially his applicable material duties under this Agreement for a period of six consecutive months.

(h) “Employment Term” shall mean the period specified in Section 2(b) below.

(i) “Fiscal Year” shall mean the period beginning on June 1 and ending on May 31.

(j) “Good Reason” shall mean, at any time during the Employment Term, in each case without Employee’s prior written consent.

(i) reduction in his then current Salary or Bonus percentage; or

(ii) the relocation of Employee’s own office location more than 35 miles from the current location of Vasomedical;

(iii) Vasomedical’s failure to pay Employee any amounts otherwise vested and due him under Sections 3, 4 and 5 hereof which breach is not cured within thirty (30) business days after written notification to Vasomedical of such breach; or

(iv) the failure to appoint Employee Chief Executive Officer or the assignment to Employee of duties materially incompatible with his current title and position or such higher position as may be agreed upon in writing between the parties, which breach is not promptly cured after written notification to Vasomedical of such breach; or

(v) any material breach of this Agreement by Vasomedical; or

(vi) a failure of Vasomedical to have any successor assume in writing the obligations under this Agreement.

(k) “Salary” shall mean the annual salary provided for in Section 3 below, as adjusted from time to time.

(l) “Spouse” shall mean, during the Term of Employment, the woman who as of any relevant date is legally married to Employee.

(m) “Subsidiary” shall mean any corporation of which Vasomedical owns, directly or indirectly, more than 50 percent of its voting stock.

2.	EMPLOYMENT TERM, POSITIONS AND DUTIES.

(a) Employment of Employee. Vasomedical hereby agrees to employ Employee, and Employee hereby accepts employment with Vasomedical, in the positions and with the duties and responsibilities set forth below and upon such other terms and conditions as are hereinafter stated. Employee shall render services to Vasomedical principally at Vasomedical’s corporate headquarters, and shall do such traveling on behalf of Vasomedical as shall be reasonably required in the course of the performance of his duties hereunder.

(b) Employment Term. Unless earlier terminated under Section 11 hereof, the Employment Term shall commence as of March 15, 2011 (the “Commencement Date”) and shall continue for a three year period, through March 14, 2014.

(c) Titles and Duties . Until the date of termination of his employment hereunder, Employee shall be employed as Chief Executive Officer, reporting to the Chairman of the Board of Directors. In his capacity as Chief Executive Officer, Employee shall have the customary powers, responsibilities and authorities of such officer of corporations of the size, type and nature of Vasomedical.

(d) Time and Effort.

(i) Employee agrees to devote his best efforts and abilities, and his full time and attention, to the affairs of Vasomedical in order to carry out his duties and responsibilities under this Agreement.

(ii) Notwithstanding the foregoing, nothing shall preclude Employee from (A) being engaged as a faculty member and professor at New York Institute of Technology, (B) serving on the boards of a reasonable number of trade associations, charitable organizations and/or businesses not in competition with Vasomedical, (C) engaging in charitable activities and community affairs and (D) managing his personal investments and affairs; provided, however, that, such activities do not interfere with the proper performance of his duties and responsibilities specified in Section 2 (c) above.

SALARY.

(a) Initial Salary. Employee shall receive from Vasomedical a Salary, payable in accordance with the regular payroll practices of Vasomedical, at the annual rate of $200,000.

(b) Salary Increase. During the Employment Term, Employee shall be eligible for periodic annual increases in Salary in the sole discretion of the Board of Directors.

4. STOCK COMPENSATION.

Employee shall also be entitled to receive as compensation, shares of the Company’s common stock on an annual basis commencing on the effective date of this Agreement in the sole discretion of the Board of Directors.

BONUSES.

Discretionary Bonus . Employee shall be eligible to receive a bonus for the Fiscal Year ending on May 31, 2011, and for each Fiscal Year thereafter during the Employment Term. The amount and the occasion for payment of such bonus, if any, shall be determined by the Board of Directors in its sole discretion.

6. LONG-TERM INCENTIVE.

During the Employment Term, Employee shall be eligible for an award under any long-term incentive compensation plan established by Vasomedical for the benefit of Employee or, in the absence thereof, under any such plan that may be established for the benefit of members of the senior management of Vasomedical.

7. EQUITY GRANTS.

As a condition to his employment, Employee shall be eligible to receive further grants of options to purchase shares of Vasomedical’s stock and awards of shares of Vasomedical’s stock, either or both as determined by the Board of Directors, under and in accordance with the terms of applicable plans of Vasomedical and related option and award agreements.

8. EXPENSE REIMBURSEMENT; CERTAIN OTHER COSTS.

During the Employment Term, Employee shall be entitled to prompt reimbursement by Vasomedical for all reasonable out-of-pocket expenses incurred by him in performing services under this Agreement.

9. PERQUISITES.

During the Employment Term, Vasomedical shall provide Employee with an office at Vasomedical’s executive offices with secretarial and other assistance.

10. EMPLOYEE BENEFIT PLANS.

(a) General. During the Employment Term, Employee shall be entitled to participate in all employee benefit plans and programs made available to Vasomedical’s senior executives or to its employees generally, as such plans or programs may be in effect from time to time, including, without limitation, pension and other retirement plans, profit-sharing plans, savings and similar plans, group life insurance, accidental death and dismemberment insurance, travel accident insurance, hospitalization insurance, surgical insurance, major and excess major medical insurance, dental insurance, short-term and long-term disability insurance, sick leave (including salary continuation arrangements), holidays, vacation (not less than four weeks in any calendar year) and any other employee benefit plans or programs that may be sponsored by Vasomedical from time to time, including plans that supplement the above-listed types of plans, whether funded or unfunded.

(b) Medical Care Reimbursement and Insurance. During the Employment Term Vasomedical shall provide Employee and his Spouse, with life insurance, hospitalization insurance, surgical insurance, major and excess major medical insurance and dental insurance in accordance with the most favorable plans, policies, programs and practices of Vasomedical made available generally to other senior executive officers of Vasomedical.

11. TERMINATION OF EMPLOYMENT.

(a) Voluntary Termination and Termination by Mutual Agreement. Employee may terminate his employment voluntarily at any time, on ninety (90) days prior written notice, during the Employment Term. If he does so, except for Good Reason, he shall be entitled to receive only the compensation and benefits specified in Section 11(b) except as otherwise provided in Section 11(g) . The Parties may terminate this Agreement by mutual written agreement at any time. If they do so, Employee’s entitlements shall be as the Parties mutually agree.

(b) General. Except as otherwise set forth in Section 11, in the event of termination of Employee’s employment under this Agreement, he or his Beneficiary, as the case may be, shall be entitled to receive (in addition to payments and benefits under, and except as specifically provided in, subsections (c) through (h) below, as applicable):

(i) his Salary through the date of termination;

(ii) any bonus awarded but not yet paid to him;

(iii) any other compensation or benefits, including without limitation long-term incentive compensation described in Section 6 above, benefits under equity grants and awards described in Section 7 above and employee benefits under plans described in Section 10 above, that have vested through the date of termination or to which he may then be entitled in accordance with the applicable terms and conditions of each grant, award or plan; and

(iv) reimbursement in accordance with Sections 11(a) and (b) above of any business and medical expenses incurred by Employee or his Spouse, as applicable, through the date of termination but not yet paid to him.

(c) Termination due to Death. In the event that Employee’s employment is terminated due to his death, his Beneficiary shall be entitled, in addition to the compensation and benefits specified in Section 11(b) , to twelve months’ Salary payable in twelve (12) equal monthly increments and commencing on the first payroll period following his death.

(d) Termination due to Disability. In the event of Disability, Vasomedical or Employee may terminate Employee’s employment. If Employee’s employment is terminated due to Disability, he shall be entitled, in addition to the compensation and benefits specified in Section 11(b) , to severance equal to twelve months’ Salary payable in twelve (12) equal monthly installments commencing on the first payroll period following such termination; provided, however, that if and to the extent necessary to avoid the imposition of any taxes imposed under Section 409A of the Code, such twelve (12) months of continued Salary shall be payable over up to twenty four (24) months.

(e) Termination by Vasomedical for Cause. In the event that Employee’s employment is terminated for Cause, he shall be entitled only to the compensation and benefits specified in Section 11(b) .

(f) Termination by Vasomedical Without Cause or by Employee for Good Reason. Vasomedical may terminate Employee’s employment hereunder without Cause and Employee may terminate his employment hereunder for Good Reason. If, during the Employment Term, Vasomedical terminates Employee’s employment without Cause or Employee terminates his employment for Good Reason, in either such case, other than within two years after a Change in Control, he shall be entitled to receive, subject to the execution and non-revocation of a release and to Employee’s continued compliance with the restrictive covenants contained in Sections 12 and 13 , commencing no later than forty-five (45) days after such termination, in addition to the compensation and benefits specified in Section 11(b) :

(i) continued Salary for twenty four (24) months payable in twenty four (24) equal monthly installments and commencing as soon as practicable following such termination; provided that in the event the remaining Employment Term is less than 24 months, the Employee shall receive monthly payments for the greater of (a) the remainder of the Employment Term, or (b) 12 months;

(ii) a bonus payment which would have otherwise been paid for the year of termination had Employee’s employment not been terminated, to be paid at such time as such bonus would otherwise have been paid; and

(iii) if Employee (or his beneficiaries) elect continued medical coverage under COBRA, Vasomedical will pay for coverage under COBRA for 18 months following such termination.

(g) Termination by Vasomedical Without Cause or by Employee for Good Reason Within Two Years After a Change in Control. If, during the Employment Term, Vasomedical terminates Employee’s employment without Cause or Employee terminates his employment for Good Reason, in either such case, within two years after a Change in Control, he shall be entitled to receive, subject to the execution and non-revocation of a release and to Employee’s continued compliance with the restrictive covenants contained in Sections 14 and 15 , commencing no later than forty-five (45) days after such termination, in addition to the compensation and benefits specified in Section 11 (b) :

(i) a lump sum payment, as soon as administratively feasible following such termination, but in any event within ten (10) days thereafter, equal to two and one-half (2.5) times the sum of (A) the Salary (but in no event less than Employee’s Salary in effect immediately prior to the Change in Control) plus (B) the average of the annual bonuses hereof paid to Employee under Section 5 in the three-year period immediately prior to such termination;

(ii) a pro-rata portion of the annual bonus for the most recently completed fiscal year, to be paid as soon as administratively feasible following such termination, but in any event within ten (10) days thereafter; and

(iii) continued medical coverage under Vasomedical’s medical and health plans until the earlier of December 31 of the second calendar year following the year of termination of Employee’s employment or Employee’s commencement of employment with another employer, at the same cost as is paid by similarly situated continuing employees.

(h) Vesting of Equity Upon Certain Terminations. If, during the Employment Term, Vasomedical terminates Employee’s employment without Cause or Employee terminates his employment for Good Reason, in either such case, all unvested options and shares shall vest in full as of the date of termination.

(i) Specified Employee. Notwithstanding any other provision of this Agreement, if (i) Employee is to receive payments or benefits under Section 11 by reason of his separation from service (as such term is defined in Section 409A of the Code) other than as a result of his death, (ii) Employee is a “specified employee” within the meaning of Code Section 409A for the period in which the payment or benefits would otherwise commence, and/or (iii) such payment or benefit would otherwise subject Employee to any tax, interest or penalty imposed under Section 409A of the Code (or any regulation promulgated thereunder) if the payment or benefit would commence within six months of a termination of Employee’s employment, then such payment or benefit required under Section 11 shall not commence until the first day which is at least six months and one day after the termination of Employee’s employment. Each severance installment contemplated under this Section 11 shall be treated as a separate payment in a series of separate payments under Treasury Regulation Section 1.409A-2(b)(2)(iii). Such payments or benefits, together with simple interest calculated at LIBOR as of the date of such separation from service, which would otherwise have been required to be made over such six month period, shall be paid to Employee in one lump sum payment or otherwise provided to Employee as soon as administratively feasible after the first day which is at least six months after the termination of Employee’s employment. Thereafter, the payments and benefits shall continue, if applicable, for the relevant period set forth above. For purposes of this Agreement, all references to “termination of employment” and other similar language shall be deemed to refer to Employee’s “separation from service” as defined in Treasury Regulation Section 1.409A-1(h), including, without limitation, the default presumptions thereof.

(j) Miscellaneous . For the avoidance of doubt, if applicable, Employee shall only be entitled to receive the payments and benefits provided under Section 11 (f) or 11 (g) , which ever is applicable, but not under both such sections.

12.

NO DUTY TO MITIGATE .

In the event of a termination of employment under Sections 11 (c), 11 (f) or 11 (g) , Employee shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor will any payment hereunder be subject to offset in the event Employee does receive compensation for any reason from any other source.

13.

PARACHUTES .

Upon a Change in Control during the Employment Term, notwithstanding any other provisions of this Agreement to the contrary, in the event that any payments or benefits received or to be received by Employee in connection with his employment with Vasomedical (or termination thereof) would subject Employee to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), and if the net-after tax amount (taking into account all applicable taxes payable by Employee, including any Excise Tax) that Employee would receive with respect to such payments or benefits does not exceed the net-after tax amount Employee would receive if the amount of such payment and benefits were reduced to the maximum amount which could otherwise be payable to Employee without the imposition of the Excise Tax, then, to the extent necessary to eliminate the imposition of the Excise Tax, (a) such cash payments and benefits shall first be reduced (if necessary, to zero) and (b) all other non-cash payments and benefits shall next be reduced.

14. CONFIDENTIAL INFORMATION.

(a) General.

(i) Employee understands and hereby acknowledges that as a result of his employment with Vasomedical he will necessarily become informed of and have access to certain valuable and confidential information of Vasomedical and any of its subsidiaries, joint ventures and affiliates, including, without limitation, inventions, trade secrets, technical information, computer software and programs, know-how and plans (“Confidential Information”), and that any such Confidential Information, even though it may be developed or otherwise acquired by Employee, is the exclusive property of Vasomedical to be held by him in trust solely for Vasomedical’s benefit.

(ii) Accordingly, Employee hereby agrees that, during the Employment Term and subsequent thereto, he shall not, and shall not cause others to, use, reveal, report, publish, transfer or otherwise disclose to any person, corporation or other entity any Confidential Information without prior written consent of the Board, except to (A) responsible officers and employees of Vasomedical or (B) responsible persons who are in a contractual or fiduciary relationship with Vasomedical or who need such information for purposes in the interest of Vasomedical. Notwithstanding , the foregoing, the prohibitions of this clause (ii) shall not apply to any Confidential Information that becomes of general public knowledge other than from Employee or is required to be divulged by court order or administrative process.

(b) Return of Documents. Upon termination of his Employment Term with Vasomedical for any reason or, if applicable, upon expiration of the Consulting Period, Employee shall promptly deliver to Vasomedical all plans, drawings, manuals, letters, notes, notebooks, reports, computer programs and copies thereof and all other materials, including without limitation those of a secret or confidential nature, relating to Vasomedical’s business that are then in his possession or control.

(c) Remedies and Sanctions. In the event that Employee is found to be in violation of Section 14(a) or (b) above, Vasomedical shall be entitled to relief as provided in Section 16 below.

15. NON-COMPETITION/NON-SOLICITATION.

(a) Prohibitions. D uring the Employment Term and for any additional period during which he continues to receive compensation from the Company, Employee shall not, without prior written authorization of the Board, directly or indirectly, through any other individual or entity:

(i) become on officer or employee of, or render any service to, any direct competitor of Vasomedical;

(ii) solicit or induce any customer of Vasomedical to cease purchasing goods or services from Vasomedical or to become a customer of any competitor of Vasomedical; or

(iii) solicit or induce any employee of Vasomedical to become employed by any competitor of Vasomedical.

(b) Remedies and Sanctions. In the event that Employee is found to be in violation of Section 15(a) above, Vasomedical shall be entitled to relief as provided in Section 15 below.

(i) apply if Vasomedical terminates Employee’s employment without Cause or Employee terminates his employment for Good Reason or his employment ends because of a Change in Control, each as provided in Section 11(f) or 11(g) above; or

(ii) be construed as preventing Employee from investing his assets in any business that is not a direct competitor of Vasomedical.

16. REMEDIES/SANCTIONS.

Employee acknowledges that the services he is to render under this Agreement are of a unique and special nature, the loss of which cannot reasonably or adequately be compensated for in monetary damages, and that irreparable injury and damage may result to Vasomedical in the event of any breach of this Agreement or default by Employee. Because of the unique nature of the Confidential Information and the importance of the prohibitions against competition and solicitation, Employee further acknowledges and agrees that Vasomedical will suffer irreparable harm if he fails to comply with his obligations under Section 14(a) or (b) above or Section 15(a) above and that monetary damages would be inadequate to compensate Vasomedical for any such breach. Accordingly, Employee agrees that, in addition to any other remedies available to either Party at law, in equity or otherwise, Vasomedical will be entitled to seek injunctive relief or specific performance to enforce the terms, or prevent or remedy the violation, of any provisions of this Agreement.

17. BENEFICIARIES/REFERENCES.

Employee shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable under this Agreement following his death by giving Vasomedical written notice thereof. In the event of Employee’s death, or of a judicial determination of his incompetence, reference in this Agreement to Employee shall be deemed to refer, as appropriate, to his beneficiary, estate or other legal representative.

18. WITHHOLDING TAXES.

(a) All payments to Employee or his Beneficiary under this Agreement shall be subject to withholding on account of federal, state and local taxes as required by law.

19. INDEMNIFICATION AND LIABILITY INSURANCE.

Nothing herein is intended to limit Vasomedical’s indemnification of Employee, and Vasomedical shall indemnify him to the fullest extent permitted by applicable law consistent with Vasomedical’s Certificate of Incorporation and By-Laws as in effect at the beginning of the Employment Term, with respect to any action or failure to act on his part while he is an officer, director or employee of Vasomedical or any subsidiary. Vasomedical shall cause Employee to be covered at all times by directors’ and officers’ liability insurance. Vasomedical shall continue to indemnify Employee as provided above and maintain such liability insurance coverage for him for at least three (3) years after the Employment Term for any claims that may be made against him with respect to his service as an officer of Vasomedical.

20. EFFECT OF AGREEMENT ON OTHER BENEFITS.

The existence of this Agreement shall not prohibit or restrict Employee’s entitlement to participate fully in compensation, employee benefit and other plans of Vasomedical in which senior executives are eligible to participate.

21. ASSIGNABILITY; BINDING NATURE.

This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs (in the case of Employee) and assigns. No rights or obligations of Vasomedical under this Agreement may be assigned or transferred by Vasomedical except pursuant to (a) a merger or consolidation in which Vasomedical is not the continuing entity or (b) sale or liquidation of all or substantially all of the assets of Vasomedical, provided that the surviving entity or assignee or transferee is the successor to all or substantially all of the assets of Vasomedical and such surviving entity or assignee or transferee assumes the liabilities, obligations and duties of Vasomedical under this Agreement, either contractually or as a matter of law.

Vasomedical further agrees that, in the event of a sale of assets or liquidation as described in the preceding sentence, it shall use reasonable commercial efforts to have such assignee or transferee expressly agree to assume the liabilities, obligations and duties of Vasomedical hereunder; provided, however, that notwithstanding such assumption, Vasomedical shall remain liable and responsible for fulfillment of the terms and conditions of this Agreement; and provided, further, that in no event shall such assignment and assumption of this Agreement adversely affect Employee’s right upon a Change in Control, as provided in Section 11(g) above. No rights or obligations of Employee under this Agreement may be assigned or transferred by him.

22. REPRESENTATIONS.

The Parties respectively represent and warrant that each is fully authorized and empowered to enter into this Agreement and that the performance of its or his obligations, as the case may be, under this Agreement will not violate any agreement between such Party and any other person, firm or organization. Vasomedical represents and warrants that this Agreement has been duly authorized by all necessary corporate action and is valid, binding and enforceable in accordance with its terms.

23. ENTIRE AGREEMENT.

Except to the extent otherwise provided herein, this Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof and supersedes any prior agreements, whether written or oral, between the Parties concerning the subject matter hereof. Payments and benefits provided under this Agreement are in lieu of any payments or other benefits under any severance program or policy of Vasomedical to which Employee would otherwise be entitled.

24. AMENDMENT OR WAIVER.

No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by both Employee and an authorized officer of Vasomedical. No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Party to be charged with the waiver. No delay by either Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof.

25. SEVERABILITY.

In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

26. SURVIVAL.

The respective rights and obligations of the Parties under this Agreement shall survive any termination of Employee’s employment with Vasomedical.

27. GOVERNING LAW/JURISDICTION.

This Agreement shall be governed by and construed and interpreted in accordance with the laws of New York, without reference to principles of conflict of laws.

28. NOTICES.

Any notice given to either Party shall be in writing and shall be deemed to have been given when delivered either personally, by fax, by overnight delivery service (such as Federal Express) or sent by certified or registered mail postage prepaid, return receipt requested, duly addressed to the Party concerned at the address indicated below or to such changed address as the Party may subsequently give notice of.

If to Vasomedical:

Vasomedical, Inc.

180 Linden Avenue

Westbury, New York 11590

Fax No. 516-997-2299

Attn: Jonathan Newton, CFO

With a copy to:

Beckman, Lieberman & Barandes, LLP

270N Duffy Avenue

Hicksville, New York 11801

Fax No. 516-

Attn: David H. Lieberman, Esq.

If to Employee:

Jun Ma

214 Riverside Drive

New York, New York 10025

29. HEADINGS.

The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

30. COUNTERPARTS.

This Agreement may be executed in counterparts, each of which when so executed and delivered shall be an original, but all such counterparts together shall constitute one and the same instrument.

IN WITNESS WHEREOF , the undersigned have executed this Agreement as of March 21, 2011.

VASOMEDICAL, INC.

By: /s/ David Lieberman

David Lieberman, Vice Chairman

EMPLOYEE

/s/ Jun Ma

Jun Ma

MODIFICATION AGREEMENT

MODIFICATION AGREEMENT made and entered into as of March 26, 2013 by and between VASOMEDICAL, INC., a Delaware corporation, with its principal office located at 180 Linden Avenue, Westbury, New York 11590 (hereinafter the "Company") and DR. JUN MA, an individual residing at 214 Riverside Drive, New York, New York 10025 (hereinafter "the Employee").

W I T N E S S E T H:

WHEREAS , the Company and Employee entered into an Employment Agreement dated March 15, 2011 (hereinafter the "Employment Agreement"); and

WHEREAS , the Company and Employee desire to amend said Employment Agreement.

NOW, THEREFORE, the parties agree as follows:

1. Paragraph 2(b) of the Employment Agreement is hereby deleted in its entirety, and in its place and stead shall be the following:

“2.(b) Employment Term . The Employment Term shall terminate on March 14, 2016 provided that the Employment Term shall extend for additional one year periods annually each March 14 commencing March 14, 2014, unless this Agreement is terminated pursuant to the provisions of Section 11 below. In no event, however, shall the employment term extend beyond March 14, 2019.”

2. Paragraph 11(f)(i) of the Employment Agreement is hereby deleted in its entirety, and in its place and stead shall be the following:

“11. (f)(i) continued Salary for the remainder of the term payable in equal monthly installments commencing as soon as practicable following such termination; provided that in the event the remaining employment term is less than thirty-six (36) months, the employee shall receive monthly payments for thirty-six (36) months.”

3. The aforesaid Employment Agreement in all other respects is hereby ratified and confirmed.

IN WITNESS WHEREOF, the undersigned have executed this Modification Agreement as of the day and year first above written.

VASOMEDICAL, INC.

By: /s/________________________

/s/___________________________

Jun Ma, Employee

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

Common Stock, $.001 par value	OTCBB
(Title of Class)	Name of each exchange on which registered

		Page
PART I		2
ITEM 1	BUSINESS	2
ITEM 1A	RISK FACTORS	15
ITEM 2	PROPERTIES	20

PART II		21
ITEM 5	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	21
ITEM 7	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .	21
ITEM 8	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	32
ITEM 9A	CONTROLS AND PROCEDURES	32

PART III		33
ITEM 10	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	33
ITEM 11	EXECUTIVE COMPENSATION	36
ITEM 12	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	39
ITEM 13	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	42
ITEM 14	PRINCIPAL ACCOUNTING FEES AND SERVICES	43

PART IV		44
ITEM 15	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	44

SIGNATURES		46


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS		F-2
CONSOLIDATED BALANCE SHEETS		F-3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)		F-4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY		F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS		F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		F-7

Year	Physician Office	Hospital
2004	$137	$113
2005	$138	$102
2006	$138	$104
2007	$147	$107
2008	$156	$109
2009	$150	$102
2010	$148	$104
2011	$153	$102
2012	$151	$94
2013	$144	$99

	Year ended December 31, 2012				June 1, 2011 - December 31, 2011				Year ended May 31, 2011
	High		Low		High		Low		High		Low
First quarter	$	0.35	$	0.19	$	0.51	$	0.28	$	0.24	$	0.18
Second quarter*	$	0.29	$	0.18	$	0.43	$	0.21	$	0.21	$	0.18
Third quarter	$	0.26	$	0.19		N/A		N/A	$	0.31	$	0.18
Fourth quarter	$	0.24	$	0.15		N/A		N/A	$	0.74	$	0.34

* Second quarter is from September 1, 2011 through December 31, 2011 in the transitional period.

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

Name of Director	Age	Principal Occupation	Director Since
Simon Srybnik	96	Chairman of the Board and Director	June, 2007
Peter C. Castle (1) (2) (3)	44	Director	August, 2010
David Lieberman (1)	68	Vice Chairman of the Board and Director	February, 2011
Jun Ma	49	President, Chief Executive Officer and Director	June, 2007
Behnam Movaseghi (1) (2) (3)	59	Director	July, 2007
Edgar Rios	61	Director	February, 2011


(1) Member of the Executive Committee, which was formed in January, 2012.
(2) Member of the Audit Committee
(3) Member of Compensation Committee


Name of Officer	Age	Position held with the Company
Jun Ma, PhD	49	President, Chief Executive Officer and Director
Randy Hill	66	Senior Vice President
Michael J. Beecher	68	Chief Financial Officer and Secretary
Jonathan P. Newton	52	Vice President of Finance and Treasurer

Name and Principal Position		Year	Salary ($)		Bonus ($) (1)		Stock Awards ($) (2)		Option Awards ($) (2)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($) (3)		Total ($)
Jun Ma, PhD	2012			262,500		100,000		120,000		-		-		-		104,805		587,305
Chief Executive Officer (4)	Transition Period			116,667		-		-		-		-		-		45,389		162,056
	2011			144,046		-		105,000		-		-		-		-		249,046
Randy Hill	2012			169,744		76,667		130,000		-		-		-		4,750		381,161
Senior Vice President (5)
Michael J. Beecher	2012			185,000		25,000		-		-		-		-		47,746		257,746
Chief Financial Officer and Secretary	Transition Period			52,654		-		166,250		-		-		-		17,489		236,393
Jonathan P. Newton	2012			145,000		40,000		-		-		-		-		19,718		204,718
Vice President of Finance and Treasurer (6)	Transition Period			81,667		-		-		-		-		-		11,411		93,078
	2011			105,000		-		31,500		-		-		-		210		136,710
John C. K. Hui	Transition Period			93,730		-		-		-		-		-		937		94,667
(Senior Vice President and	2011			144,209		-		-		-		-		-		1,193		145,402
Chief Technology Officer) (7)	2010			157,151		-		20,000		-		-		-		886		178,037
W. Brent Barron	2012			73,803		102,970		-		-		-		-		2,215		178,988
(Chief Operating Officer - VasoHealthcare) (8)	Transition Period			158,513		29,908		-		-		-		-		4,603		193,024
	2011			270,000		60,750		17,100		-		-		-		963		348,813
Tarachand Singh	2011			20,000		-		-		-		-		-		220		20,220
(Chief Financial Officer) (9)

	Option Awards										Stock Awards
Name		Number of Securities Underlying Unexercised Options - Exercisable		Number of Securities Underlying Unexercised Options - Unexercisable		Equity Incentive Plan Awards: Number of Underlying Unexercised Unearned Options		Option Exercise Price		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested		Market Value of Shares or Units of Stock That Have Not Vested		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
Jun Ma, PhD			150,000		-		-	$	0.12	7/25/2017		-		-		-		-
			250,000		-		-	$	0.08	12/17/2014		-		-		-		-
												166,667	$	30,000		-		-
												250,000	$	45,000
Randy Hill												500,000	$	90,000
Michael J. Beecher												250,000	$	45,000
Jonathan P. Newton												50,000	$	9,000

Name	Number of Shares or Units of Stock That Have Not Vested	Vesting Date
Jun Ma, PhD	166,667	9/8/2013
	250,000	3/26/2013
Randy Hill	250,000	7/30/2013
	250,000	7/30/2014
Michael J. Beecher	125,000	9/20/2013
	125,000	9/20/2014
Jonathan P. Newton	50,000	9/8/2013

Director Compensation
	Fees Earned or Paid in Cash		Stock Awards		Option Awards		Non-equity Incentive Plan Compensation		Nonqualified Deferred Compensation Earnings		All Other Compensation		Total
Name	($)		($)		($)		($)		($)		($)		($)
Simon Srybnik		42,500		-		-		-		-		3,090		45,590
Peter Castle		62,500		-		-		-		-		50,000		112,500
William Dempsey		5,000		-		-		-		-		-		5,000
David Lieberman		43,333		-		-		-		-		50,000		93,333
Behnam Movaseghi		62,500		-		-		-		-		50,000		112,500
Edgar Rios		40,000		-		-		-		-		-		40,000

Name of Beneficial Owner	Common Stock Beneficially Owned (1)		% of Common Stock (2)
Michael J. Beecher **		225,000		*
Peter Castle **		200,000		*
Randy Hill **		500,000		*
David Lieberman **		1,324,200		*
Jun Ma, PhD **		2,545,834		1.56	%
Benham Movaseghi **		1,064,404		*
Jonathan Newton **		200,000		*
Edgar Rios **		1,475,000		*
Simon Srybnik (3) (4) **		55,738,318		34.17	%
Louis Srybnik (3) (4)		45,165,993		27.71	%

** Directors and executive officers as a group (9 persons)		63,272,756		38.61	%

Jun Ma, PhD		400,000
Behnam Movaseghi		350,000
Simon Srybnik		150,000
Directors and executive
officers as a group		900,000

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity Compensation
plans approved by
security holders		1,489,776	$	0.17		785,224

Equity Compensation
plans not approved
by security holders (1)		1,345,000	$	0.53		866,560

Total		2,834,776				1,651,784

(2)	(a)	Restated Certificate of Incorporation (2)
	(b)	By-Laws (1)
(3.1)		Certificate of Designations of Preferences and Rights of Series E Convertible Preferred Stock (9)
(4)	(a)	Specimen Certificate for Common Stock (1)
	(b)	Specimen Certificate for Series E Convertible Preferred Stock (11)
(10)	(a)	1995 Stock Option Plan (3)
	(b)	Outside Director Stock Option Plan (3)
	(c)	1997 Stock Option Plan, as amended (4)
	(d)	1999 Stock Option Plan, as amended (5)
	(e)	2004 Stock Option/Stock Issuance Plan (6)
	(f)	Securities Purchase Agreement dated June 21, 2007 between Registrant and Kerns Manufacturing Corp. (7)
	(g)	Form of Common Stock Purchase Warrant to dated June 21, 2007 (7)
	(h)	Registration Rights Agreement dated June 21, 2007 between Registrant, Kerns Manufacturing Corp. and Living Data Technology Corporation. (7)
	(i)	Purchase and Sale Agreement dated June 1, 2007 between 180 Linden Avenue Corp and 180 Linden Realty LLC. (8)
	(j)	Lease Agreement dated August 15, 2007 between 180 Linden Realty LLC and Registrant (8)
	(k)	Form of Stock Purchase Agreement (9)
	(l)	Redacted Sales Representative Agreement between GE Healthcare Division of General Electric Company and Vaso Diagnostics, Inc. d/b/a VasoHealthcare, a subsidiary of Vasomedical, Inc. dated as of May 19, 2010 (10).
	(m)	2010 Stock Plan (11).
	(n)	Consulting Agreement dated March 1, 2011 between Vasomedical, Inc. and Edgary Consultants, LLC. (12)
	(o)	Employment Agreement entered into as of March 21, 2011 between Vasomedical, Inc. and Jun Ma, as amended.
	(p)	Stock Purchase Agreement dated as of August 19, 2011 among Vasomedical, Inc., Fast Growth Enterprises Limited (FGE) and the FGE Shareholders (13)
	(q)	Amendment to Sales Representative Agreement between GE Healthcare Division of General Electric Company and Vaso Diagnostics, Inc. d/b/a VasoHealthcare, a subsidiary of Vasomedical, Inc. dated as of June 20, 2012 (14)

Name	State of Incorporation	Percentage Owned by Company
Viromedics, Inc.	Delaware	61%
Vaso Diagnostics, Inc.	New York	100%
Vasomedical Global Corp	New York	100%
Vasomedical Solutions, Inc.	New York	100%
Fast Growth Enterprises Limited	British Virgin Islands	100%

(31)	Certification Reports pursuant to Securities Exchange Act Rule 13a - 14
(32)	Certification Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

		VASOMEDICAL, INC.
		By: /s/ Jun Ma
		Jun Ma
		President, Chief Executive Officer,
		and Director (Principal Executive Officer)

/s/Jun Ma	President, Chief Executive Officer
Jun Ma	and Director (Principal Executive Officer)

/s/ Michael Beecher Michael Beecher	Chief Financial Officer (Principal Financial Officer)

/s/ Simon Srybnik	Chairman of the Board
Simon Srybnik

/s/ David Lieberman	Vice Chairman of the Board
David Lieberman

/s/ Edgar Rios	Director
Edgar Rios

/s/ Behnam Movaseghi	Director
Behnam Movaseghi

/s/ Peter C. Castle	Director
Peter C. Castle

	Page

Report of Independent Registered Public Accounting Firm	F-2

Financial Statements
Consolidated Balance Sheets as of December 31, 2012 and 2011	F-3

Consolidated Statements of Operations and Comprehensive Income (Loss)
for the year ended December 31, 2012, for the seven months
ended December 31, 2011, and for the year ended May 31, 2011	F-4

Consolidated Statements of Changes in Stockholders’ Equity
for the year ended December 31, 2012, for the seven months
ended December 31, 2011, and for the year ended May 31, 2011	F-5

Consolidated Statements of Cash Flows
for the year ended December 31, 2012, for the seven months
ended December 31, 2011, and for the year ended May 31, 2011	F-6

Notes to Consolidated Financial Statements	F-7 – F-33

	December 31, 2012			December 31, 2011 (a)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	11,469		$	2,294
Short-term investments		110			110
Accounts and other receivables, net of an allowance for doubtful
accounts and commission adjustments of $3,179 at December 31,
2012 and $2,163 at December 31, 2011		9,145			20,101
Receivables due from related parties		25			196
Inventories, net		2,166			2,421
Deferred commission expense		2,480			1,833
Deferred related party consulting expense - current portion		85			510
Other current assets		236			221
Total current assets		25,716			27,686

PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$1,161 at December 31, 2012 and $1,409 at December 31, 2011		473			416
GOODWILL		3,212			3,168
DEFERRED RELATED PARTY CONSULTING EXPENSE		-			85
OTHER ASSETS		2,980			2,980
	$	32,381		$	34,335

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		342		$	273
Accrued commissions		2,337			3,816
Accrued expenses and other liabilities		4,626			2,560
Sales tax payable		177			355
Income taxes payable		1			278
Deferred revenue - current portion		10,580			8,890
Deferred gain on sale-leaseback of building - current portion		-			31
Deferred tax liability		112			112
Notes payable due to related party		3			193
Total current liabilities		18,178			16,508

LONG-TERM LIABILITIES
Deferred revenue		5,022			6,337
Other long-term liabilities		171			214
Total long-term liabilities		5,193			6,551

COMMITMENTS AND CONTINGENCIES (NOTE Q)

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 1,000,000 shares authorized;
no shares issued and outstanding at December 31, 2012
and December 31, 2011		-			-
Common stock, $.001 par value; 250,000,000 shares authorized;
162,917,996 shares at December 31, 2012 and
153,186,295 shares at December 31, 2011 issued and outstanding		163			153
Additional paid-in capital		61,229			60,188
Accumulated deficit		(52,416	)		(49,065	)
Accumulated other comprehensive income		34			-
Total stockholders’ equity		9,010			11,276
	$	32,381		$	34,335

	Year ended December 31, 2012			Seven months ended December 31, 2011			Year ended May 31, 2011
Revenues
Equipment sales	$	4,191		$	1,473		$	3,029
Equipment rentals and services		1,832			1,103			2,231
Commissions		23,217			20,913			11,113
Total revenues		29,240			23,489			16,373

Cost of revenues
Cost of sales, equipment		1,791			814			1,938
Cost of equipment rentals and services		908			519			909
Cost of commissions		5,947			5,400			2,614
Total cost of revenues		8,646			6,733			5,461
Gross profit		20,594			16,756			10,912

Operating expenses
Selling, general and administrative		23,526			11,243			14,383
Research and development		576			324			462
Total operating expenses		24,102			11,567			14,845
Operating income (loss)		(3,508	)		5,189			(3,933	)

Other income (expenses)
Interest and financing costs		(2	)		(9	)		(32	)
Interest and other income, net		150			177			28
Amortization of deferred gain on
sale-leaseback of building		31			31			53
Total other income, net		179			199			49

Income (loss) before income taxes		(3,329	)		5,388			(3,884	)
Income tax expense, net		(52	)		(276	)		(7	)
Net income (loss)		(3,381	)		5,112			(3,891	)

Preferred stock dividends		-			(1,221	)		(429	)
Net income (loss) applicable to common stockholders	$	(3,381	)	$	3,891		$	(4,320	)

Other comprehensive income (loss)
Foreign currency translation gain (loss)		34			-			-
Comprehensive income (loss)	$	(3,347	)	$	3,891		$	(4,320	)

Income (loss) per common share
- basic	$	(0.02	)	$	0.03		$	(0.04	)
- diluted	$	(0.02	)	$	0.03		$	(0.04	)

Weighted average common shares outstanding
- basic		158,366			146,549			111,978
- diluted		158,366			153,657			111,978

	Preferred Stock				Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive		Total Stockholders
	Shares			Amount		Shares	Amount		C apital			Deficit			Income		Equity
Balance at May 31 , 2010	-		$	-		110,271	$	110	$	48,959		$	(48,636	)	$	-	$	433
Common stock issued to directors for fiscal year 2011 compensation and meeting fees	-			-		750		1		177			-			-		178
Share-based compensation	-			-		995		1		267			-			-		268
Shares granted for consulting agreements	-			-		3,116		3		1,086			-			-		1,089
Shares issued on exercise of warrant	-			-		384		-		-			-			-		-
Preferred shares sold (including converted notes payable)	308			3		-		-		4,930			-			-		4,933
Preferred shares issued as dividends	6			-		-		-		101			-			-		101
Beneficial conversion feature of Preferred shares	-			-		-		-		225			-			-		225
Preferred share dividends	-			-		-		-		-			(429	)		-		(429	)
Conversion of preferred shares	(16	)		-		1,563		2		(2	)		-			-		-
Net loss	-			-		-		-		-			(3,891	)		-		(3,891	)
Balance at May 31, 2011	298		$	3		117,079	$	117	$	55,743		$	(52,956	)	$	-	$	2,907
Common stock issued to Director	-			-		50		-		23			-			-		23
Share-based compensation	-			-		894		1		184			-			-		185
Shares not issued for employee tax liability	-			-		-		-		(80	)		-			-		(80	)
Shares granted for consulting agreements	-			-		207		-		47			-			-		47
Common shares, warrants and contingent shares issued for acquisition	-			-		5,000		5		2,974			-			-		2,979
Beneficial conversion feature of Preferred shares	-			-		-		-		1,201			-			-		1,201
Preferred shares issued as dividends	7			-		-		-		123			-			-		123
Preferred share dividends	-			-		-		-		-			(1,221	)		-		(1,221	)
Conversion of preferred shares	(305	)		(3	)	29,956		30		(27	)		-			-		-
Foreign currency translation gain (loss)	-			-		-		-		-			-			-		-
Net income	-			-		-		-		-			5,112			-		5,112
Balance at December 31, 2011	-		$	-		153,186	$	153	$	60,188		$	(49,065	)	$	-	$	11,276
Shares issued for acquisition	-			-		2,400		2		(2)			-			-		-
Shares-based compensation	-			-		2,271		2		796			-			-		798
Shares not issued for employee tax liability	-			-		-		-		(103)			-			-		(103)
Shares granted for consulting agreements	-			-		63		-		13			-			-		13
Exercise of warrant	-			-		4,286		4		339			-			-		343
Issue shares for conversion of preferred shares	-			-		712		2		(2)			-			-		(0)
Other	-			-		-		-		-			30			-		30
Foreign currency translation gain	-			-		-		-		-			-			34		34
Net income/(loss)	-			-		-		-		-			(3,381)			-		(3,381)
Balance at December 31, 2012	-		$	-		162,918	$	163	$	61,229		$	(52,416)		$	34	$	9,010

	Year ended December 31, 2012			Seven Months ended December 31, 2011			Year ended May 31, 2011
Cash flows from operating activities
Net income (loss)	$	(3,381	)	$	5,112		$	(3,891	)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization of property, equipment and intangibles		391			101			144
Amortization of deferred gain on sale-leaseback of building		(31	)		(31	)		(53	)
Gains on disposal of fixed assets		-			(5	)		-
Provision for doubtful accounts and commission adjustments		2			55			1,150
Amortization of deferred distributor costs		-			124			126
Share-based compensation		793			208			446
Amortization of deferred consulting expense		545			370			154
Changes in operating assets and liabilities:
Accounts and other receivables		10,854			(15,581	)		(4,696	)
Receivables due from related parties		173			(196	)		-
Inventories, net		249			(186	)		248
Deferred commission expense		(648	)		699			(2,533	)
Other current assets		(17	)		52			(179	)
Other assets		(52	)		(1,888	)		(194	)
Accounts payable		69			(657	)		205
Accrued commissions		(1,479	)		1,852			1,935
Accrued expenses and other liabilities		2,090			1,398			264
Sales tax payable		(179	)		98			18
Income taxes payable		(279	)		221			4
Deferred revenue		374			3,305			10,895
Accrued rent expense		-			(5	)		(13	)
Trade payable due to related party		-			(268	)		26
Other long-term liabilities		(43	)		119			83
Net cash provided by (used in) operating activities		9,431			(5,103	)		4,139

Cash flows from investing activities
Purchases of property, equipment and software		(402	)		(80	)		(135	)
Purchases of short-term investments		(70	)		-			(40	)
Redemption of short-term investments		70			-			-
Acquisition of Fast Growth Enterprises		-			(1,000	)		-
Cash acquired through purchase of Fast Growth Enterprises		-			442			-
Net cash used in investing activities		(402	)		(638	)		(175	)

Cash flows from financing activities
Repayment of notes payable due to related party		(190	)		(95	)		-
Proceeds from exercise of warrant		343
Net cash (used in) provided by financing activities		153			(95	)		3,684

Effect of exchange rate differences on cash and cash equivalents		(7	)		-			-

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		9,175			(5,836	)		7,648
Cash and cash equivalents - beginning of period		2,294			8,130			482
Cash and cash equivalents - end of period	$	11,469		$	2,294		$	8,130

SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
Interest paid	$	5		$	11			8
Income taxes paid	$	412		$	22			8

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Inventories transferred to property and equipment,
attributable to operating leases, net	$	9		$	27		$	30
Accrued preferred stock dividends	$	-		$	(1,221	)	$	(429	)
Common shares, warrants and contingent shares issued for acquisition	$	-		$	2,979		$	-
Fair value of assets acquired	$	291		$	4,731		$	-
Liabilities assumed through acquisition	$	(291	)	$	(1,194	)	$	-
Issuance of preferred stock in satisfaction of accrued dividend	$	-		$	123		$	101
Conversion of preferred stock to common stock	$	-		$	30		$	2
Common shares issued for consulting agreements	$	-		$	-		$	1,070

	For the year ended December 31, 2012			For the seven months ended December 31, 2011		For the year ended May 31, 2011
Beginning Balance	$	2,163		$	1,297	$	147
Provision for losses on accounts receivable		(2	)		55		(1	)
Direct write-offs, net of recoveries		(2	)		-		(58	)
Commission adjustments		1,020			811		1,209
Ending Balance	$	3,179		$	2,163	$	1,297

	For the year ended December 31, 2012		For the seven months ended December 31, 2011		For the year ended May 31, 2011
Domestic (United States)		26,103		22,391		14,414
Non-domestic (foreign)		3,137		1,098		1,959
		29,240		23,489		16,373

	December 31, 2012		December 31, 2011		May 31, 2011
Stock options		1,810		260		1,864
Warrants		1,500		1,500		4,286
Convertible preferred stock		-		-		30,545
Common stock grants		3,448		375		3,912
		6,758		2,135		40,607

	As of or for the year ended December 31, 2012
	Equipment Segment			Sales Representation Segment			Corporate			Consolidated

Revenues from external customers	$	6,023		$	23,217		$	-		$	29,240
Operating income/(loss)	$	(1,805	)	$	(153	)	$	(1,550	)	$	(3,508	)
Total assets	$	10,069		$	23,615		$	(1,303	)	$	32,381
Accounts and other receivables, net	$	900		$	8,245		$	-		$	9,145
Deferred commission expense	$	-		$	4,580		$	-		$	4,580


	As of or for the seven months ended December 31, 2011
	Equipment Segment			Sales Representation Segment			Corporate			Consolidated

Revenues from external customers	$	2,576		$	20,913		$	-		$	23,489
Operating income/(loss)	$	(1,603	)	$	7,417		$	(625	)	$	5,189
Total assets	$	9,207		$	22,877		$	2,251		$	34,335
Accounts and other receivables, net	$	901		$	19,200		$	-		$	20,101
Deferred commission expense	$	-		$	3,185		$	-		$	3,185


	As of or for the year ended May 31, 2011
	Equipment Segment			Sales Representation Segment			Corporate			Consolidated

Revenues from external customers	$	5,260		$	11,113		$	-		$	16,373
Operating income/(loss)	$	(530	)	$	(2,962	)	$	(441	)	$	(3,933	)
Total assets	$	4,504		$	5,920		$	8,130		$	18,554
Accounts and other receivables, net	$	932		$	3,087		$	-		$	4,019
Deferred commission expense	$	-		$	2,723		$	-		$	2,723

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable (Level 3)		Balance as of December 31, 2012
Assets
Cash equivalents invested in money market funds (included in cash and cash equivalents)	$	9,124	$	-	$	-	$	9,124
Investment in certificates of deposit (included in short-term investments)		110						110
	$	9,234	$	-	$	-	$	9,234

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable (Level 3)		Balance as of December 31 , 2011
Assets
Cash equivalents invested in money market funds (included in cash and cash equivalents)	$	1,313	$	-	$	-	$	1,313
Investment in certificates of deposit (included in short-term investments)		110						110
	$	1,423	$	-	$	-	$	1,423

	December 31, 2012			December 31, 2011
Trade receivables	$	12,193		$	22,143
Due from employees		131			121
Allowance for doubtful accounts and
commission adjustments		(3,179	)		(2,163	)
	$	9,145		$	20,101

	December 31, 2012		December 31, 2011

Raw materials	$	909	$	842
Work in process		483		528
Finished goods		774		1,051
	$	2,166	$	2,421

Cash	$	1,000
Vasomedical, Inc. common stock		2,100
Vasomedical, Inc. warrants to purchase common stock		304
Contingent issuance of Vasomedical, Inc. common stock		575
Total purchase price	$	3,979

	As initially reported			Measurement period adjustments			As adjusted
Cash and cash equivalents	$	442		$	-		$	442
Accounts receivable and other current assets		591			(308	)		283
Inventories		670			(194	)		476
Property and equipment		32			-			32
Goodwill		3,175			(7	)		3,168
Customer lists		-			800			800
Accounts payable and other current liabilites		(931	)		(291	)		(1,222	)
Net assets acquired	$	3,979		$	-		$	3,979