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A Global Leader in Noninvasive Healthcare 2013 Annual Report

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Page 1: A Global Leader in Noninvasive Healthcare...now in the process of reorganizing the marketing and sales effort as well as our overall global strategy. In the sales representation segment,

A Global Leader inNoninvasive Healthcare

2013 Annual Report

Page 2: A Global Leader in Noninvasive Healthcare...now in the process of reorganizing the marketing and sales effort as well as our overall global strategy. In the sales representation segment,

VasoHealthcare

VasoHealthcare—a wholly owned subsidiary

of Vasomedical that operates as a sales repre-

sentative for GE Healthcare, the healthcare

business unit of GE, for the sale of select

GE Healthcare Diagnostic Imaging products.

VasoHealthcare has been appointed to exclu-

sively represent certain market segments in

the 48 contiguous states of the United States

and District of Columbia.

annualized revenue in excess of $25 million.

sales professionals.

VasoSolutions

VasoSolutions—markets and provides Enhanced

External Counterpulsation (EECP®

systems to hospitals, clinics and private physi-

cian practices, worldwide. EECP®

currently being offered to tens of thousands

of patients every year in the US alone.

®

technology for noninvasive outpatient treat-

ment of ischemic diseases.

congestive heart failure.

CE marking certified and Health Canada listed.

that are clinically proven as documented in

numerous peer-reviewed papers.

VasoGlobal

VasoGlobal—established to manage the opera-

as well as to identify and manage potential

international businesses the Company may

consider. Current Chinese companies include:

products include ECG Holter recorders,

ambulatory blood pressure monitoring

Health Canada Listed.

and engineering arm of VasoSolutions for its

Enhanced External Counterpulsation (EECP®)

national market.

Operations by Subsidiary

Our Global Presence

Company Description

Vasomedical, Inc. is a diversified medical technology company specializing in the design, manufacture and sale of its

nesses include the domestic sales representation of GE Healthcare diagnostic imaging products, and the provision of

®

considered the gold standard in ECP therapy around the world. EECP®

EECP

BIOX

EECP & BIOX

EECP

BIOX

EECP & BIOX

Page 3: A Global Leader in Noninvasive Healthcare...now in the process of reorganizing the marketing and sales effort as well as our overall global strategy. In the sales representation segment,

“I firmly believe that Vasomedical and all its subsidiaries are

well-positioned for dynamic, robust growth in coming years.”

I am pleased to report to you another year of significant progress of

our Company, Vasomedical, Inc., despite the many uncertainties in the

domestic marketplace resulting from the Patient Protection and Afford-

able Care Act—commonly known as Obamacare—and the adverse

certainty of the Medical Device Excise Tax, which took effect in 2013.

A Year of Strong Growth

In fiscal year 2013, we enjoyed a 12.5% year-over-year growth in total

annual revenues, to $32.9 million, reaching a record high in the Company’s

recent history (see Total Revenue chart). While both our equipment

segment and sales representation segment delivered improved per-

formance, our VasoHealthcare team delivered remarkable results and

achieved the highest commission rate payable under its agreement

with GE Healthcare (“GEHC”). The new leadership at VasoHealthcare,

which was put into place in mid 2012 with the appointment of industry

veteran Randy Hill as CEO, was a major factor in our success for 2013.

We are proud of this leadership team and the exceptional sales profes-

sionals at VasoHealthcare.

In addition to the top-line growth, the Company’s robust performance

in 2013 was also manifested in the significantly increased backlog of

our business. As of December 31, 2013, our total deferred revenue

increased to $18.0 million, a 15.5% year-to-year growth (see Deferred

Revenue chart). This deferred revenue is directly related to business

we have won but has yet to be delivered to customers, either by us or

by our partner GEHC, and therefore will translate to recognized reve-

nue in the future.

Continued Growth in Biox

The increase in equipment segment sales and a significant improvement

in its gross margin were due to the contribution of Biox Instruments, a

China-based operation we acquired in September 2011. We anticipate

continued growth from this business as it is expanding market presence

and penetration in China as well as in international markets, through

increased marketing and sales efforts and the introduction of new

products including MobiCare™, a multiparameter wireless patient

monitoring system with tremendous potential for the hospital market

and the even broader homecare market. Given the present uncertain-

ties surrounding the EECP® business, Biox is becoming an increasingly

valuable asset to the overall health and future growth of Vasomedical.

VASOMEDICAL, INC. ❘ 2013 ANNUAL REPORT ❘ PAGE 1

Dear Fellow Stockholders,

Page 4: A Global Leader in Noninvasive Healthcare...now in the process of reorganizing the marketing and sales effort as well as our overall global strategy. In the sales representation segment,

The markets for EECP® systems have remained fl at for a long time, and

2013 was an important year for the business. As clinical data on EECP®

therapy continue to be published around the world, the European

Society of Cardiology in late August 2013 rated the therapy with a

Class IIa recommendation in its latest practice guidelines, signifying

that physicians should consider it when treating patients suffering

from ischemic heart diseases. This is a manifestation of the improved

acceptance of EECP® Therapy by the medical community. At the end of

December 2013, the US FDA announced a fi nal order to reclassify ECP

systems as a Class III device for all indications other than refractory

angina, thereby requiring premarket approval for all these indicated

uses. In other words, device-specifi c clinical evidence on safety and

effi cacy is now required for FDA approval of use of ECP systems on

anything other than refractory angina. We believe these signifi cant

developments are benefi cial to Vasomedical in the long run since our

EECP® systems, supported by strong and expansive clinical evidence,

can now also be distinguished from other ECP systems from a regula-

tory standpoint as well.

Commitment to Growth Strategy

The strong growth our Company has experienced in the last several

years can be attributed to the effective planning and execution of our

growth and diversifi cation strategy. Management is working diligently

to further implement this strategy. In the equipment segment, after the

introduction of the Biox™ series of ambulatory monitoring products

and the subsequent acquisition of Biox Instruments Co. Ltd, we have

been working on new technologies that will bring us into tomorrow’s

healthcare markets such as telemedicine and home care. The MobiCare™

wireless vital sign monitor is one such device.

In 2013, we also started to rebuild our domestic sales team and, by the

end of 2013, we had achieved territorial coverage unparalleled in our

recent history. There are also several clinical studies ongoing, which

hopefully will lead to new indications for EECP® Therapy. On the inter-

national front, through increased activities such as professional con-

ferences and tradeshows, we reassessed our sales approach and are

now in the process of reorganizing the marketing and sales effort as

well as our overall global strategy.

In the sales representation segment, we have built a fi rst-class infra-

structure within the VasoHealthcare subsidiary and have assembled a

group of extraordinary executives to lead and a group of quality profes-

sionals to execute, who together have delivered superior performance.

Total Annual Revenues(USD in millions)

‘09

4.3

10

.5

31

.1

29

.2 32

.9

‘10 ‘11 ‘12 ‘13

Deferred Revenue at Year End(USD in millions)

‘09

1.1

12

.6

15

.2

15

.6

18

.0

‘10 ‘11 ‘12 ‘13

❘ PAGE 2

Page 5: A Global Leader in Noninvasive Healthcare...now in the process of reorganizing the marketing and sales effort as well as our overall global strategy. In the sales representation segment,

To take full advantage of this strength, we are actively pursuing addi-

tional opportunities for independent sales with our partner GEHC

as well as with other medical device manufacturers.

I will keep you apprised of material developments in all these areas.

Growth in Shareholder Value

Our commitment to shareholder value is unwavering. The Board of

Directors takes a long-term view towards appreciation in the capital

market and believes in building business fundamentals as a foundation

for growth. This strategy has apparently paid off. Over the fi ve-year

period from December 31, 2008 to December 31, 2013, our Company’s

stock price and market capitalization both reached new levels (see Stock

Price and Market Cap charts) and increased approximately 16 and 26

times, equivalent to a compound annual growth rate (CAGR) of 174%

and 193%, respectively, refl ecting the capital market’s recognition of

our performance and accomplishments.

Last but not least, an update on the Company’s stock buyback program,

which began in April 2013. We initially committed up to $1.5 million

and later increased the ceiling to $2.0 million. As of February 28, 2014,

9,481,401 shares of common stock have been repurchased at an aver-

age price of approximately $0.185 per share. Comparing to the closing

per share price of $0.40 on the same day, we can confi dently conclude

that the program has been very successful. We will continue to report

the progress of the stock buyback program in our quarterly and annual

fi lings with the SEC.

I fi rmly believe that Vasomedical and all its subsidiaries are well-

positioned for dynamic, robust growth in coming years. I invite you

to join us at the annual shareholder meeting on May 20, 2014, in

New York City, where we look forward to hearing your feedback.

On behalf of the Board of Directors and the management of Vasomedical,

I would like to thank you, our shareholders, for your continued trust

and support.

Yours truly,

Jun Ma, Ph.D.President and Chief Executive Officer

Stock Price at Year End(USD)

‘09

0.0

6

0.2

4

0.2

2

0.1

8

0.3

4

‘10 ‘11 ‘12 ‘13

0.0

2

‘08

Market Cap at Year End(USD in millions)

‘09

6.0

26

.8

1.9

33

.7

29

.3

51

.3

‘10‘08 ‘11 ‘12 ‘13

VASOMEDICAL, INC. ❘ 2013 ANNUAL REPORT ❘ PAGE 3

Page 6: A Global Leader in Noninvasive Healthcare...now in the process of reorganizing the marketing and sales effort as well as our overall global strategy. In the sales representation segment,

Left to right: Michael Beecher, Chief Financial Officer; Lawrence M. Liebman, Vice President for Sales and Marketing of VasoSolutions;

Jun Ma, Ph.D., President and Chief Executive Officer; Jonathan Newton, Vice President for Finance and Controller; David Nierle, Vice

President for US Sales and Service of VasoSolutions

Not present: Randy Hill, Senior Vice President, CEO of VasoHealthcare; Qiuming Shen, President of Biox Instruments Co. Ltd.;

Xichang Li, President of Life Enhancement Technology Ltd.

“The strong growth our Company has experienced

in the last several years can be attributed to the effective

planning and execution of our growth and diversification

strategy. Management is working diligently

to further implement this strategy.”

Senior Management

❘ PAGE 4

Page 7: A Global Leader in Noninvasive Healthcare...now in the process of reorganizing the marketing and sales effort as well as our overall global strategy. In the sales representation segment,

2013 Form 10-K

Page 8: A Global Leader in Noninvasive Healthcare...now in the process of reorganizing the marketing and sales effort as well as our overall global strategy. In the sales representation segment,

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Page 74: A Global Leader in Noninvasive Healthcare...now in the process of reorganizing the marketing and sales effort as well as our overall global strategy. In the sales representation segment,

Simon Srybnik

Chairman of the Board

Simon Srybnik has been Chairman of the Board since

June 2010 and a director since June 2007. He is the

Chairman of the Board of Kerns Manu facturing Corp.

Mr. Srybnik, through his direct ownership and indirect

ownership by entities controlled by him and his brother,

Louis, is the largest stockholder of the Company.

David Lieberman

Vice Chairman

David Lieberman has been a director of the

Company and the Vice Chairman of the Board, since

February 2011. He is currently a senior partner at

the law firm of Beckman, Lieberman

& Barandes, LLP.

Michael Beecher, C.P.A.

Chief Financial Officer

Michael Beecher, C.P.A., joined the Company as

Chief Financial Officer in September 2011. Prior to

joining Vasomedical, Mr. Beecher was Chief Financial

Officer of Direct Insite Corp., a publicly held com-

pany, from December 2003 to September 2011.

Jun Ma, Ph.D.

Director, President and Chief Executive Officer

Jun Ma, Ph.D. has been a director since June 2007

and was appointed President and Chief Executive

Officer of the Company on October 16, 2008.

Previously, Dr. Ma provided technology

and business consulting services to several

companies in aerospace, automotive, biomedical,

medical device, and other industries.

Jonathan Newton

Vice President for Finance and Controller

Jonathan Newton served as Chief Financial Officer of

the Company from September 1, 2010 to September

8, 2011, and is currently Vice President of Finance

and Controller. From June 2006 to August 2010, Mr.

Newton was Director of Budgets and Financial

Analysis for Curtiss-Wright Flow Control.

Randy Hill

Senior Vice President; CEO of VasoHealthcare

A veteran in the medical device industry, Randy Hill

was, until May 2011, Chief Operating Officer and

interim Chief Executive Officer of Siemens

Healthcare USA, where he was responsible for

sales, marketing, service and logistics across

the Siemens Healthcare portfolio.

Lawrence M. Liebman

Vice President for Sales and Marketing of VasoSolutions

Larry Liebman has been with Vasomedical for the

last 15 years, having started its original domestic

direct sales organization in 1995. Larry has over 30

years of sales, marketing and senior man agement

experience with Picker International, Cambridge

Instruments, Kontron Instruments, Mennen Medical

and Spacelabs Medical.

Peter Castle

Chairman of the Audit Committee

Peter Castle has been a director since August 2010.

Mr. Castle is currently the President and Chief

Operating Officer of NetWolves Corporation, where

he has been employed since 1998.

David Nierle

Vice President for US Sales and Service of VasoSolutions

Dave joined the Vasomedical team in January 2013

with an extensive background and proven track record

in healthcare sales and service management. With

over 30 years of experience with Xerox, Pfizer Medical

Systems and Siemens Medical Solutions, Dave has

gained significant experience handling the challenges

and respon sibilities of management in a number of

senior positions including District Manager, Zone and

Regional Vice President, as well as Manager and

Senior Director of Strategic National Accounts.

Ben Movaseghi, C.P.A.

Chairman of the Compensation Committee

Ben Movaseghi, C.P.A. has been a director since

July 2007. Mr. Movaseghi is the CFO and Treasurer

of Kerns Manufacturing Corporation since 2000.

Qiuming Shen

President of Biox Instruments Co. Ltd.

Qiuming Shen is a co-founder and President of Biox

Instruments Co. Ltd. since its inception in 1996. He

started his career in medical devices nearly 25 years

ago, first in research and development then in mar-

keting and corporate operations and management. His

work has led to many personal awards and corporate

awards by various governmental bodies in China.

Edgar Rios

Director

Edgar Rios currently is President of Edgary

Consultants, LLC. and was appointed a director

in conjunction with the Company’s consulting

agreement with Edgary Consultants, LLC.

Mr. Rios was Executive Vice President, General

Counsel, Secretary, and Director of AmeriChoice

Corporation from its inception in 1989 through

its acquisition by UnitedHealth in 2002.

Xichang Li

President of Life Enhancement Technology Ltd.

Xichang Li is the founder and President of Life

Enhancement Technology Ltd. since 2004, and prior

to that, he was President of Life Sciences (Foshan)

Co. Ltd. and Vamed Medical Instruments Co. Ltd.

from 1997 to 2004. In all these roles, he has mainly

been in charge of manufacturing EECP systems and

has been involved in the development of several

generations of EECP technology.

Board of Directors

Jun Ma, Ph.D.

President and Chief Executive Officer

Randy Hill

Senior Vice President and CEO of VasoHealthcare

Senior Management

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