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 September 30, 2014
[ ] 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)
RegistrantŐs
Telephone Number (516)
997-4600
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
[X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
Large
Accelerated Filer [ ] Accelerated
Filer [ ] Non-Accelerated Filer
[ ] Smaller Reporting Company [X]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
[ ] No [X]
Number of Shares
Outstanding of Common Stock, $.001 Par Value,
at November 9, 2014 – 155,677,283
Vasomedical,
Inc. and Subsidiaries
INDEX
PART
I – FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS as of September 30,
2014 (unaudited) and December 31, 2013.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
ITEM 2 -
MANAGEMENTŐS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
ITEM 4 - CONTROLS
AND PROCEDURES
Vasomedical,
Inc. and Subsidiaries
(in thousands, except share data)
The accompanying
notes are an integral part of these condensed consolidated financial
statements.
Vasomedical, Inc. and
Subsidiaries
(Unaudited)
(in thousands, except per
share data)
The accompanying notes are an integral part of these condensed consolidated financial
statements.
Vasomedical, Inc. and
Subsidiaries
(Unaudited)
(in thousands)
Vasomedical, Inc. was
incorporated in Delaware in July 1987. Unless the context requires otherwise,
all references to ŇweÓ, ŇourÓ, ŇusÓ, ŇCompanyÓ, ŇregistrantÓ, ŇVasomedicalÓ or
ŇmanagementÓ refer to Vasomedical, Inc. and its subsidiaries. The Company until
July 2014 had been operating in two distinct business segments, the Sales
Representation segment and the Equipment segment. In May 2010, the Company,
through its wholly-owned subsidiary Vaso Diagnostics, Inc. d/b/a VasoHealthcare,
expanded into the sales representation business via its agreement with GE
Healthcare (ŇGEHCÓ), the healthcare business unit of General Electric Company
(NYSE: GE), to be GEHCŐs exclusive sales representative for the sale of select
GEHC diagnostic imaging products in specific market segments in the 48
contiguous states of the United States and the District of Columbia. In June 2012, the Company entered
into an amendment, effective July 1, 2012, of the sales representative
agreement (ŇGEHC AgreementÓ) extending the initial term of three years
commencing July 1, 2010 to five years through June 30, 2015, subject to earlier
termination under certain circumstances.
In the Equipment segment we design, manufacture, market and support
certain medical devices. Our
principal products in this segment are Enhanced External Counterpulsation (EECP¨)
systems, which are non-invasive therapy devices based on our proprietary
technology, and currently indicated in the United States for the treatment of refractory
angina and used for other ischemic diseases overseas. In addition we develop, manufacture and
market certain ambulatory patient monitoring systems including recorders and
analysis software.
In September 2011, the Company acquired Fast Growth
Enterprises Limited (FGE), a British Virgin Islands company which owns and
controls two Chinese operating companies - Life Enhancement Technologies Ltd. (ŇLETÓ)
and Biox Instruments Co. Ltd. (ŇBioxÓ), respectively – to expand its
technical and manufacturing capabilities and to enhance its distribution
network, technology, and product portfolio. Also in September 2011, the Company
restructured to further align its business management structure and long-term
growth strategy and started to operate through three wholly-owned subsidiaries. Vaso Diagnostics d/b/a VasoHealthcare
continues as the operating subsidiary for the sales representation of GE
Healthcare diagnostic imaging products; Vasomedical Global Corp. operates the
CompanyŐs Chinese companies; and Vasomedical Solutions, Inc. manages and
coordinates our EECP¨ therapy business as well as other medical
equipment operations.
In April 2014, the Company announced that it entered into
an agreement with Chongqing PSK-Health Sci-Tech Development Co., Ltd.
("PSK") of Chongqing, China, the leading manufacturer of ECP therapy
systems in China, to form a joint venture company, VSK Medical Limited
("VSK"), for the global marketing, sale and advancement of ECP
therapy technology. The joint
venture is in the early implementation phase and had not begun operations as of
September 30, 2014.
In June 2014, the Company entered into a Value Added
Reseller Agreement (ŇVAR AgreementÓ) with GEHC to become a national value added
reseller of GE Healthcare IT's Radiology PACS (Picture Archiving and
Communication System) software solutions and related services, including
implementation, management and support.
This multiyear VAR Agreement focuses primarily on existing customer
segments currently served by Vaso Diagnostics on behalf of GEHC. A new wholly owned subsidiary,
VasoHealthcare IT Corp., was formed to conduct the healthcare IT business.
In August 2014, the Company acquired all of the outstanding
shares of Genwell Instruments Co. Ltd. (ŇGenwellÓ), located in Wuxi, China,
through its wholly owned subsidiary Wuxi Gentone Instruments Co. Ltd.
(ŇGentoneÓ). Genwell was formed in
China in 2010 with the assistance of a government grant to develop the MobiCareTM wireless multi-parameter patient
monitoring system and holds the patents and intellectual property rights for
this system. See Note K.
We report the operations of Vasomedical Global Corp. and
Vasomedical Solutions, Inc. under our Equipment segment. Vaso Diagnostics activities are included
under our Sales Representation segment.
VasoHealthcare IT operations report under the IT segment (See Note C).
NOTE B - BASIS OF PRESENTATION AND
CRITICAL ACCOUNTING POLICIES
Basis of Presentation and Use of
Estimates
The accompanying
condensed consolidated 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 condensed
consolidated financial statements prepared in accordance with U.S. GAAP have
been condensed or omitted pursuant to such rules and regulations. Accordingly,
these condensed consolidated financial statements should be read in connection
with the audited consolidated financial statements and related notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2013, as filed with the SEC. These condensed consolidated financial statements
include the accounts of the companies over which we exercise control. In the
opinion of management, the accompanying condensed consolidated 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 any other interim period or 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 condensed
consolidated
financial statements, the disclosure of contingent assets and liabilities in
the condensed consolidated financial statements and the accompanying notes, and
the reported amounts of revenues, expenses and cash flows during the periods
presented. Actual amounts and results could differ from those estimates. The
estimates and assumptions the Company makes are based on historical factors,
current circumstances and the experience and judgment of the Company's
management. The Company evaluates its estimates and assumptions on an ongoing
basis.
Significant Accounting Policies
Note B of the Notes to
Consolidated Financial Statements, included in the Annual Report on Form 10-K
for the year ended December 31, 2013, includes a summary of the significant
accounting policies used in the preparation of the condensed consolidated financial
statements.
Revenue and Expense Recognition for VasoHealthcare
The Company recognizes commission revenue, net of the
medical device tax reimbursement to GEHC, in its Sales Representation segment
(see Note C) when persuasive evidence of an arrangement exists, service has
been rendered, the price is fixed or determinable and collectability is
reasonably assured. These
conditions are deemed to be met when the underlying equipment has been accepted
at the customer site in accordance with the specific terms of the sales
agreement. Consequently, amounts
billable under the agreement with GE Healthcare in advance of the customer
acceptance of the equipment are recorded as accounts receivable and deferred
revenue in the condensed consolidated balance sheets. Similarly, commissions payable to our
sales force related to such billings are recorded as deferred commission
expense when the associated deferred revenue is recorded. Commission expense is recognized when
the corresponding commission revenue is recognized.
Reclassifications
Certain reclassifications have
been made to prior period amounts to conform with current period presentation.
NOTE C – SEGMENT REPORTING
AND CONCENTRATIONS
The Company views its business in three segments – the
Sales Representation segment, the Equipment segment, and the IT segment. The Sales Representation segment
operates through the VasoHealthcare subsidiary and is currently engaged solely
in the fulfillment of the CompanyŐs responsibilities under our agreement with
GEHC. The Equipment segment is
engaged in designing, manufacturing, marketing and supporting EECP¨
enhanced external counterpulsation systems both domestically and
internationally, as well as the development, production, marketing and
supporting of other medical devices.
The CompanyŐs new subsidiary, VasoHealthcare IT Corp., formed to conduct
its healthcare IT operations, reports through the IT segment. Operations in the IT segment began in the
third quarter of 2014. The Company
evaluates segment performance based on operating income. Administrative functions such as
finance, human resources, and information technology are centralized and related
expenses allocated to each segment.
Other costs not directly attributable to operating segments, such as
audit, legal, director fees, investor relations, and others, as well as certain
assets – primarily cash balances – are reported in the Corporate
entity below. There are no
intersegment revenues. Summary
financial information for the segments is set forth below:
(in
thousands)
For the three months ended September 30, 2014 and 2013, GE
Healthcare accounted for 84% and 77% of revenue, respectively. For the nine months ended September 30, 2014
and 2013, GE Healthcare accounted for 86% and 80% of revenue, respectively. Also, GE Healthcare accounted for $6.2 million,
or 87%, and $8.1 million, or 89%, of accounts and other receivables at September
30, 2014 and December 31, 2013, respectively.
NOTE D – SHARE-BASED
COMPENSATION
The Company complies with ASC
Topic 718 ŇCompensation – Stock CompensationÓ (ŇASC 718Ó), which requires
all share-based awards to employees, including grants of employee stock
options, to be recognized in the condensed consolidated financial statements
based on their estimated fair values.
During the nine months ended September
30, 2014, the Company granted 450,000 restricted shares of common stock valued
at $157,500 to officers and 140,000 restricted shares of common stock valued at
$31,100 to employees. Of the 450,000
shares granted to officers, 100,000 shares vested immediately and the remainder
vest at various times through February 2016. Of the 140,000 shares granted to
employees, 50,000 shares vested immediately and 90,000 shares vest over a three
year period. In the first nine
months of 2014, the Company also granted 500,000 restricted shares of common
stock to directors. The shares were
valued at $175,000 and vested immediately.
During the nine month period
ended September 30, 2013, the Company granted 400,000 restricted shares of
common stock valued at $74,000.
100,000 of such shares were granted to an officer and 300,000 shares
were granted to employees. Shares
valued at $3,600 and $38,000 vested over six month and two year periods,
respectively, with the remainder vesting immediately.
During the nine month periods
ended September 30, 2014 and 2013,
the Company did not grant any stock options.
Share-based compensation expense
recognized for the three and nine month periods ended September 30, 2014 was $32,000
and $189,000, respectively, and $29,000 and $300,000 for the three and nine month
periods ended September 30, 2013, respectively. These expenses are included in selling,
general, and administrative expenses in the condensed consolidated statements
of operations in 2014, and in cost of revenues; selling, general, and
administrative expenses; and research and development expenses in the condensed
consolidated statements of operations in 2013. Expense for share-based arrangements with
directors and non-employees was $43,000 and $131,000 for the three and nine months
ended September 30, 2014, respectively, and $0 and $87,000 for the three and nine
months ended September 30, 2013, respectively. Unrecognized expense related to share-based
compensation and arrangements is approximately $130,000 at September 30, 2014 and
will be recognized through September 2017.
Basic loss per common share is computed as earnings
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.
The following table represents
common stock equivalents that were excluded from the computation of diluted
earnings per share for the three and nine months ended September 30, 2014 and 2013,
because the effect of their inclusion would be anti-dilutive.
(in thousands)
NOTE
F – FAIR VALUE MEASUREMENTS
The Company complies with the provisions of ASC 820 ŇFair
Value Measurements and DisclosuresÓ (ŇASC 820Ó). Under ASC 820, fair value is defined as
the price that would be received to sell an asset or paid to transfer a
liability (i.e., the Ňexit priceÓ) in an orderly transaction between market
participants at the measurement date.
The following tables present information about the CompanyŐs
assets measured at fair value as of September 30, 2014 and December 31, 2013:
(in thousands)
The fair values of the CompanyŐs cash equivalents invested
in money market funds are determined through market, observable and
corroborated sources.
NOTE
G – ACCOUNTS AND OTHER RECEIVABLES, NET
The following table presents information regarding the
CompanyŐs accounts and other receivables as of September 30, 2014 and December 31,
2013:
(in thousands)
Trade receivables include amounts due for shipped products
and services rendered. Amounts
currently due under the GEHC Agreement are subject to adjustment in subsequent
periods should the underlying sales order amount, upon which the receivable is
based, change.
Allowance for doubtful accounts and commission adjustments
include estimated losses resulting from the inability of our customers to make
required payments, and adjustments arising from subsequent changes in sales
order amounts that may reduce the amount the Company will ultimately receive
under the GEHC Agreement. Due from
employees is primarily commission advances made to sales personnel.
Inventories,
net of reserves, consist of the following:
(in thousands)
At September 30, 2014 and December
31, 2013, the Company maintained reserves for excess and obsolete inventory of $829,000
and $803,000, respectively.
NOTE I – GOODWILL AND OTHER
INTANGIBLES
Goodwill aggregating $3,280,000 and
$3,303,000 was recorded on the CompanyŐs condensed consolidated balance sheets
at September 30, 2014 and December 31, 2013, respectively, pursuant to the
acquisition of FGE in September 2011.
All of the goodwill was allocated to the CompanyŐs Equipment segment. The components of the change in goodwill
are as follows:
(in thousands)
The CompanyŐs other
intangible assets consist of capitalized patent and technology costs, customer
lists and software costs, as follows:
(in thousands)
Patents and technology, customer
lists, and software are included in other assets in the accompanying condensed consolidated
balance sheets and are amortized on a straight line basis over their estimated
useful lives of ten, seven, and five years, respectively. Amortization expense amounted to $50,000
and $146,000 for the three and nine months ended September 30, 2014,
respectively, and $41,000 and $126,000 for the three and nine months ended September 30, 2013, respectively.
NOTE J - DEFERRED REVENUE
The changes in the CompanyŐs deferred revenues are as
follows:
(in thousands)
NOTE K – RELATED-PARTY TRANSACTIONS
On February 28,
2011, David Lieberman and Edgar Rios were appointed by the Board of
Directors as directors of the Company.
Mr. Lieberman, a practicing attorney in the State of New York, was also
appointed to serve as the Vice Chairman of the Board. He is
currently a senior partner at the law firm of Beckman, Lieberman &
Barandes, LLP, which performs certain legal services for the Company. Fees of approximately
$60,000 and $180,000 were billed by the firm through the three and nine months
ended September 30, 2014, respectively, and fees of approximately $66,000 and $187,000
were billed through the three and nine months ended September 30, 2013,
respectively, at which dates no amounts were outstanding.
Mr. Rios currently is President of Edgary Consultants, LLC, and was appointed a director in conjunction with the CompanyŐs consulting agreement with Edgary Consultants, LLC. The consulting agreement (the ŇAgreementÓ) between the Company and Edgary Consultants, LLC (ŇConsultantÓ) commenced on March 1, 2011 and was for a two-year term and expired on February 28, 2013. The Agreement provided for the engagement of Consultant to assist the Company in seeking broader reimbursement coverage of EECP¨ therapy.
In consideration for the services to be
provided by Consultant under the Agreement, the Company agreed to issue to
Consultant or its designees, up to 18,500,000 shares of restricted common
stock of the Company, 3,000,000 of which were issued in March 2011 and the
balance was to be earned on performance. Mr. Lieberman received 600,000 of
these restricted shares. The
Company recorded the fair value of the shares issued to Consultant as a prepaid
expense and amortized the cost ratably over the two year agreement. No performance-based shares were issued
and no further compensation is expected to be paid in conjunction with the
agreement.
Receivables due from FGE management aggregating $8,000 and $6,000
were collected during the three and nine months ended September 30, 2013,
respectively.
On August 6, 2014 the Company acquired all of the
outstanding shares of Genwell Instruments Co. Ltd. (ŇGenwellÓ), located in
Wuxi, China, through its wholly owned subsidiary Wuxi Gentone Instruments Co.
Ltd. (ŇGentoneÓ) for cash and notes of Chinese Yuan RMB13,250,000
(approximately $2,151,000 at the acquisition date – see Note P). Genwell was formed in China in 2010 with
the assistance of a government grant to develop the MobiCareTM wireless multi-parameter patient
monitoring system and holds the patents and intellectual property rights for
this system. The president of our
subsidiary Life Enhancement Technologies Ltd. and the president and vice-president
of our subsidiary Biox Instruments Company Ltd. together owned 80.9% of Genwell
at the time of acquisition. The
President and CEO of the Company was appointed the nominee Chairman of Genwell
at its formation for the sole purpose of applying for the government grant
available only to overseas Chinese persons. He has never received any compensation
from Genwell nor held any ownership interest in Genwell. The Company has received a fairness
opinion for this transaction from an independent certified appraisal firm and a
legal opinion from Chinese counsel.
NOTE L –
STOCKHOLDERSŐ EQUITY
Common Stock
On June 17, 2010 the Board of Directors approved the 2010
Stock Plan (the Ň2010 PlanÓ) for officers, directors, employees and consultants
of the Company. The stock issuable
under the 2010 Plan shall be shares of the CompanyŐs authorized but unissued or
reacquired common stock. The
maximum number of shares of common stock which may be issued under the 2010
Plan is 5,000,000 shares.
The 2010 Plan is comprised of two separate equity programs,
the Options Grant Program, under which eligible persons may be granted options
to purchase shares of common stock, and the Stock Issuance Program, under which
eligible persons may be issued shares of common stock directly, either through
the immediate purchase of such shares or as compensation for services rendered
to the Company. The 2010 Plan
provides that the Board of Directors, or a committee of the Board of Directors,
will administer it with full authority to determine the identity of the
recipients of the options or shares and the number of options or shares.
During the nine months ended September 30, 2014 the Company issued, under the 2010 Plan, 710,000
shares of common stock to employees and officers, and 500,000 shares of common
stock to directors. As of September 30, 2014, 1,222 shares were available for grant under the
2010 Plan.
On October 30, 2013 the Board of Directors approved the
2013 Stock Plan (the Ň2013 PlanÓ) for officers, directors, employees and
consultants of the Company. The
stock issuable under the 2013 Plan shall be shares of the CompanyŐs authorized
but unissued or reacquired common stock.
The maximum number of shares of common stock which may be issued under
the 2013 Plan is 7,500,000 shares.
The 2013 Plan is comprised of two separate equity programs,
the Options Grant Program, under which eligible persons may be granted options
to purchase shares of common stock, and the Stock Issuance Program, under which
eligible persons may be issued shares of common stock directly, either through
the immediate purchase of such shares or as compensation for services rendered
to the Company. The 2013 Plan
provides that the Board of Directors, or a committee of the Board of Directors,
will administer the Plan with full authority to determine the identity of the
recipients of the options or shares and the number of options or shares.
During the nine months ended September 30, 2014 the Company issued, under the 2013 Plan, 69,988
shares of common stock to employees.
As of September 30, 2014, 7,330,012
shares were available for grant under the 2013 Plan.
No options were issued under the 2010 Plan or 2013 Plan during
the nine-month period ended September 30, 2014.
In April 2013, the CompanyŐs Board of Directors authorized
a share repurchase program of up to $1.5 million, which was subsequently
increased in July 2013 to $2.0 million, of the CompanyŐs common stock. As of September 30, 2014, 10,308,087 shares had been repurchased at a cost
of $2,000,000, which cost has been recorded as treasury stock in the
accompanying condensed consolidated balance sheet as of September 30, 2014.
NOTE M – INCOME TAXES
The CompanyŐs provision for income taxes consists of state and local, and foreign taxes, as applicable, in amounts necessary to align the CompanyŐs year-to-date tax provision with the effective rate that it expects to achieve for the full year. For the three and nine months ended September 30, 2014, the Company recorded an income tax provision of $26,000 and $50,000, respectively, consisting primarily of state and local minimum taxes and foreign taxes related to the Chinese subsidiary. For the three and nine months ended September 30, 2013, the Company recorded a tax benefit of $91,000 and $35,000, respectively, consisting of a tax refund on a previous period return, partially offset by state and local minimum taxes and foreign taxes related to the Chinese subsidiary. Our domestic deferred tax assets are not realizable on a more-likely-than-not basis and, therefore, we have recorded a full valuation allowance against our domestic deferred tax assets.
NOTE N –
COMMITMENTS AND CONTINGENCIES
Sales representation agreement
In June 2012, the Company concluded an
amendment of the GEHC Agreement with GE Healthcare, originally signed on May
19, 2010. The amendment, effective
July 1, 2012, extended the initial term of three years commencing July 1, 2010
to five years through June 30, 2015, subject to earlier termination under
certain circumstances. These
circumstances include not materially achieving certain sales goals, not
maintaining a minimum number of sales representatives, and various legal and
GEHC policy requirements. Under the
terms of the agreement, the Company is required to lease dedicated computer
equipment from GEHC for connectivity to their network.
Value Added Reseller agreement
In
June 2014, the Company entered into an agreement with GE Healthcare for the
purchase of certain GEHC IT professional services in conjunction with the execution
of its VAR Agreement, as described in Note A.
NOTE O - RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS
Standards issued
but not yet effective
In May 2014, the FASB issued a comprehensive new revenue
recognition standard which will supersede previous existing revenue recognition
guidance. The standard creates a five-step model for revenue recognition that
requires companies to exercise judgment when considering contract terms and
relevant facts and circumstances. The five-step model includes (1) identifying
the contract, (2) identifying the separate performance obligations in the
contract, (3) determining the transaction price, (4) allocating the transaction
price to the separate performance obligations and (5) recognizing revenue when
each performance obligation has been satisfied. The standard also requires
expanded disclosures surrounding revenue recognition. The standard is effective
for fiscal periods beginning after December 15, 2016 and allows for either full
retrospective or modified retrospective adoption. The Company is currently
evaluating the impact of the adoption of this standard on its consolidated
financial statements.
NOTE P –
BUSINESS COMBINATION
On August 6, 2014 the Company acquired all of the
outstanding shares of Genwell Instruments Co. Ltd. (ŇGenwellÓ), located in
Wuxi, China, through its wholly owned subsidiary Wuxi Gentone Instruments Co.
Ltd. (ŇGentoneÓ) for cash and notes of Chinese Yuan RMB13,250,000
(approximately $2,151,000 at the acquisition date). The notes totaling RMB6,250,000
(approximately $1,015,000) are payable one year from the closing date with
interest at the rate of 5% per annum.
Genwell was formed in China in 2010 with the assistance of a government
grant to develop the MobiCareTM
wireless multi-parameter patient monitoring system and holds the patents
and intellectual property rights for this system. The primary purpose of the
acquisition was to acquire ownership of these patents and intellectual
property.
The operating results of Genwell from August 6, 2014 to
September 30, 2014 are included in the accompanying condensed consolidated
statements of operations and comprehensive loss for the three and nine month
periods ended September 30, 2014. The
accompanying condensed consolidated balance sheet at September 30, 2014
reflects the acquisition of Genwell effective August 6, 2014.
In accordance with Accounting Standards Codification 805,
Business Combinations, the total purchase consideration is allocated to the net
tangible and intangible assets acquired and liabilities assumed based on their
estimated fair values at August 6, 2014 (the acquisition date). The purchase price was allocated based
on the information currently available, and may be adjusted after obtaining
more information regarding, among other things, asset valuations, liabilities
assumed, and revisions of preliminary estimates. The following table summarizes the
estimated fair values of the net assets acquired:
(in thousands)
During the three and nine month periods ended September 30,
2014, the Company expensed $8,000 of acquisition-related legal costs. The costs are included in the line item
Selling, General & Administrative costs in the accompanying condensed
consolidated statements of operations and comprehensive loss. The amounts of revenue and net loss of
Genwell included in the CompanyŐs condensed consolidated statements of
operations and comprehensive loss for the three months ended September 30, 2014
was $0 and $10,000, respectively. Genwell
is not expected to report future revenue as the sales of its principal product,
MobiCareTM , will be through the Biox subsidiary. The following unaudited supplemental pro
forma information presents the financial results as if the acquisition of
Genwell had occurred January 1, 2013:
(in
thousands)
An adjustment was made to the unaudited pro forma financial information
to reflect the acquisition-related costs in the nine months ended September 30,
2013.
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 ŇanticipatesÓ, ŇbelievesÓ, ŇcouldÓ, ŇestimatesÓ,
ŇexpectsÓ, ŇmayÓ, ŇplansÓ, ŇpotentialÓ and ŇintendsÓ 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
CompanyŐs management, as well as assumptions made by and information currently
available to the CompanyŐs 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; continuation of the GEHC Agreement and the risk factors
reported from time to time in the CompanyŐs SEC reports, including its recent
report on Form 10-K. 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 ŇweÓ, ŇourÓ, ŇusÓ, ŇCompanyÓ, ŇregistrantÓ,
ŇVasomedicalÓ or ŇmanagementÓ refer to Vasomedical, Inc. and its
subsidiaries. Until 2010, we were
primarily engaged in designing, manufacturing, marketing and supporting
Enhanced External Counterpulsation (EECP¨) systems, based on our
proprietary technology, to physicians and hospitals throughout the United
States and in select international markets.
In May 2010, the Company, through its wholly-owned
subsidiary Vaso Diagnostics, Inc. d/b/a VasoHealthcare, expanded into the sales
representation business via its agreement with GE Healthcare (ŇGEHCÓ), the
healthcare business unit of General Electric Company (NYSE: GE), to be GEHCŐs
exclusive sales representative for the sale of select GEHC diagnostic imaging
products in specific market segments in the 48 contiguous states of the United
States and the District of Columbia. In June 2012, the Company
entered into an amendment, effective July 1, 2012, of the sales representative
agreement (ŇGEHC AgreementÓ) extending the initial term of three years
commencing July 1, 2010 to five years through June 30, 2015, subject to earlier
termination under certain circumstances.
In September 2011, the Company acquired Fast Growth
Enterprises Limited (FGE), a British Virgin Islands company, which owns and
controls two Chinese operating companies - Life Enhancement Technology Ltd. and
Biox Instruments Co. Ltd., respectively - to expand its technical and
manufacturing capabilities and to enhance its distribution network, technology,
and product portfolio. Also in
September 2011, the Company restructured to further align its business
management structure and long-term growth strategy, and started to operate
through three wholly-owned subsidiaries.
Vaso Diagnostics d/b/a VasoHealthcare continues as the operating
subsidiary for the sales representation of GE diagnostic imaging products;
Vasomedical Global Corp. operates the CompanyŐs Chinese companies; and
Vasomedical Solutions, Inc. was formed to manage and coordinate our EECP¨ therapy
business as well as other medical equipment operations.
In April 2014, the Company announced that it entered into
an agreement with Chongqing PSK-Health Sci-Tech Development Co., Ltd.
("PSK") of Chongqing, China, the leading manufacturer of ECP therapy
systems in China, to form a joint venture company, VSK Medical Limited
("VSK"), for the global marketing, sale and advancement of ECP
therapy technology. The joint
venture is in the early implementation phase and had not begun operations as of
September 30, 2014.
In June 2014, the Company entered into a Value Added
Reseller Agreement (ŇVAR AgreementÓ) with GEHC to become a national value added
reseller of GE Healthcare IT's Radiology PACS (Picture Archiving and
Communication System) software solutions and related services, including
implementation, management and support.
This multiyear VAR Agreement focuses primarily on existing customer
segments currently served by Vaso Diagnostics on behalf of GEHC. A new wholly owned subsidiary,
VasoHealthcare IT Corp., was formed to conduct the healthcare IT business.
In August 2014, the Company acquired all of the outstanding
shares of Genwell Instruments Co. Ltd. (ŇGenwellÓ), located in Wuxi, China,
through its wholly owned subsidiary Wuxi Gentone Instruments Co. Ltd.
(ŇGentoneÓ). Genwell was formed in
China in 2010 with the assistance of a government grant to develop the MobiCareTM wireless multi-parameter patient
monitoring system and holds the patents and intellectual property rights for
this system.
We report the operations of Vasomedical Global Corp. and
Vasomedical Solutions, Inc. under our Equipment segment. Vaso Diagnostics activities are included
under our Sales Representation segment.
VasoHealthcare IT operations report under the IT segment.
The Company expects to achieve profitability
through its sales representation operations and its China operations, as well
as by expanding its market presence and product portfolio. In addition, the Company continues to
pursue acquisitions or partnership opportunities in the international and
domestic markets and to expand its sales representation business.
Critical Accounting Policies and Estimates
Our discussion and analysis of
our financial condition and results of operations are based upon the
accompanying unaudited condensed consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States (ŇU.S. GAAPÓ). 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 ŇcriticalÓ, as they are both most important to the
financial statement presentation and require managementŐs 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 ŇManagementŐs Discussion and Analysis of
Financial Condition and Results of OperationsÓ in our Annual Report on Form 10-K
for the year ended December 31, 2013.
Results of Operations – For the Three Months Ended September
30, 2014 and 2013
Total revenue for the three months ended September 30, 2014
and 2013 was $7,643,000 and $7,606,000, respectively, an increase of $37,000,
or less than 1%. Net loss for the three months ended September 30, 2014 was $123,000
compared to a net loss of $464,000 for the three months ended September 30, 2013,
an improvement of $341,000. The decrease
in net loss was primarily attributable to an increase in gross profit from our
Sales Representation segment of $550,000 and a $163,000 decrease in selling,
general and administrative costs, offset by a decrease in gross profit of $362,000
in our Equipment segment. Our total
net loss was $0.00 per basic and diluted common share for the three months
ended September 30, 2014 and 2013. We have implemented changes in our Equipment
segment operations to reduce sales, marketing and other operating costs and the
effect of these changes are reflected in the reduction in selling, general and
administrative expenses during the third quarter. We anticipate that the
positive effects of these changes will continue to be reflected in subsequent
periods.
Revenues
Commission revenues in the Sales
Representation segment were $6,409,000 in the third quarter of 2014, as
compared to $5,862,000 in the third quarter of 2013, an increase of $547,000,
or 9%. The increase in commission
revenue in the third quarter of 2014 is due primarily to an increase in the
commission rate on equipment delivered, as well as an increase in the volume of
equipment delivered by GEHC. The
Company recognizes revenue when the underlying equipment has been accepted at
the customer site in accordance with the specific terms of the sales
agreement. Consequently, amounts
billable under the GEHC Agreement prior to customer acceptance of the equipment
are recorded as deferred revenue in the condensed consolidated balance
sheet. As of September 30, 2014, $16,760,000
in deferred commission revenue was recorded in the CompanyŐs condensed
consolidated balance sheet, of which $8,359,000 was long-term. At September 30, 2013, $11,357,000 in
deferred commission revenue was recorded in the CompanyŐs condensed
consolidated balance sheet, of which $4,443,000 was long-term.
Revenue in our Equipment segment
decreased by $510,000, or 29%, to $1,234,000 for the three-month period ended September
30, 2014 from $1,744,000 for the same period of the prior year. Equipment segment revenue from equipment
sales decreased by $450,000, or 33%, to $903,000 for the three-month period
ended September 30, 2014 as
compared to $1,353,000 for the same period in the prior year primarily due to lower
EECP¨ revenues as a result of lower sales volume.
We anticipate that demand for
EECP¨ systems will remain soft unless there is greater clinical
acceptance for the use of EECP¨ therapy or a favorable change in
current reimbursement policies by CMS or third party payers. We will continue to cost effectively
pursue strategies to increase and expand reimbursement for EECP¨
therapy.
Equipment segment revenue from
equipment rental and services decreased 15% to $331,000 in the third quarter of
2014 from $391,000 in the third quarter of 2013. Revenue from equipment rental
and services represented 27% and 22% of total Equipment segment revenue in the third
quarters of fiscal 2014 and fiscal 2013, respectively. The decrease in revenue generated from
equipment rentals and services is due primarily to decreased service contract revenues.
Gross Profit
The Company had a gross profit
of $5,375,000 in the third quarter of 2014 compared to $5,187,000 in the third quarter
of the prior year, an increase of 4%.
The increase is principally due to higher commission rates in our Sales
Representation segment on equipment orders booked in 2013and delivered in the third
quarter of 2014. Equipment segment
gross profit decreased to $794,000, or 64% of Equipment segment revenues, for
the third quarter of 2014 compared to $1,156,000, or 66% of Equipment segment
revenues, for the same quarter of 2013. Equipment segment gross profit decreased due
to lower sales volume in the third quarter of 2014. Gross profit margin in the Equipment
segment decreased due to lower mix of higher margin equipment sales in the
third quarter of 2014 as compared to the prior year period.
Sales Representation segment
gross profit was $4,581,000, or 71%, for the three months ended September 30, 2014,
as compared to $4,031,000, or 69%, for the three months ended September 30, 2013. The increase was due to higher commission
rates the Company received on equipment booked in 2013, coupled with commission
expense which is at the same rate as in 2013 and higher equipment delivery
volume by GEHC in the third quarter of 2014. Cost of commissions of $1,828,000 and $1,831,000,
for the three months ended September 30, 2014 and 2013, respectively, reflects
commission expense associated with recognized commission revenues. Commission expense associated with
deferred revenue is recorded as deferred commission expense until the related
commission revenue is earned.
Operating Loss
Operating loss was $149,000 for the three months ended September
30, 2014 as compared to an operating loss of $492,000 for the three months
ended September 30, 2013, a decrease of $343,000. The decrease in operating loss was primarily
attributable to the increase in gross profit in the Sales Representation
segment as described above, where operating income was $723,000 for the third quarter
of 2014 compared to operating income of $199,000 in the same quarter of the
prior year. Equipment segment
operating loss increased by $41,000 to $405,000 in the third quarter of 2014 from
$364,000 in the same period of the prior year, primarily due to lower equipment
sales partially offset by a decrease in selling, general, and administrative
expense. As noted above, we have
taken steps to reduce costs in our Equipment segment.
Selling, general and administrative
(ŇSG&AÓ) expenses for the third quarter of 2014 and 2013 were $5,344,000,
or 70% of revenues, and $5,507,000, or 72% of revenues, respectively,
reflecting a decrease of $163,000 or approximately 3%. The decrease in SG&A
expenditures in the third quarter of 2014 resulted from $266,000 lower EECP-related
sales and marketing costs – mainly consulting and personnel-related expenses
- in the Equipment segment, partially offset by increased staffing costs associated
with initial operations of the IT segment.
Research
and development (ŇR&DÓ) expenses of $180,000, or 2% of revenues (15% of
Equipment segment revenues), for the third quarter of 2014 increased by $8,000,
or 5%, from $172,000, or 2% of revenues (13% of Equipment segment revenues),
for the third quarter of 2013. The increase is primarily attributable to an increase
in product development and clinical research expenses.
Interest and Other Income, Net
Interest and other income
(expense), net for the third quarters of 2014 and 2013 was $52,000 and
($63,000), respectively. The change
from expense to income reflected a $130,000 settlement charge associated with a
workersŐ compensation fund in the third quarter of 2013.
Income Tax Expense
During
the third quarter of 2014 we recorded an income tax expense of $26,000 as
compared to an income tax benefit of $91,000 for the third quarter of 2013. The change from benefit to expense arose
primarily from a tax refund recognized in 2013. Our domestic deferred tax assets are not
realizable on a more-likely-than-not basis and, therefore, we have recorded a
full valuation allowance against our domestic deferred tax assets.
Results of Operations – For the Nine Months Ended September
30, 2014 and 2013
Total revenue for the nine months ended September 30, 2014 and
2013 was $22,599,000 and $22,795,000, respectively, a decrease of $196,000, or 1%.
Net loss for the nine months ended September 30, 2014 was $1,343,000 compared
to a net loss of $1,649,000 for the nine months ended September 30, 2013. The decrease in net loss was primarily
attributable to an increase of $410,000 in gross profit, partially offset by a
$125,000 increase in research and development costs. Our total net loss was $0.01 per basic
and diluted common share for the nine months ended September 30, 2014 and 2013,
respectively.
Revenues
Commission revenues in the Sales
Representation segment were $19,335,000 in the first nine months of 2014, as
compared to $18,262,000 in the same period of 2013, an increase of 6%. The increase in commission revenue in
the first nine months of 2014 is due primarily to an increase in the commission
rate on equipment delivered, partially offset by a decreased volume of
equipment delivered by GEHC. The
Company recognizes revenue when the underlying equipment has been accepted at
the customer site in accordance with the specific terms of the sales
agreement. Consequently, amounts
billable under the GEHC Agreement prior to customer acceptance of the equipment
are recorded as deferred revenue in the condensed consolidated balance sheet.
Revenue in our Equipment segment
decreased by $1,269,000, or 28%, to $3,264,000 for the nine-month period ended September
30, 2014 from $4,533,000 for the same period of the prior year. Equipment segment revenue from equipment
sales decreased by $1,163,000, or 35%, to $2,157,000 for the nine-month period
ended September 30, 2014 as
compared to $3,320,000 for the same period in the prior year, primarily due to
a decrease of $797,000 in EECP¨ revenues and a decrease in sales at
our China subsidiaries of $369,000 as a result of lower sales volume. We anticipate an increase in revenue
from our China operations as we expand our geographic penetration in China and
internationally, and as the newly introduced MobiCareTM product
gains market acceptance.
We anticipate that demand for
EECP¨ systems will remain soft unless there is greater clinical
acceptance for the use of EECP¨ therapy or a favorable change in
current reimbursement policies by CMS or third party payers. We will continue to cost effectively
pursue strategies to increase and expand reimbursement for EECP¨
therapy.
Equipment segment revenue from
equipment rental and services decreased 9% to $1,107,000 in the first nine
months of 2014 from $1,213,000 in the first nine months of 2013. Revenue from
equipment rental and services represented 34% and 27% of total Equipment
segment revenue in the first nine months of fiscal 2014 and fiscal 2013,
respectively. The decrease in
revenue generated from equipment rentals and services is due primarily to
decreased service contract revenues, partially offset by higher field service
revenues.
Gross Profit
The Company had a gross profit
of $16,023,000 in the first nine months of 2014 compared to $15,613,000 in the same
period of the prior year, an increase of 3%. The increase is principally due to the
increase in commission revenue discussed above. Equipment segment gross profit decreased
to $1,970,000, or 60% of Equipment segment revenues, for the first nine months of
2014 compared to $2,853,000, or 63% of Equipment segment revenues, for the same
period of 2013. Equipment segment
gross profit declined due to lower equipment sales in the first three quarters
of 2014, partially offset by higher gross profit on equipment rentals and services. Gross profit margin on EECP¨
equipment decreased as a result of lower shipment volume and an increase in severance
costs incurred in conjunction with our efforts to reduce costs in our EECP
operations.
Sales Representation segment
gross profit was $14,053,000, or 73%, for the nine months ended September 30, 2014
as compared to $12,760,000, or 70%, for the nine months ended September 30, 2013. The increase was due to higher commission
rates in this segment, as explained above, partially offset by lower delivery
volume in the first nine months of 2014.
Cost of commissions of $5,282,000 and $5,502,000, for the nine months
ended September 30, 2014 and 2013, respectively, reflects commission expense
associated with recognized commission revenues. Commission expense associated with
deferred revenue is recorded as deferred commission expense until the related
commission revenue is earned.
Operating Loss
Operating loss was $1,443,000 for the nine months ended September
30, 2014 as compared to an operating loss of $1,704,000 for the nine months
ended September 30, 2013, an improvement of $261,000. The decrease in operating loss was
primarily attributable to improved operating performance in the Sales
Representation segment, where operating income was $2,267,000 for the first
nine months of 2014 compared to operating income of $870,000 in the same period
of the prior year, partially offset by an increase in operating loss of $872,000
in the Equipment segment to $2,361,000 in the first nine months of 2014 from an
operating loss of $1,489,000 in the same period of the prior year, and a $182,000
increase in Corporate expenses during the same period. As noted previously, we have taken steps
to reduce sales, marketing and other operating costs in our Equipment segment.
Selling, general and
administrative (ŇSG&AÓ) expenses for the first nine months of 2014 and 2013
were $16,867,000, or 75% of revenues, and $16,843,000, or 74% of revenues,
respectively, reflecting an increase of $24,000 or less than 1%. The increase
in SG&A expenditures in the first nine months of 2014 resulted primarily from
increased staffing costs associated with initial operations of the IT segment
and higher corporate expenses, primarily directorsŐ fees, partially offset by
lower expenditures in the Equipment and Sales Representation segments
reflecting lower sales and marketing costs.
Research
and development (ŇR&DÓ) expenses of $599,000, or 3% of revenues (18% of
Equipment segment revenues), for the first nine months of 2014 increased by $125,000,
or 26%, from $474,000, or 2% of revenues (10% of Equipment segment revenues),
for the first nine months of 2013. The increase is primarily attributable to costs
associated with the preparation of an FDA required pre-market approval of our
EECP¨ therapy system for the treatment of congestive heart failure,
as well as an increase in product development and clinical research expenses.
Interest and Other Income, Net
Interest and other income,
net for the first nine months of 2014 was $150,000 as compared to $20,000 for
the same period of 2013. The increase was due primarily to a $130,000
settlement charge associated with a workersŐ compensation fund in 2013.
Income Tax (Expense) Benefit
Cash and Cash Flow
We have financed our operations
from working capital. At September
30, 2014, we had cash and cash equivalents of $9,054,000, short-term
investments of $111,000 and working capital of $3,720,000 compared to cash and
cash equivalents of $7,961,000, short-term investments of $111,000 and working
capital of $6,716,000 at December 31, 2013.
Cash provided by operating
activities was $2,586,000 during the first nine months of 2014, which consisted
of a net loss after adjustments to reconcile net loss to net cash of $695,000,
offset by cash provided by operating assets and liabilities of $3,281,000. The
changes in the account balances primarily reflect a decrease in accounts and
other receivables of $6,396,000, partially offset by increases in other assets
of $1,639,000 and decreases in accrued expenses of $1,203,000. Under the GEHC Agreement the Company
earns progressively higher commission rates as calendar year targets are met, and
this commission structure has a significant impact on our cash flows. As we
achieve these targets, the higher commission rates are retroactively applied to
all orders booked in the calendar year, and therefore, significantly higher
commission billings and recognized revenue were generated in the fourth quarter
of 2013, resulting in significant cash inflows in the first quarter of 2014. As we previously reported in our Annual
Report on Form 10-K for the year ended December 31, 2013, higher commission
rates were earned in 2013 than in 2012, resulting in higher cash inflows in 2014.
Cash used in investing activities during the nine-month
period ended September 30, 2014 was $1,023,000,
net of cash acquired, for the acquisition of Genwell and $227,000 for the
purchase of equipment and software.
Cash used in financing activities during the nine-month
period ended September 30, 2014 was $244,000 for the repurchase of common
stock.
Liquidity
The Company expects to achieve
profitability through its sales representation operations and its China operations,
as well as by expanding its market presence and product portfolio. In addition, the Company continues to
pursue acquisitions or partnership opportunities in the international and
domestic markets and to expand its sales representation business.
Based on our operations through September
30, 2014 and our current business outlook for the ensuing year, we believe
internally generated funds from our business segments will be sufficient for
the Company to continue operations through at least October 1, 2015.
Evaluation of Disclosure Controls and Procedures
Disclosure
controls and procedures reporting as promulgated under the Exchange Act is
defined as controls and procedures that are designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act are recorded, processed, summarized and reported within the time
periods specified in the SEC rules and forms. Disclosure controls and procedures
include without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is accumulated and communicated to our management, including our
Chief Executive Officer (ŇCEOÓ) and Chief Financial Officer (ŇCFOÓ), or persons
performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
Our CEO and our CFO have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of September 30, 2014 and have concluded that the
CompanyŐs disclosure controls and procedures were effective as of September 30,
2014.
Changes in Internal Control Over Financial Reporting
There
was no change in the CompanyŐs internal control over financial reporting during
the CompanyŐs last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the CompanyŐs internal control over
financial reporting.
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.
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
and Chief Executive Officer
(Principal
Executive Officer)
/s/ Michael J. Beecher .
Michael
J. Beecher
Chief
Financial Officer and Principal Accounting Officer
Date: November 13, 2014
EXHIBIT 31.1
CERTIFICATION
PURSUANT TO RULE 13a/15d OF THE SECURITIES EXCHANGE ACT OF 1934,
AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jun Ma, certify that:
/s/ Jun
Ma
.
Jun Ma
President and Chief Executive Officer
Date: November 13, 2014
EXHIBIT 31.2
CERTIFICATION
PURSUANT TO RULE 13a/15d OF THE SECURITIES EXCHANGE ACT OF 1934,
AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Beecher, certify
that:
/s/ Michael
J. Beecher
.
Michael J.
Beecher
Chief Financial Officer
Date: November 13, 2014
EXHIBIT
32.1
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly
report of Vasomedical, Inc. and subsidiaries (the ŇCompanyÓ) on Form 10-Q for
the period ending September 30, 2014, as filed with the Securities and Exchange
Commission on the date hereof (the ŇReportÓ), I, Jun Ma, as President and Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. ¤ 1350, as
adopted pursuant to ¤ 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies
with the requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended; and
(2) The information
contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/ Jun Ma
.
Jun
Ma
President
and Chief Executive Officer
Dated: November 13, 2014
EXHIBIT
32.2
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the
quarterly report of Vasomedical, Inc. and subsidiaries (the ŇCompanyÓ) on Form
10-Q for the period ending September 30, 2014, as filed with the Securities and
Exchange Commission on the date hereof (the ŇReportÓ), I, Michael J. Beecher,
as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ¤
1350, as adopted pursuant to ¤ 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully
complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(2) The information
contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/ Michael J. Beecher
.
Michael J. Beecher
Dated: November 13, 2014
Chief Financial Officer