0001201800-15-000027.txt : 20151113 0001201800-15-000027.hdr.sgml : 20151113 20151113160224 ACCESSION NUMBER: 0001201800-15-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20150930 FILED AS OF DATE: 20151113 DATE AS OF CHANGE: 20151113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VASOMEDICAL, INC CENTRAL INDEX KEY: 0000839087 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 112871434 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18105 FILM NUMBER: 151229120 BUSINESS ADDRESS: STREET 1: 180 LINDEN AVENUE CITY: WESTBURY STATE: NY ZIP: 11590 BUSINESS PHONE: 516-997-4600 MAIL ADDRESS: STREET 1: 180 LINDEN AVENUE CITY: WESTBURY STATE: NY ZIP: 11590 FORMER COMPANY: FORMER CONFORMED NAME: VASOMEDICAL INC DATE OF NAME CHANGE: 19950517 FORMER COMPANY: FORMER CONFORMED NAME: FUTURE MEDICAL PRODUCTS INC /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FUTURE MEDICAL PRODUCTS INC /NY/ DATE OF NAME CHANGE: 19920506 10-Q 1 vaso10q-sept2015.htm vaso10q-sept2015.htm
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, 2015

[ ] 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)
 

137 Commercial Street, Suite 200, Plainview, New York  11803
(Address of principal executive offices)

Registrant’s Telephone Number
(516) 997-4600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  x No   o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x      Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
 
Large Accelerated Filer o
Accelerated Filer o
Non-Accelerated Filer o
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   o    No  x
 
Number of Shares Outstanding of Common Stock, $.001 Par Value, at November 8, 2015 – 158,412,283
 
 
 
Page 1

 

Vasomedical, Inc. and Subsidiaries

INDEX

   
   
   
   
5
   
   
   
   
   
   
 
 
 
Page 2

 
Vasomedical, Inc. and Subsidiaries
(in thousands, except share and per share data)
 
   
September 30, 2015
   
December 31, 2014
 
ASSETS
 
(unaudited)
       
CURRENT ASSETS
           
Cash and cash equivalents
  $ 1,928     $ 9,128  
Short-term investments
    109       111  
Accounts and other receivables, net of an allowance for doubtful
               
accounts and commission adjustments of $4,265 at September 30,
               
2015 and $4,571 at December 31, 2014
    8,732       15,273  
Receivables due from related parties
    106       21  
Inventories, net
    1,950       1,898  
Deferred commission expense
    2,583       2,200  
Prepaid expenses and other current assets
    515       363  
 Total current assets
    15,923       28,994  
                 
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
               
$2,745 at September 30, 2015 and $1,397 at December 31, 2014
    2,928       266  
GOODWILL
    22,582       3,288  
INTANGIBLES, net
    2,447       2,826  
OTHER ASSETS
    3,504       5,617  
    $ 47,384     $ 40,991  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES
               
Accounts payable
  $ 3,604     $ 462  
Accrued commissions
    1,746       2,247  
Accrued expenses and other liabilities
    4,259       5,627  
Sales tax payable
    612       247  
Deferred revenue - current portion
    11,174       9,882  
Notes payable - current portion
    1,654       163  
Deferred tax liability, net
    112       112  
Notes payable due to related party
    997       1,039  
Total current liabilities
    24,158       19,779  
                 
LONG-TERM LIABILITIES
               
Notes payable
    5,007       -  
Deferred revenue
    8,576       12,650  
Other long-term liabilities
    539       811  
Total long-term liabilities
    14,122       13,461  
                 
COMMITMENTS AND CONTINGENCIES (NOTE N)
               
                 
STOCKHOLDERS' EQUITY
               
Preferred stock, $.01 par value; 1,000,000 shares authorized; nil shares
               
 issued and outstanding at September 30, 2015, and December 31, 2014
    -       -  
Common stock, $.001 par value; 250,000,000 shares authorized;
               
168,720,370 and 166,435,370 shares issued at September 30, 2015
               
and December 31, 2014, respectively; 158,412,283 and
               
156,127,283 shares outstanding at September 30, 2015 and
               
December 31, 2014, respectively
    169       166  
Additional paid-in capital
    62,222       61,924  
Accumulated deficit
    (51,267 )     (52,433 )
Accumulated other comprehensive income
    (20 )     94  
Treasury stock, at cost, 10,308,087 shares at September 30, 2015 and December 31, 2014
    (2,000 )     (2,000 )
Total stockholders’ equity
    9,104       7,751  
    $ 47,384     $ 40,991  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
Page 3

 
Vasomedical, Inc. and Subsidiaries
 
 
(Unaudited)
(in thousands, except per share data)

      Three months ended September 30,     Nine months ended September 30,
   
2015
   
2014
   
2015
   
2014
 
Revenues
                       
Professional sales services
  $ 7,584     $ 6,409     $ 21,010     $ 19,335  
Managed IT systems and services
    8,800       -       11,611       -  
Equipment sales and services
    1,017       1,234       3,077       3,264  
Total revenues
    17,401       7,643       35,698       22,599  
                                 
Cost of revenues
                               
Cost of professional sales services
    1,701       1,828       4,748       5,282  
Cost of managed IT systems and services
    5,308       -       6,921       -  
Cost of equipment sales and services
    542       440       1,283       1,294  
Total cost of revenues
    7,551       2,268       12,952       6,576  
Gross profit
    9,850       5,375       22,746       16,023  
                                 
Operating expenses
                               
Selling, general and administrative
    8,355       5,344       21,059       16,867  
Research and development
    158       180       430       599  
Total operating expenses
    8,513       5,524       21,489       17,466  
Operating income (loss)
    1,337       (149 )     1,257       (1,443 )
                                 
Other income (expense)
                               
Interest and financing costs
    (148 )     -       (265 )     (1 )
Interest and other income, net
    79       52       225       151  
Total other income (expense), net
    (69 )     52       (40 )     150  
                                 
Income (loss) before income taxes
    1,268       (97 )     1,217       (1,293 )
Income tax expense
    (38 )     (26 )     (51 )     (50 )
Net income (loss)
    1,230       (123 )     1,166       (1,343 )
                                 
Other comprehensive income
                               
Foreign currency translation (loss) gain
    (145 )     2       (114 )     (28 )
Comprehensive income (loss)
  $ 1,085     $ (121 )   $ 1,052     $ (1,371 )
                                 
Income (loss) per common share
                         
- basic
  $ 0.01     $ (0.00 )   $ 0.01     $ (0.01 )
- diluted
  $ 0.01     $ (0.00 )   $ 0.01     $ (0.01 )
                                 
Weighted average common shares outstanding
                 
- basic
    157,288       155,186       156,502       155,319  
- diluted
    157,782       155,186       156,868       155,319  
 

 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
Page 4

 
Vasomedical, Inc. and Subsidiaries

 
(in thousands)
 
     Common Stock    Treasury Stock    
 Additional
Paid-in-
     Accumulated      
Accumulated Other
Comprehensive
     Total Stockholders'  
      Shares        Amount        Shares       Amount        Capital        Deficit        Income        Equity   
Balance at
December 31, 2013
    164,705       165       (9,481 )     (1,755 )     61,508       (53,561 )     108       6,465  
Repurchase of
shares
    -       -       (827 )     (245 )     -       -       -       (245 )
Share-based
compensation
    1,280       1       -       -       389       -       -       390  
Shares not issued
for employee
tax liability
    -       -       -       -       (9 )     -       -       (9 )
Exercise of
stock options
    450       -       -       -       36       -       -       36  
Foreign currency
translation loss
    -       -       -       -       -       -       (14 )     (14 )
Net income
    -       -       -       -       -       1,128       -       1,128  
Balance at
December 31, 2014
    166,435     $ 166       (10,308 )   $ (2,000 )   $ 61,924     $ (52,433 )   $ 94     $ 7,751  
Share-based
compensation
    2,285       3       -       -       298       -       -       301  
Foreign currency
translation loss
    -       -       -       -       -       -       (114 )     (114 )
Net income
    -       -       -       -       -       1,166       -       1,166  
Balance at
September 30, 2015
(unaudited)
    168,720     $ 169       (10,308 )   $ (2,000 )   $ 62,222     $ (51,267 )   $ (20 )   $ 9,104  
                                                              .  
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
 
Page 5

 

Vasomedical, Inc. and Subsidiaries
(Unaudited)
(in thousands)
      Nine months ended  
      September 30,
   
2015
   
2014
 
Cash flows from operating activities
           
Net income (loss)
  $ 1,166     $ (1,343 )
Adjustments to reconcile net income (loss) to net cash
         
  provided by operating activities
               
Depreciation and amortization
    783       290  
Loss on disposal of fixed assets
    -       39  
Provision for doubtful accounts and commission adjustments
    109       (1 )
Share-based compensation and arrangements
    301       320  
Changes in operating assets and liabilities:
               
Accounts and other receivables
    7,860       6,396  
Receivables due from related parties     (85 )        
Inventories, net
    (221 )     (332 )
Deferred commission expense
    (382 )     (75 )
Other current assets
    (53 )     (123 )
Other assets
    2,274       (1,639 )
Accounts payable
    (5 )     (72 )
Accrued commissions
    (548 )     (55 )
Accrued expenses and other  liabilities
    (2,129 )     (1,203 )
Sales tax payable
    (68 )     (48 )
Deferred revenue
    (2,782 )     218  
Notes payable due to related party
    (42 )     -  
Other long-term liabilities
    (299 )     214  
Net cash provided by operating activities
    5,879       2,586  
                 
Cash flows from investing activities
               
Purchases of equipment and software
    (619 )     (227 )
Purchases of short-term investments
    (38 )     (40 )
Redemption of short-term investments
    40       40  
Acquisition of Genwell
    -       (1,136 )
Cash acquired through purchase of Genwell
    -       113  
Acquisition of Netwolves
    (18,000 )     -  
Cash acquired through purchase of Netwolves
    733       -  
Investment in VSK
    (100 )     -  
Net cash used in investing activities
    (17,984 )     (1,250 )
                 
Cash flows from financing activities
               
Net borrowings on revolving line of credit
    136       -  
Repurchase of common stock
    -       (244 )
Repayment of notes payable
    (83 )     -  
Proceeds from note payable
    4,800       -  
Net cash provided by (used in) financing activities
    4,853       (244 )
Effect of exchange rate differences on cash and cash equivalents
    52       1  
                 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    (7,200 )     1,093  
Cash and cash equivalents - beginning of period
    9,128       7,961  
Cash and cash equivalents - end of period
  $ 1,928     $ 9,054  
                 
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
         
Interest paid
  $ 66     $ -  
Income taxes paid
  $ 130     $ 48  
                 
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
 
Inventories transferred to property and equipment,
               
attributable to operating leases, net
  $ 138     $ 5  
Note issued for acquisition
  $ -     $ 1,017  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
Page 6

 
Vasomedical, Inc. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (unaudited)
 
 
NOTE A - ORGANIZATION AND PLAN OF OPERATIONS

Vasomedical, Inc. was incorporated in Delaware in July 1987.  Unless the context requires otherwise, all references to “we”, “our”, “us”, “Company”, “registrant”, “Vasomedical” or “management” refer to Vasomedical, Inc. and its subsidiaries.  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. Beginning in July 2010 the Company, through its wholly-owned subsidiary Vaso Diagnostics, Inc. (Vaso Diagnostics), began its sales representation business via its agreement (the “GEHC Agreement”) with GE Healthcare (“GEHC”), the healthcare business unit of General Electric Company (NYSE: GE), to be GEHC’s 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 GEHC Agreement was amended and extended through June 30, 2015 and again, in December 2014, the GEHC Agreement was further amended and extended through December 31, 2018, subject to earlier termination under certain circumstances and termination without cause on or after July 1, 2017.

In September 2011, the Company acquired Fast Growth Enterprises Limited (FGE), a British Virgin Islands company, which owns or controls two Chinese operating companies - Life Enhancement Technology Ltd. and Biox Instruments Co. Ltd. (Biox), 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 continues as the operating subsidiary for the sales representation of GE diagnostic imaging products; Vasomedical Global Corp. operates the Company’s 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 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 Company owns 49.9% of the joint venture, which began operations in January 2015.

In June 2014, the Company entered into a Value Added Reseller Agreement (VAR Agreement) 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, through its wholly owned subsidiary Wuxi Gentone Instruments Co. Ltd. (Gentone), acquired all of the outstanding shares of Genwell Instruments Co. Ltd. (Genwell), located in Wuxi, China.  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.
 
In May 2015, the Company entered into an agreement for, and completed its purchase of, all of the assets of NetWolves, LLC and its affiliates, including the membership interests in NetWolves Network Services LLC  (collectively, “NetWolves”). The purchase of NetWolves was accomplished pursuant to an Asset Purchase Agreement.  As a result, the Company effectively purchased all rights, titles and ownership of all assets held by NetWolves.  NetWolves designs and delivers efficient and cost-effective multi-network and multi-technology solutions as a managed network provider, and provides a complete single-source solution that includes design, network redundancy, application device management, real-time network monitoring, reporting and support systems as a comprehensive solution.  The Company believes there are significant operational synergies between NetWolves’ capabilities and VasoHealthcare IT’s requirements under its VAR Agreement with GEHC, as well as the opportunity to expand NetWolves’ existing services to the healthcare IT market.
 
 
Page 7

 
Vasomedical, Inc. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (unaudited)
 

 
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 and NetWolves operations report under the IT segment.

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 unaudited 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:

1)  
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, 2014, as filed with the SEC on March 30, 2015.

2)  
The audited consolidated financial statements of NetWolves, LLC and related notes thereto included in the Form 8-K/A filed with the SEC on August 12, 2015.  The operating results of NetWolves from May 29, 2015 to September 30, 2015 are included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) for the three and nine month periods ended September 30, 2015.

These unaudited 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 unaudited 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, 2014, and Note B of the Notes to Consolidated Financial Statements for the year ended December 31, 2014, included on Form 8-K/A, include a summary of the significant accounting policies used in the preparation of the condensed consolidated financial statements.

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or service has been rendered, the price is fixed or determinable and collectability is reasonably assured.

Revenue and Expense Recognition for the Sales Representation Segment

The Company recognizes commission revenue 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.
 
 
Page 8

 
Vasomedical, Inc. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (unaudited)
 
Variable Interest Entities

The Company follows the guidance of accounting for variable interest entities, which requires certain variable interest entities to be consolidated by the primary beneficiary of the entities.  Biox is a Variable Interest Entity (VIE).
 
Liabilities recognized as a result of consolidating this VIE do not represent additional claims on the Company’s general assets. The financial information of Biox, which is included in the accompanying condensed consolidated financial statements, is presented as follows:

                                                                                      
    (in thousands)  
   
As of
September 30, 2015
   
As of
 December 31, 2014
 
      (unaudited)           
Cash and cash equivalents
  $ 119     $ 159  
Total assets
  $ 1,037     $ 1,047  
Total liabilities
  $ 1,040     $ 878  
                 
 
                                                                                                      
     (in thousands)  
   
 Three months ended
 September 30, 
   
 Nine months ended
September 30,
   
2015
   
2014
   
2015
   
2014
 
   
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
 
Total net revenue
  $ 358     $ 368     $ 1,183     $ 1,126  
                                 
Net income (loss)
  $ 24     $ (152 )   $ (199 )   $ (382 )
                                 
Reclassifications

Certain reclassifications have been made to prior period amounts to conform with the 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 Vaso Diagnostics subsidiary and is currently engaged solely in the fulfillment of the Company’s responsibilities under our agreement with GEHC.  The IT segment includes the operations of NetWolves and VasoHealthcare IT Corp.  Operations in the IT segment began in the third quarter of 2014.  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 chief operating decision maker is the Company’s Chief Executive Officer, who, in conjunction with upper management, 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:
 
 
 
Page 9

 
Vasomedical, Inc. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (unaudited)

                   
    (in thousands)  
    As of or for the three months ended September 30, 2015 (unaudited)  
   
Sales Representation Segment
 
IT Segment
   
Equipment Segment
 
Corporate
   
Consolidated
 
                               
Revenues from external customers
  $ 7,584     $ 8,800     $ 1,017     $ -     $ 17,401  
Operating income (loss)
  $ 2,586     $ (187 )   $ (582 )   $ (480 )   $ 1,337  
Total assets
  $ 11,408     $ 24,642     $ 9,293     $ 2,041     $ 47,384  
Accounts and other receivables, net
  $ 5,663     $ 2,253     $ 816     $ -     $ 8,732  
Deferred commission expense
  $ 2,533     $ 50     $ -     $ -     $ 2,583  
Other assets
  $ 2,720     $ 51     $ 623     $ 110     $ 3,504  
                                         
    As of or for the three months ended September 30, 2014 (unaudited)  
   
Sales Representation Segment
 
IT Segment
   
Equipment Segment
 
Corporate
   
Consolidated
 
                                         
Revenues from external customers
  $ 6,409     $ -     $ 1,234     $ -     $ 7,643  
Operating income (loss)
  $ 723     $ (82 )   $ (405 )   $ (385 )   $ (149 )
Total assets
  $ 13,341     $ 2     $ 9,909     $ 9,067     $ 32,319  
Accounts and other receivables, net
  $ 6,376     $ -     $ 791     $ -     $ 7,167  
Deferred commission expense
  $ 2,388     $ -     $ -     $ -     $ 2,388  
Other assets
  $ 4,402     $ -     $ 3,170     $ 13     $ 7,585  
                                         
    As of or for the nine months ended September 30, 2015 (unaudited)  
   
Sales Representation Segment
 
IT Segment
   
Equipment Segment
 
Corporate
   
Consolidated
 
                                         
Revenues from external customers
  $ 21,010     $ 11,611     $ 3,077     $ -     $ 35,698  
Operating income (loss)
  $ 5,466     $ (908 )   $ (1,893 )   $ (1,408 )   $ 1,257  
Total assets
  $ 11,408     $ 24,642     $ 9,293     $ 2,041     $ 47,384  
Accounts and other receivables, net
  $ 5,663     $ 2,253     $ 816     $ -     $ 8,732  
Deferred commission expense
  $ 2,533     $ 50     $ -     $ -     $ 2,583  
Other assets
  $ 2,720     $ 51     $ 623     $ 110     $ 3,504  
                                         
    As of or for the nine months ended September 30, 2014 (unaudited)  
   
Sales Representation Segment
 
IT Segment
   
Equipment Segment
 
Corporate
   
Consolidated
 
                                         
Revenues from external customers
  $ 19,335     $ -     $ 3,264     $ -     $ 22,599  
Operating income (loss)
  $ 2,267     $ (82 )   $ (2,361 )   $ (1,267 )   $ (1,443 )
Total assets
  $ 13,341     $ 2     $ 9,909     $ 9,067     $ 32,319  
Accounts and other receivables, net
  $ 6,376     $ -     $ 791     $ -     $ 7,167  
Deferred commission expense
  $ 2,388     $ -     $ -     $ -     $ 2,388  
Other assets
  $ 4,402     $ -     $ 3,170     $ 13     $ 7,585  
 
 
 
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Vasomedical, Inc. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (unaudited)
 
 
For the three months ended September 30, 2015 and 2014, GE Healthcare accounted for 44% and 84% of revenue, respectively.  For the nine months ended September 30, 2015 and 2014, GE Healthcare accounted for 59% and 86% of revenue, respectively, and $5.5 million or 63%, and $14.2 million or 93%, of accounts and other receivables at September 30, 2015 and December 31, 2014, respectively.

NOTE D – EARNINGS (LOSS) PER COMMON SHARE

 Basic earnings (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 earnings (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.

Diluted earnings (loss) per share were computed based on the weighted average number of shares outstanding plus all potentially dilutive common shares.  A reconciliation of basic to diluted shares used in the earnings per share calculation is as follows:
 
    (in thousands)  
    Three months ended September 30,     Nine months ended September 30,  
   
2015
   
2014
   
2015
   
2014
 
Basic weighted average shares outstanding
    157,288       155,186       156,502       155,319  
Dilutive effect of share-based compensation
    494       -       366       -  
Diluted weighted average shares outstanding
    157,782       155,186       156,868       155,319  
 
 
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, 2015 and 2014, because the effect of their inclusion would be anti-dilutive.
 
    (in thousands)  
      For the three months ended     For the nine months ended  
   
September 30, 2015
   
September 30, 2014
   
September 30, 2015
   
September 30, 2014
 
   
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
 
Stock options
    300       1,402       300       1,402  
Common stock grants
    -       490       -       490  
      300       1,892       300       1,892  
          
 
Page 11

 
Vasomedical, Inc. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (unaudited)
 

NOTE E – ACCOUNTS AND OTHER RECEIVABLES, NET

The following table presents information regarding the Company’s accounts and other receivables as of September 30, 2015 and December 31, 2014:
 
    (in thousands)  
   
September 30, 2015
   
December 31, 2014
 
   
(unaudited)
       
Trade receivables
  $ 12,792     $ 19,734  
Due from employees
    205       110  
Allowance for doubtful accounts and
               
commission adjustments
    (4,265 )     (4,571 )
Accounts and other receivables, net
  $ 8,732     $ 15,273  
 
 
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.

NOTE F – INVENTORIES, NET

Inventories, net of reserves, consist of the following:                 
 
    (in thousands)  
   
September 30, 2015
   
December 31, 2014
 
   
(unaudited)
       
Raw materials
  $ 475     $ 583  
Work in process
    626       679  
Finished goods
    849       636  
    $ 1,950     $ 1,898  
                 
 
At September 30, 2015 and December 31, 2014, the Company maintained reserves for excess and obsolete inventory of $673,000 and $815,000, respectively.

 
Page 12

 
Vasomedical, Inc. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (unaudited)
 
 
NOTE G – GOODWILL AND OTHER INTANGIBLES

Goodwill aggregating $22,582,000 and $3,288,000 was recorded on the Company’s condensed consolidated balance sheets at September 30, 2015 and December 31, 2014, respectively, of which $19,406,000, allocated to the IT segment, resulted from the acquisition of NetWolves in May 2015.  The remaining $3,176,000 of goodwill is allocated to the Company’s Equipment segment.  The components of the change in goodwill are as follows:
 
    (in thousands)  
   
Carrying Amount
 
       
Balance at December 31, 2014
  $ 3,288  
Foreign currency translation
    (112 )
Acquisition of Netwolves
    19,406  
Balance at September 30, 2015 (unaudited)
  $ 22,582  
         
 
The Company’s other intangible assets consist of capitalized patent costs, customer lists and software costs, as follows:
 
    (in thousands)  
   
September 30, 2015
   
December 31, 2014
 
   
(unaudited)
       
Patents and Technology
           
Costs
  $ 2,441     $ 2,489  
Accumulated amortization
    (742 )     (549 )
      1,699       1,940  
                 
Customer lists
               
Costs
    800       800  
Accumulated amortization
    (467 )     (381 )
      333       419  
                 
Software
               
Costs
    1,133       962  
Accumulated amortization
    (718 )     (495 )
      415       467  
                 
    $ 2,447     $ 2,826  
                 
 
 
Patents, 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 $167,000 and $502,000 for the three and nine months ended September 30, 2015, respectively, and $50,000 and $146,000 for the three and nine months ended September 30, 2014, respectively.

 
Page 13

 
Vasomedical, Inc. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE H – OTHER ASSETS

Other assets consist of the following at September 30, 2015 and December 31, 2014:
 
    (in thousands)  
   
September 30, 2015
   
December 31, 2014
 
   
(unaudited)
       
Deferred commission expense - noncurrent
  $ 1,845     $ 2,988  
Trade receivables - noncurrent
    1,026       2,171  
Other
    633       458  
    $ 3,504     $ 5,617  
                 

 
NOTE I – ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following at September 30, 2015 and December 31, 2014:
 
    (in thousands)  
   
September 30, 2015
   
December 31, 2014
 
   
(unaudited)
       
Accrued compensation
  $ 1,344     $ 2,917  
Accrued expenses - other
    1,292       1,098  
Other liabilities
    1,623       1,612  
    $ 4,259     $ 5,627  
                 
  
NOTE J- DEFERRED REVENUE

The changes in the Company’s deferred revenues are as follows:
 
    (in thousands)  
    For the three months ended     For the nine months ended  
   
September 30, 2015
   
September 30, 2014
   
September 30, 2015
   
September 30, 2014
 
   
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
 
Deferred revenue at beginning of period
  $ 19,614     $ 17,712     $ 22,532     $ 18,019  
Additions:
                               
Deferred extended service contracts
    160       244       465       791  
Deferred in-service and training
    5       13       10       28  
Deferred service arrangements
    10       28       25       58  
Deferred commission revenues
    3,516       3,457       6,847       8,840  
Recognized as revenue:
                               
Deferred extended service contracts
    (209 )     (207 )     (654 )     (654 )
Deferred in-service and training
    -       (10 )     (10 )     (25 )
Deferred service arrangements
    (15 )     (26 )     (58 )     (72 )
Deferred commission revenues
    (3,331 )     (2,975 )     (9,407 )     (8,749 )
Deferred revenue at end of period
    19,750       18,236       19,750       18,236  
Less: current portion
    11,174       9,158       11,174       9,158  
Long-term deferred revenue at end of period
  $ 8,576     $ 9,078     $ 8,576     $ 9,078  
 
 
 
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Vasomedical, Inc. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (unaudited)
 
 
NOTE K – DEBT

On May 29, 2015, the Company entered into a Note Purchase Agreement with MedTechnology Investments, LLC (“MedTech”) pursuant to which it issued MedTech a secured subordinated promissory note (“Note”) for $3,800,000 for the purchase of NetWolves. MedTech was formed to acquire the Note, and $1,950,000 of the aggregate funds used to acquire the Note was provided by six of our directors.  In June 2015, a second Note for $750,000 was issued to MedTech for working capital purposes, $250,000 of which was provided by a director and a director’s relative.  In July 2015, an additional $250,000 was borrowed under the Note Purchase Agreement.
 
The Notes bear interest at an annual rate of 9%, mature on May 29, 2019, may be prepaid without penalty, and are subordinated to any current or future Senior Debt as defined in the Subordinated Security Agreement. The Subordinated Security Agreement secures payment and performance of the Company’s obligations under the Notes and as a result, MedTech was granted a subordinated security interest in the Company’s assets.

In July 2015, NetWolves' lending institution extended its $2.0 million line of credit and increased the maximum borrowings to $3.0 million.  Advances under the line, which expires on August 26, 2016, bear interest at a rate of LIBOR plus 2.25% and are secured by substantially all of the assets of NetWolves Network Services, LLC and guaranteed by Vasomedical, Inc.  At September 30, 2015, the Company had drawn approximately $1.2 million against the line.

NOTE L – BUSINESS COMBINATION

On May 29, 2015, the Company entered into an agreement for, and completed its purchase of, all of the assets of NetWolves, LLC and its affiliates, including the membership interests in NetWolves Network Services LLC  (collectively, “NetWolves”) for $18,000,000 (the “Purchase Price”). The purchase of NetWolves was accomplished pursuant to an Asset Purchase Agreement (the "Purchase Agreement").  As a result, the Company effectively purchased all rights, titles and ownership of all assets held by NetWolves.   The Purchase Price was paid using $14,200,000 in cash on hand and $3,800,000 raised through the issuance of the Note to MedTech (See Note K).  The Company believes there are significant operational synergies between NetWolves’ capabilities and VasoHealthcare IT’s requirements under its VAR contract with GEHC, as well as the opportunity to expand NetWolves’ existing services to the healthcare IT market.

The operating results of NetWolves from May 29, 2015 to September 30, 2015 are included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) for the three and nine month periods ended September 30, 2015.  The accompanying condensed consolidated balance sheet at September 30, 2015 reflects the acquisition of NetWolves effective May 29, 2015.

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 May 29, 2015 (the acquisition date).  The purchase price was initially allocated based on the information then available, and certain amounts were adjusted after revisions of certain preliminary estimates.  The Company expects additional measurement period adjustments will be recorded after obtaining more information regarding, among other things, asset valuations, liabilities assumed, and revisions of preliminary estimates.  The following table summarizes the current allocation of the assets acquired and liabilities assumed based on their preliminary estimated fair values and current measurement period adjustments as follows:
 

 
 
Page 15

 
Vasomedical, Inc. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (unaudited)
 
 
 
    (in thousands)  
 
 
As initially reported
   
Measurement period adjustments
   
As adjusted
 
Cash and cash equivalents
  $ 733     $ -     $ 733  
Accounts receivable and other current assets
    1,638       (103 )     1,535  
Other assets
    50       -       50  
Property and equipment
    2,359       -       2,359  
Accounts payable and other current liabilities
    (4,382 )     -       (4,382 )
Long term debt
    (1,701 )     -       (1,701 )
Goodwill and other intangibles
    19,303       103       19,406  
Total
  $ 18,000     $ -     $ 18,000  
                         
 
 

During the nine months ended September 30, 2015, the Company expensed $100,000 of acquisition-related legal costs and incurred $60,000 in debt issue costs.  The legal costs are included in the line item Selling, General & Administrative costs in the accompanying condensed consolidated statements of operations and comprehensive income (loss).  The debt issue costs are recorded as a reduction to long term notes payable in the accompanying condensed consolidated balance sheet at September 30, 2015.  The amounts of revenue and net income of NetWolves included in the Company’s condensed consolidated statements of operations and comprehensive income (loss) was $8,707,000 and $227,000, respectively, for the three months ended September 30, 2015, and $11,470,000 and $377,000, respectively, for the nine months ended September 30, 2015.  The goodwill is expected to be deductible for tax purposes.

The following unaudited supplemental pro forma information presents the financial results as if the acquisitions of Genwell and NetWolves had occurred January 1, 2013, and January 1, 2014, respectively.

    (in thousands)  
      Three months ended       Nine months ended  
   
September 30, 2015
   
September 30, 2014
   
September 30, 2015
   
September 30, 2014
 
Revenue
  $ 17,401     $ 15,101     $ 48,850     $ 44,532  
                                 
Net income (loss)
    1,353       (2 )     1,584       (1,397 )
                                 
Basic earnings (loss) per share
  $ 0.01     $ (0.00 )   $ 0.01     $ (0.01 )
                                 
Diluted earnings (loss) per share
  $ 0.01     $ (0.00 )   $ 0.01     $ (0.01 )
 
 
NOTE M – RELATED-PARTY TRANSACTIONS

One of the Company’s directors, Peter Castle, was the Chief Executive Officer and President of NetWolves, LLC.  Another of the Company’s directors, David Lieberman, was a director of NetWolves Network Services, LLC. Mr. Castle and Mr. Lieberman owned of record approximately 10.4% and 5.7%, respectively of the membership interests of NetWolves LLC.  Mr. Lieberman may also be deemed to have owned beneficially up to an additional 13.5% of such membership interests.  The Company’s board of directors negotiated the Purchase Price on an arm’s length basis, and both Mr. Castle and Mr. Lieberman abstained from the vote approving the Purchase Agreement.

The Company obtained an opinion regarding the fairness of the Purchase Price for the NetWolves entities from a reputable, independent third-party investment banking firm.  $14,200,000 of the Purchase Price was paid for by cash on hand, and the remaining $3,800,000 was raised from the sale of a Subordinated Secured Note sold to MedTech.  Of the $4,800,000 borrowed from MedTech at September 30, 2015, $2,200,000 was provided by six of our directors or members of their families.
 
 
Page 16

 
Vasomedical, Inc. and Subsidiaries
 
Notes to Condensed Consolidated Financial Statements (unaudited)
 
 
David Lieberman, the Vice Chairman of the Company’s Board of Directors, is a practicing attorney in the State of New York and a senior partner at the law firm of Beckman, Lieberman & Barandes, LLP, which performs certain legal services for the Company.  Fees of approximately $85,000 and $213,000 were billed by the firm for the three and nine month periods ended September 30, 2015, respectively, at which date no amounts were outstanding.  Fees of approximately $60,000 and $180,000 were billed by the firm for the three and nine month periods ended September 30, 2014, respectively, at which date no amounts were outstanding.
 
In January 2015, operations began under the VSK joint venture.  The Company accounts for its investment in VSK using the equity method.  At September 30, 2015, the Company had contributed $100,000 to VSK, and $86,000 was due from VSK for equipment and services the Company billed to it. VSK earned approximately $97,000 and $143,000 for the three and nine months ended September 30, 2015, respectively.  Under the terms of the agreement, the Company’s accrues no interest in VSK’s income in the years ending December 31, 2015, 2016 and 2017 unless certain performance targets are achieved.  For the nine months ended September 30, 2015 such targets had not been achieved.

NOTE N – COMMITMENTS AND CONTINGENCIES

Sales representation agreement

In June 2012, the Company concluded an amendment of the GEHC Agreement with GEHC, 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.  In December 2014, the Company concluded an additional amendment, effective January 1, 2015, extending the term through December 31, 2018, subject to earlier termination under certain circumstances and termination without cause on or after July 1, 2017.  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.

NOTE O - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers”, 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.  In August 2015, FASB issued ASU 2015-14, “Revenue from Contracts with Customers – Deferral of the Effective Date” (Topic 606).  The amendments in this ASU defer the effective date of ASU 2014-09, “Revenue from Contracts with Customers,” for all entities by one year.  Public business entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.  The Company is currently evaluating the impact of the adoption of this standard on its Consolidated Financial Statements.
 
In April 2015, the FASB issued ASU 2015-03 “Simplifying the Presentation of Debt Issuance Costs”, which changes the presentation of debt issuance costs in financial statements. An entity presents such costs in the balance sheet as a direct deduction from the related debt liability rather than as an asset. Amortization of the costs is reported as interest expense.  The standard is effective for fiscal periods beginning after December 31, 2015 and allows for early adoption.  The Company has early adopted this statement for the nine months ended September 30, 2015, resulting in $60,000 in debt issue costs initially deducted from the MedTech debt and $5,000 amortized to interest expense.

In September 2015, the FASB issued ASU 2015-16 “Simplifying the Accounting for Measurement-period Adjustments”, which require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined.  The standard is effective for fiscal periods beginning after December 15, 2015 and allows for early adoption.  The Company is currently evaluating the impact of the adoption of this standard on its Consolidated Financial Statements.
 
 
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Vasomedical, Inc. and Subsidiaries
 
 

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 

Except for historical information contained in this report, the matters discussed are forward-looking statements that involve risks and uncertainties. When used in this report, words such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “may”, “plans”, “potential” and “intends” and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Among the factors that could cause actual results to differ materially are the following: the effect of business and economic conditions; the effect of the dramatic changes taking place in the healthcare environment; the impact of competitive procedures and products and their pricing; medical insurance reimbursement policies; unexpected manufacturing or supplier problems; unforeseen difficulties and delays in the conduct of clinical trials and other product development programs; the actions of regulatory authorities and third-party payers in the United States and overseas; uncertainties about the acceptance of a novel therapeutic modality by the medical community; continuation of the GEHC agreements and the risk factors reported from time to time in the Company’s 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 “we”, “our”, “us”, “Company”, “registrant”, “Vasomedical” or “management” 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. Beginning in July 2010 the Company, through its wholly-owned subsidiary Vaso Diagnostics, Inc. d/b/a VasoHealthcare, began its sales representation business via its agreement (GEHC Agreement) with GE Healthcare (GEHC), the healthcare business unit of General Electric Company (NYSE: GE), to be GEHC’s 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 GEHC Agreement was amended and extended through June 30, 2015 and again, in December 2014, the GEHC Agreement was further amended and extended through December 31, 2018, subject to earlier termination under certain circumstances and termination without cause on or after July 1, 2017.

In September 2011, the Company acquired Fast Growth Enterprises Limited (FGE), a British Virgin Islands company, which owns or 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 Company’s 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 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 Company owns 49.9% of the shares of VSK.  VSK began operations in January 2015.  The Company contributed $100,000 in cash to VSK during the nine months ended September 30, 2015.

In June 2014, the Company entered into a Value Added Reseller Agreement (VAR Agreement) 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.

 
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Vasomedical, Inc. and Subsidiaries
 
 
In August 2014, the Company, through its wholly owned subsidiary Wuxi Gentone Instruments Co. Ltd. (Gentone), acquired all of the outstanding shares of Genwell Instruments Co. Ltd. (Genwell), located in Wuxi, China.  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.

In May 2015, the Company entered into an agreement for, and completed its purchase of, all of the assets of NetWolves, LLC and its affiliates, including the membership interests in NetWolves Network Services LLC  (collectively, “NetWolves”). The purchase of NetWolves was accomplished pursuant to an Asset Purchase Agreement.  As a result, the Company effectively purchased all rights, titles and ownership of all assets held by NetWolves.  NetWolves designs and delivers efficient and cost-effective multi-network and multi-technology solutions as a managed network provider, and provides a complete single-source solution that includes design, network redundancy, application device management, real-time network monitoring, reporting and support systems as a comprehensive solution.  The Company believes there are significant operational synergies between NetWolves’ capabilities and VasoHealthcare IT’s requirements under its VAR Agreement with GEHC, as well as the opportunity to expand NetWolves’ existing services to the healthcare IT market.  The operating results of NetWolves from May 29, 2015 to September 30, 2015 are included in the accompanying condensed consolidated statements of operations and comprehensive income (loss) for the three and nine month periods ended September 30, 2015.  

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 and NetWolves operations report under the IT segment.

The Company continues to pursue acquisitions or partnership opportunities in the international and domestic markets and to seek expansion of 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 (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Although these estimates are based on our knowledge of current events, our actual amounts and results could differ from those estimates. The estimates made are based on historical factors, current circumstances, and the experience and judgment of our management, who continually evaluate the judgments, estimates and assumptions and may employ outside experts to assist in the evaluations.

Certain of our accounting policies are deemed “critical”, as they are both most important to the financial statement presentation and require management’s most difficult, subjective or complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a discussion of our critical accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2014 as filed with the SEC on March 30, 2015.

Results of Operations – For the Three Months Ended September 30, 2015 and 2014

Total revenue for the three months ended September 30, 2015 and 2014 was $17,401,000 and $7,643,000, respectively, representing an increase of $9,758,000, or 128% year-over-year.  The revenue increase was primarily due to $8,800,000 in revenue in the IT segment, of which $8,707,000 resulted from the operations of NetWolves.  Net income for the three months ended September 30, 2015 was $1,230,000, compared to a net loss of $123,000 for the three months ended September 30, 2014, representing an improvement of $1,353,000.  Our total net income (loss) was $0.01 and $(0.00) per basic and diluted common share for the three months ended September 30, 2015 and 2014, respectively.
 
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Vasomedical, Inc. and Subsidiaries
Revenues

Commission revenues in the Sales Representation segment were $7,584,000 in the third quarter of 2015, an increase of 18%, as compared to $6,409,000 in the third quarter of 2014.  The increase in commission revenues in the third quarter of 2015 was due primarily to higher commission rates on equipment delivered by GEHC during the quarter, as well as a 9% increase in such deliveries.  The Company recognizes commission 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 agreement with GE Healthcare prior to customer acceptance of the equipment are recorded as deferred revenue in the condensed consolidated balance sheet.  As of September 30, 2015, $18,595,000 in deferred commission revenue was recorded in the Company’s condensed consolidated balance sheet, of which $8,068,000 was long-term.  At September 30, 2014, $16,760,000 in deferred commission revenue was recorded in the Company’s condensed consolidated balance sheet, of which $8,359,000 was long-term.

Revenue in the IT segment for the three months ended September 30, 2015 was $8,800,000 compared to $0 revenue for the three months ended September 30, 2014, virtually all the increase resulting from the acquisition of NetWolves.

Revenue in our Equipment segment decreased by $217,000, or 18%, to $1,017,000 for the three-month period ended September 30, 2015 compared to the same period of the prior year.  The decrease was principally due to a decrease in  EECP® revenues and international sales by our China operations as a result of lower sales volume, offset by a small increase in field service and service contract revenue.
 
Gross Profit

The Company had a gross profit of $9,850,000, or 57% of revenue, in the third quarter of 2015 compared to $5,375,000, or 70% of revenue, in the third quarter of the prior year, an increase of $4,475,000, or 83%.  The increase is principally due to $3,492,000 in gross profit in the IT segment, of which $3,483,000 resulted from the acquisition of NetWolves, and higher revenues and gross profit margin in the Sales Representation segment.

Sales Representation segment gross profit was $5,883,000, or 78% of the segment revenue, for the three months ended September 30, 2015 as compared to $4,581,000, or 71% of the segment revenue, for the three months ended September 30, 2014.  The increase in absolute dollars and margin percentage was due to higher delivery volume and commission rates during the third quarter of 2015 than in the same period last year, as well as lower commission expense in the third quarter of 2015.  Cost of commissions of $1,701,000 and $1,828,000, for the three months ended September 30, 2015 and 2014, respectively, reflected commission expense associated with recognized commission revenues.  The decrease was due to lower commission expenses in the third quarter 2015 compared to the same period in 2014.  Commission expense associated with deferred revenue is recorded as deferred commission expense until the related commission revenue is recognized.
 
IT segment gross profit for the three months ended September 30, 2015 was $3,492,000 compared to $0 gross profit for the three months ended September 30, 2014, virtually all the increase resulting from the acquisition of NetWolves.
 
Equipment segment gross profit decreased to $475,000, or 47% of Equipment segment revenues, for the third quarter of 2015 compared to $794,000, or 64% of Equipment segment revenues, for the same quarter of 2014.  Gross profit margin in the Equipment segment decreased due mainly to lower average selling prices and higher inventory obsolescence costs.
 
Operating Income (Loss)
 
Operating income was $1,337,000 for the three months ended September 30, 2015, compared to an operating loss of $149,000 for the three months ended September 30, 2014, an improvement of $1,486,000. During the third quarter of 2015, there was a $4,475,000 increase in gross profit and a $3,011,000 increase in selling, general, and administrative costs.  Operating income in the Sales Representation segment increased by $1,863,000 to $2,586,000, compared to $723,000 in the third quarter of the prior year, due mainly to a higher gross margin combined with lower SG&A costs.  In addition, operating loss in the Equipment segment increased by $177,000, or 44%, to $582,000 compared to $405,000 in the same quarter of the prior year, due primarily to $319,000 lower gross profit, partially offset by $120,000 lower SG&A costs in the current year quarter.  Our IT segment had an operating loss of $187,000 in the third quarter of 2015.  This loss was reduced by a $237,000 operating profit from NetWolves operations.  We anticipate that the operating profit in this segment will improve with the NetWolves operations and increases in revenue in our GEHC VAR business.

SG&A expenses for the third quarter of 2015 and 2014 were $8,355,000, or 48% of revenues, and $5,344,000, or 70% of revenues, respectively, reflecting an increase of $3,011,000 or approximately 56%. The increase in SG&A expenditures in the third quarter of 2015 resulted primarily from $3,679,000 in costs attributable to the IT segment in 2015 mainly due to the inclusion of NetWolves operations during the quarter, and higher corporate expenses, primarily accounting fees, partially offset by lower costs in the Sales Representation and Equipment segments.
 
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Research and development (“R&D”) expenses were $158,000, or 1% of revenues (16% of Equipment segment revenues), for the third quarter of 2015, a decrease of $22,000, or 12%, from $180,000, or 2% of revenues (15% of Equipment segment revenues), for the third quarter of 2014. The decrease is primarily attributable to lower clinical grants in the third quarter of 2015.

Interest and Other Income (Expense)

Interest and other income (expense) for the third quarter of 2015 was $(69,000) as compared to $52,000 for the third quarter of 2014. The change from income to expense was due primarily to higher interest expense from debt associated with the Genwell and NetWolves acquisitions.

Income Tax Expense

During the third quarter of 2015 we recorded income tax expense of $38,000 as compared to income tax expense of $26,000 for the third quarter of 2014.  The increase arose from higher Federal income tax expense partially offset by lower tax expense at our Chinese subsidiaries.

Results of Operations – For the Nine Months Ended September 30, 2015 and 2014

Total revenue for the nine months ended September 30, 2015 and 2014 was $35,698,000 and $22,599,000, respectively, representing an increase of $13,099,000, or 58% year-over-year.  The revenue increase was primarily due to $11,611,000 in revenue in the IT segment, of which $11,470,000 resulted from the operations of NetWolves.  Net income (loss) for the nine months ended September 30, 2015 and 2014 was $1,166,000 and $(1,343,000), respectively, representing an improvement of $2,509,000.  Our total net income (loss) was $0.01 and $(0.01) per basic and diluted common share for the nine months ended September 30, 2015 and 2014, respectively.
 
Revenues

Commission revenues in the Sales Representation segment were $21,010,000 in the first nine months of 2015, an increase of 9% from $19,335,000 in the first nine months of 2014.  The increase in commission revenue in the first nine months of 2015 is due to increases in both commission rate earned and volume of equipment delivered by GEHC during the period.  The Company recognizes commission 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 agreement with GE Healthcare prior to customer acceptance of the equipment are recorded as deferred revenue in the condensed consolidated balance sheet.
 
Revenue in the IT segment for the nine months ended September 30, 2015 was $11,161,000 compared to $0 revenue for the nine months ended September 30, 2014, virtually all the increase resulting from the inclusion of four months of NetWolves results.

Revenue in our Equipment segment decreased by $187,000, or 6%, to $3,077,000 for the nine-month period ended September 30, 2015 from $3,264,000 for the same period of the prior year.  The decrease was due to decreases in EECP® revenues as a result of lower average selling prices, partially offset both by higher EECP® sales volume, and by increases in international sales by our China operations, and a decrease in service and accessory part revenue.

Gross Profit

The Company had a gross profit of $22,746,000, or 64% of revenue, in the first three quarters of 2015 compared to $16,023,000, or 71% of revenue, in the first three quarters of the prior year, an increase of $6,723,000, or 42%.  The increase is principally due to $4,690,000 in gross profit in the IT segment, of which $4,669,000 resulted from the inclusion of NetWolves operations for the four months after the acquisition, and higher gross profit margin in our Sales Representation segment.
 
Sales Representation segment gross profit was $16,262,000, or 77% of the segment revenue, for the nine months ended September 30, 2015 as compared to $14,053,000, or 73% of the segment revenue, for the nine months ended September 30, 2014.  The increase in absolute dollars and margin percentage was due to higher commission rates, and higher equipment deliveries by GEHC during the first nine months of 2015 than in the same period last year, coupled with lower commission expenses in the first nine months of 2015.  Cost of commissions of $4,748,000 and $5,282,000, for the nine months ended September 30, 2015 and 2014, respectively, reflected commission expense associated with recognized commission revenues.  The decrease was due to lower commission expenses in the nine-month period ended September 30, 2015 compared to the same period in 2014. Commission expense associated with deferred revenue is recorded as deferred commission expense until the related commission revenue is recognized.

 
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Vasomedical, Inc. and Subsidiaries
 
IT segment gross profit for the nine months ended September 30, 2015 was $4,690,000 compared to $0 gross profit for the nine months ended September 30, 2014, virtually all the increase resulting from the inclusion of four months of NetWolves results.
 
Equipment segment gross profit decreased to $1,794,000, or 58% of Equipment segment revenues, for the first three quarters of 2015 compared to $1,970,000, or 60% of Equipment segment revenues, for the same period of 2014.  Gross profit margin in the Equipment segment decreased due mainly to lower average selling prices and higher inventory obsolescence costs.

Operating Income (Loss)

Operating income was $1,257,000 for the nine months ended September 30, 2015 as compared to a loss of $1,443,000 for the nine months ended September 30, 2014, an improvement of $2,700,000.  Partially offsetting the operating income in the nine months ended September 30, 2015 was an operating loss of $908,000 in our IT segment, as compared to a $82,000 operating loss for this segment in the same period of 2014. The IT segment began operations in the third quarter of 2014.  During the nine months ended September 30, 2015, there was a $6,723,000 increase in gross profit partially offset by a $4,192,000 increase in selling, general, and administrative costs.  Operating income in the Sales Representation segment increased by $3,199,000 to $5,466,000 as compared to $2,267,000 in the first nine months of the prior year, due mainly to higher gross margin combined with lower SG&A costs.  In addition, operating loss in the Equipment segment decreased by $468,000, or 20%, to $1,893,000 compared to $2,361,000 in the same period of the prior year, due primarily to $476,000 lower SG&A costs and $169,000 lower R&D costs in the current year period.

SG&A expenses for the first three quarters of 2015 and 2014 were $21,059,000, or 59% of revenues, and $16,867,000, or 75% of revenues, respectively, reflecting an increase of $4,192,000 or approximately 25%. The increase in SG&A expenditures in the first three quarters of 2015 resulted primarily from $5,597,000 in costs attributable to the IT segment in 2015, primarily resulting from the NetWolves operations, and higher corporate expenses, primarily legal and accounting fees, partially offset by lower costs in the Sales Representation and Equipment segments.

Research and development (“R&D”) expenses were $430,000, or 1% of revenues (14% of Equipment segment revenues), for the first nine months of 2015, a decrease of $169,000, or 28%, from $599,000, or 3% of revenues (18% of Equipment segment revenues), for the first nine months of 2014. The decrease is primarily attributable to non-recurring costs in the first nine months of 2014, not incurred in 2015, associated with the reclassification by FDA of our EECP® therapy system, as well as lower clinical grants in the first nine months of 2015.

Interest and Other Income (Expense)

Interest and other income (expense) for the first three quarters of 2015 was $(40,000) as compared to $150,000 for the first three quarters of 2014. The change from income to expense was due primarily to higher interest expense from debt associated with the Genwell and NetWolves acquisitions.

Income Tax Expense

During the first three quarters of 2015 we recorded income tax expense of $51,000 as compared to income tax expense of $50,000 for the same period of 2014.  The increase arose from higher Federal tax expense, largely offset by lower tax expense at our Chinese subsidiaries.

 
 
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Vasomedical, Inc. and Subsidiaries
 
 
Liquidity and Capital Resources

Cash and Cash Flow

We have financed our operations from working capital and the proceeds from notes issued to MedTech.  At September 30, 2015, we had cash and cash equivalents of $1,928,000, short-term investments of $109,000 and negative working capital of $8,235,000 compared to cash and cash equivalents of $9,128,000, short-term investments of $111,000 and working capital of $9,215,000 at December 31, 2014.  $8,591,000 in negative working capital at September 30, 2015 is attributable to the net balance of deferred commission expense and deferred revenue.  These are non-cash expense and revenue items and have no impact on future cash flows.

Cash provided by operating activities was $5,879,000 during the first nine months of 2015, compared to $2,586,000 for the same period in 2014, which consisted of net income after adjustments to reconcile net income to net cash of $2,356,000 and cash provided by operating assets and liabilities of $3,520,000. The changes in the account balances primarily reflect a decrease in accounts and other receivables of $7,860,000, partially offset by decreases in deferred revenue of $2,782,000, accrued expenses of $2,129,000, and accrued commissions of $548,000.  Significantly higher commission billings and recognized revenue were generated in the fourth quarter of 2014, resulting in significant cash inflows early in 2015.

Cash used in investing activities during the nine-month period ended September 30, 2015 was $17,984,000, of which $17,267,000, net of cash acquired, was used for the acquisition of NetWolves, $100,000 was invested in the VSK joint venture, and $619,000 was used for the purchase of equipment and software.

Cash provided by financing activities during the nine-month period ended September 30, 2015 was $4,800,000 through the issuance of notes to MedTech and $136,000 in borrowings on our line of credit, partially offset by $83,000 in repayments of notes issued for equipment purchases.

Liquidity

The Company expects to be profitable for the year ending December 31, 2015 and to continue to generate positive cash flow through its existing sales representation operations, from the operation of NetWolves, and improved operating efficiency and growth in its China operations and by expanding its market presence and product portfolio.  The Company has reorganized its EECP® business model, both domestically and internationally, including the start of operations of the joint venture VSK Medical, intended to reduce costs and achieve profitability in this business.  The Company will continue to pursue acquisitions and partnership opportunities in the international and domestic markets and will look to expand its sales representation business.

ITEM 4 - CONTROLS AND PROCEDURES
 
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 (“CEO”) and Chief Financial Officer (“CFO”), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
 
 
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Vasomedical, Inc. and Subsidiaries
 
 
Our CEO and our CFO have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2015 and have concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2015.

Changes in Internal Control Over Financial Reporting

There was no change in the Company’s internal control over financial reporting during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 

 
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Vasomedical, Inc. and Subsidiaries

PART II - OTHER INFORMATION



ITEM 6 – EXHIBITS
 
Exhibits

31
Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to Rules 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32
Certifications of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


 
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Vasomedical, Inc. and Subsidiaries


In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


VASOMEDICAL, INC.

By:           /s/ Jun Ma                                           
Jun Ma
 
President and Chief Executive Officer
 
(Principal Executive Officer)

/s/ Michael J. Beecher
Michael J. Beecher
 
Chief Financial Officer and Principal Accounting Officer

Date:  November 13, 2015




 
 
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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:

1.
I have reviewed this quarterly report on Form 10-Q of Vasomedical, Inc. and subsidiaries (the “registrant”);

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/s/ Jun Ma .
Jun Ma
President and Chief Executive Officer

Date: November 13, 2015
 
 
 

 

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:

1.
I have reviewed this quarterly report on Form 10-Q of Vasomedical, Inc. and subsidiaries (the “registrant”);

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/s/ Michael J. Beecher .
Michael J. Beecher
Chief Financial Officer

Date: November 13, 2015

EX-32 4 vaso10q-sept2015ex32.htm vaso10q-sept2015ex32.htm

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 “Company”) on Form 10-Q for the period ending September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), 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, 2015



 
 

 



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 “Company”) on Form 10-Q for the period ending September 30, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), 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
       Chief Financial Officer
Dated: November 13, 2015
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