UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2019

 

☐ 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

 

 

VASO CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware		11-2871434
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

 

137 Commercial St., 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 ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ☐

Accelerated Filer ☐

Non-Accelerated Filer ☒

Smaller Reporting Company ☒

Emerging Growth Company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

 

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

 

Securities registered pursuant to Section 12 (b) of the Act:

 

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock	VASO	OTC:PK

 

Number of Shares Outstanding of Common Stock, $.001 Par Value, at November 10, 2019 – 172,701,726

 

 

Vaso Corporation and Subsidiaries

 

INDEX

 

PART I – FINANCIAL INFORMATION	3
ITEM 1 - FINANCIAL STATEMENTS	3
CONDENSED CONSOLIDATED BALANCE SHEETS as of September 30, 2019 (unaudited) and December 31, 2018	3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) for the Nine Months Ended September 30, 2019 and 2018	6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)	7
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 4 - CONTROLS AND PROCEDURES	29
PART II - OTHER INFORMATION	30
ITEM 6 – EXHIBITS	30

  

 

PART I – FINANCIAL INFORMATION

 

ITEM 1 - FINANCIAL STATEMENTS

Vaso Corporation and Subsidiaries

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

	September 30, 2019	December 31, 2018
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$1,343	$2,668
Accounts and other receivables, net of an allowance for doubtful accounts and commission adjustments of $4,039 at September 30, 2019 and $3,994 at December 31, 2018	8,040	11,028
Receivables due from related parties	18	20
Inventories, net	2,181	1,983
Deferred commission expense	2,476	2,585
Prepaid expenses and other current assets	1,075	890
Total current assets	15,133	19,174
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $7,164 at September 30, 2019 and $6,370 at December 31, 2018	5,091	5,809
OPERATING LEASE RIGHT OF USE ASSETS	998	-
GOODWILL	17,203	17,309
INTANGIBLES, net	4,395	4,740
OTHER ASSETS, net	2,733	3,067
DEFERRED TAX ASSETS, net	375	375
	$45,928	$50,474
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$4,919	$6,284
Accrued commissions	581	2,116
Accrued expenses and other liabilities	4,604	5,655
Finance lease liabilities - current	146	188
Operating lease liabilities - current	621	-
Sales tax payable	933	1,020
Deferred revenue - current portion	11,148	10,382
Notes payable - current portion	10,415	9,116
Notes payable - related parties - current portion	1,245	582
Due to related party	10	10
Total current liabilities	34,622	35,353
LONG-TERM LIABILITIES
Notes payable - related parties, net of current portion	-	245
Finance lease liabilities, net of current portion	406	400
Operating lease liabilities, net of current portion	377	-
Deferred revenue, net of current portion	6,752	7,704
Deferred tax liability	124	124
Other long-term liabilities	1,083	1,037
Total long-term liabilities	8,742	9,510
COMMITMENTS AND CONTINGENCIES (NOTE Q)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 1,000,000 shares authorized; nil shares issued and outstanding at September 30, 2019 and December 31, 2018	-	-
Common stock, $.001 par value; 250,000,000 shares authorized; 182,969,813 and 177,417,287 shares issued at September 30, 2019 and December 31 2018, respectively; 172,661,726 and 167,109,200 shares outstanding at September 30, 2019 and December 31, 2018, respectively	184	178
Additional paid-in capital	63,787	63,672
Accumulated deficit	(58,961)	(55,924)
Accumulated other comprehensive loss	(446)	(315)
Treasury stock, at cost, 10,308,087 shares at September 30, 2019 and December 31, 2018	(2,000)	(2,000)
Total stockholders’ equity	2,564	5,611
	$45,928	$50,474

  

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

 

 

Vaso Corporation and Subsidiaries

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands, except per share data)

 

	Three months ended		Nine months ended
	September 30,		September 30,
	2019	2018	2019	2018
Revenues
Managed IT systems and services	$11,485	$11,002	$34,217	$33,118
Professional sales services	6,336	6,854	14,882	18,868
Equipment sales and services	906	932	2,695	2,755
Total revenues	18,727	18,788	51,794	54,741
Cost of revenues
Cost of managed IT systems and services	6,414	6,563	19,791	19,291
Cost of professional sales services	1,140	1,465	2,780	3,903
Cost of equipment sales and services	332	309	1,084	1,040
Total cost of revenues	7,886	8,337	23,655	24,234
Gross profit	10,841	10,451	28,139	30,507
Operating expenses
Selling, general and administrative	9,840	10,462	29,884	32,459
Research and development	196	230	624	668
Total operating expenses	10,036	10,692	30,508	33,127
Operating income (loss)	805	(241)	(2,369)	(2,620)
Other (expense) income
Interest and financing costs	(268)	(178)	(728)	(530)
Interest and other income, net	36	56	109	114
Gain on sale of investment in VSK	-	-	-	212
Total other (expense) income, net	(232)	(122)	(619)	(204)
Income (loss) before income taxes	573	(363)	(2,988)	(2,824)
Income tax expense	(11)	(14)	(49)	(71)
Net income (loss)	562	(377)	(3,037)	(2,895)
Other comprehensive income (loss)
Foreign currency translation (loss) gain	(193)	(131)	(131)	(218)
Comprehensive income (loss)	$369	$(508)	$(3,168)	$(3,113)
Earnings (loss) per common share
- basic	$0.00	$(0.00)	$(0.02)	$(0.02)
- diluted	$0.00	$(0.00)	$(0.02)	$(0.02)
Weighted average common shares outstanding
- basic	168,662	166,431	167,557	165,024
- diluted	168,787	166,431	167,557	165,024

 

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

 

Vaso Corporation and Subsidiaries

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

 

							Accumulated
							Other	Total
	Common Stock		Treasury Stock		Additional	Accumulated	Comprehensive	Stockholders’
	Shares	Amount	Shares	Amount	Paid-in-Capital	Deficit	Loss	Equity
Balance at January 1, 2018	175,742	$176	(10,308)	$(2,000)	$63,363	$(52,329)	$(58)	$9,152
Share-based compensation	167	-	-	-	141	-	-	141
Adoption of new accounting standard (*)	-	-	-	-	-	139	-	139
Foreign currency translation gain	-	-	-	-	-	-	184	184
Net loss	-	-	-	-	-	(2,069)	-	(2,069)
Balance at March 31, 2018 (unaudited)	175,909	$176	(10,308)	$(2,000)	$63,504	$(54,259)	$126	$7,547
Share-based compensation	1,011	1	-	-	80	-	-	81
Shares not issued for employee tax liability	-	-	-	-	(1)	-	-	(1)
Foreign currency translation loss	-	-	-	-	-	-	(271)	(271)
Net loss	-	-	-	-	-	(446)	-	(446)
Balance at June 30, 2018 (unaudited)	176,920	177	(10,308)	(2,000)	63,583	(54,705)	(145)	6,910
Share-based compensation	108	-	-	-	44	-	-	44
Foreign currency translation gain (loss)	-	-	-	-	-	-	(131)	(131)
Net loss	-	-	-	-	-	(380)	-	(380)
Balance at September 30, 2018 (unaudited)	177,028	$177	(10,308)	$(2,000)	$63,627	$(55,085)	$(276)	$6,443
Balance at January 1, 2019	177,417	$178	(10,308)	(2,000)	$63,672	$(55,924)	$(315)	$5,611
Share-based compensation	-	-	-	-	44	-	-	44
Foreign currency translation gain	-	-	-	-	-	-	137	137
Net loss	-	-	-	-	-	(2,849)	-	(2,849)
Balance at March 31, 2019 (unaudited)	177,417	$178	(10,308)	$(2,000)	$63,716	$(58,773)	$(178)	$2,943
Share-based compensation	5,438	5	-	-	49	-	-	54
Shares not issued for employee tax liability	-	-	-	-	(2)	-	-	(2)
Foreign currency translation loss	-	-	-	-	-	-	(75)	(75)
Net loss	-	-	-	-	-	(750)	-	(750)
Balance at June 30, 2019 (unaudited)	182,855	$183	(10,308)	$(2,000)	$63,763	$(59,523)	$(253)	$2,170
Share-based compensation	115	1	-	-	24	-	-	25
Foreign currency translation loss	-	-	-	-	-	-	(193)	(193)
Net income	-	-	-	-	-	562	-	562
Balance at September 30, 2019 (unaudited)	182,970	$184	(10,308)	$(2,000)	$63,787	$(58,961)	$(446)	$2,564

 

(*) Accounting Standards Codification Topic 606, Revenue from Contracts with Customers

  

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

 

 

Vaso Corporation and Subsidiaries

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

	Nine months ended
	September 30,
	2019	2018
Cash flows from operating activities
Net loss	$(3,037)	$(2,895)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation and amortization	2,024	1,828
Loss from interest in joint venture	-	9
Gain on sale of investment in VSK	-	(212)
Provision for doubtful accounts and commission adjustments	243	240
Amortization of debt issue costs	14	24
Share-based compensation	123	266
Changes in operating assets and liabilities:
Accounts and other receivables	2,774	2,837
Inventories, net	(232)	(75)
Deferred commission expense	109	1,142
Prepaid expenses and other current assets	(190)	(152)
Other assets, net	269	244
Accounts payable	(1,363)	1,756
Accrued commissions	(1,539)	(1,264)
Accrued expenses and other liabilities	(1,022)	791
Sales tax payable	(85)	155
Deferred revenue	(185)	(6,114)
Deferred tax liability	-	12
Other long-term liabilities	47	(124)
Net cash used in operating activities	(2,050)	(1,532)
Cash flows from investing activities
Purchases of equipment and software	(889)	(2,168)
Sale of fixed assets	22	-
Proceeds from sale of investment in VSK	-	311
Net cash used in investing activities	(867)	(1,857)
Cash flows from financing activities
Net borrowings on revolving lines of credit	1,000	1,158
Payroll taxes paid by withholding shares	(2)	(1)
Repayment of capital lease obligations	-	(94)
Repayment of notes payable and finance lease obligations	(181)	-
Proceeds from notes payable	300	18
Proceeds from notes payable - related parties	930	-
Repayment of notes payable - related parties	(500)	-
Net cash provided by financing activities	1,547	1,081
Effect of exchange rate differences on cash and cash equivalents	45	42
NET DECREASE IN CASH AND CASH EQUIVALENTS	(1,325)	(2,266)
Cash and cash equivalents - beginning of period	2,668	5,245
Cash and cash equivalents - end of period	$1,343	$2,979
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
Interest paid	$550	$491
Income taxes paid	$38	$74
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Initial recognition of operating lease right of use asset and liability	$1,107	$-
Sale of investment in VSK	$-	$676
Equipment acquired through finance lease	$134	$399

 

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

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

NOTE A - ORGANIZATION AND PLAN OF OPERATIONS

 

Vaso Corporation was incorporated in Delaware in July 1987. Unless the context requires otherwise, all references to “we”, “our”, “us”, “Company”, “registrant”, “Vaso” or “management” refer to Vaso Corporation and its subsidiaries.

 

Overview

 

Vaso Corporation principally operates in three distinct business segments in the healthcare and information technology (“IT”) industries. We manage and evaluate our operations, and report our financial results, through these three business segments.

 

 

 

 

VasoTechnology

 

VasoTechnology, Inc. was formed in May 2015, at the time the Company acquired all of the assets of NetWolves, LLC and its affiliates, including the membership interests in NetWolves Network Services, LLC (collectively, “NetWolves”). It currently consists of a managed network and security service division and a healthcare IT application VAR (value added reseller) division. Its current offerings include:

 

 

VasoTechnology uses a combination of proprietary technology, methodology and third-party applications to deliver its value proposition.

 

VasoHealthcare

 

VasoHealthcare commenced operations in 2010, in conjunction with the Company’s execution of its exclusive sales representation agreement (“GEHC Agreement”) with GEHC, which is the healthcare business division of the General Electric Company, to further the sale of certain healthcare capital equipment in the healthcare provider middle market. Sales of GEHC equipment by the Company have grown significantly since then.

 

VasoHealthcare’s current offerings consist of:

 

 

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

VasoMedical

 

VasoMedical is the Company’s business division for its proprietary medical device operations, including the design, development, manufacturing, sales and service of various medical devices in the domestic and international markets and includes the Vasomedical Global and Vasomedical Solutions business units. These devices are primarily for cardiovascular monitoring, diagnostic and therapeutic systems. Its current offerings consist of:

 

 

This segment uses its extensive cardiovascular device knowledge coupled with its significant engineering resources to cost-effectively create and market its proprietary technology. It works with a global distribution network of channel partners to sell its products. It also provides engineering and OEM services to other medical device companies.

 

Going concern Assessment

 

We have incurred net losses from operations for the nine months ended September 30, 2019, and the years ended December 31, 2018 and 2017. We maintain lines of credit from a lending institution which will require further extensions after their current December 18, 2019 maturity date. We also have notes payable which mature within the next twelve months. Our ability to continue operating as a going concern is dependent upon achieving profitability, extending the maturity date of our existing lines of credit and notes payable, or through additional debt or equity financing. Achieving profitability is largely dependent on our ability to reduce operating costs and to maintain or increase our current revenue. While we believe we will continue to maintain or increase our gross revenue and are substantially reducing operating costs, and while historically we have received extensions of the maturity dates of our lines of credit, failure to achieve these objectives could cast doubt on our ability to continue as a going concern.

 

NOTE B – INTERIM STATEMENT PRESENTATION

 

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") for interim financial information. Certain information and disclosures normally included in the 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 conjunction 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, 2018, as filed with the SEC on April 15, 2019.

 

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.

 

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Significant Accounting Policies and Recent Accounting Pronouncements

 

Recently Adopted Accounting Pronouncements

 

Effective January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842, “Leases”. See Note N for further details.

  

Reclassifications

 

Certain reclassifications have been made to prior period amounts to conform with the current period presentation.

 

NOTE C – REVENUE RECOGNITION

 

Disaggregation of Revenue

 

The following tables present revenues disaggregated by our business operations and timing of revenue recognition:

 

 

	(in thousands)
	Three Months Ended September 30, 2019 (unaudited)				Three Months Ended September 30, 2018 (unaudited)
		Professional sales	Equipment			Professional sales	Equipment
	IT segment	service segment	segment	Total	IT segment	service segment	segment	Total
Network services	$10,210			$10,210	$10,146			$10,146
Software sales and support	1,275			1,275	856			856
Commissions		6,336		6,336		6,854		6,854
Medical equipment sales			686	686			661	661
Medical equipment service			220	220			271	271
	$11,485	$6,336	$906	$18,727	$11,002	$6,854	$932	$18,788

	Nine Months Ended September 30, 2019 (unaudited)				Nine Months Ended September 30, 2018 (unaudited)
		Professional sales	Equipment			Professional sales	Equipment
	IT segment	service segment	segment	Total	IT segment	service segment	segment	Total
Network services	$30,221			$30,221	$30,418			$30,418
Software sales and support	3,996			3,996	2,700			2,700
Commissions		14,882		14,882		18,868		18,868
Medical equipment sales			1,911	1,911			1,936	1,936
Medical equipment service			784	784			819	819
	$34,217	$14,882	$2,695	$51,794	$33,118	$18,868	$2,755	$54,741

 

	Three Months Ended September 30, 2019 (unaudited)				Three Months Ended September 30, 2018 (unaudited)
		Professional sales	Equipment			Professional sales	Equipment
	IT segment	service segment	segment	Total	IT segment	service segment	segment	Total
Revenue recognized over time	$10,524	$-	$145	$10,669	$9,561	$-	$163	$9,724
Revenue recognized at a point in time	961	6,336	761	8,058	1,441	6,854	769	9,064
	$11,485	$6,336	$906	$18,727	$11,002	$6,854	$932	$18,788

	Nine Months Ended September 30, 2019 (unaudited)				Nine Months Ended September 30, 2018 (unaudited)
		Professional sales	Equipment			Professional sales	Equipment
	IT segment	service segment	segment	Total	IT segment	service segment	segment	Total
Revenue recognized over time	$30,526	$-	$447	$30,973	$29,315	$-	$505	$29,820
Revenue recognized at a point in time	3,691	14,882	2,248	20,821	3,803	18,868	2,250	24,921
	$34,217	$14,882	$2,695	$51,794	$33,118	$18,868	$2,755	$54,741

 

 

   

Transaction Price Allocated to Remaining Performance Obligations

 

As of September 30, 2019, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $80.4 million, of which we expect to recognize revenue as follows:

 

	(in thousands) Fiscal years of revenue recognition
	remainder of 2019	2020	2021	Thereafter
Unfulfilled performance obligations	$15,520	$37,538	$14,164	$13,256

   

Contract Liabilities

 

Contract liabilities arise in our IT VAR, VasoHealthcare, and VasoMedical businesses. In our IT VAR business, payment arrangements with clients typically include an initial payment due upon contract signing and milestone-based payments based upon product delivery and go-live, as well as post go-live monthly payments for subscription and support fees. Customer payments received, or receivables recorded, in advance of go-live and customer acceptance, where applicable, are deferred as contract liabilities. Such amounts aggregated approximately $808,000 and $344,000 at September 30, 2019 and December 31, 2018, respectively, and are included in accrued expenses and other liabilities in our condensed consolidated balance sheets.

 

In our VasoHealthcare business, we bill amounts for certain milestones in advance of customer acceptance of the underlying equipment. Such amounts aggregated approximately $17,069,000 and $17,098,000 at September 30, 2019 and December 31, 2018, respectively, and are classified in our condensed consolidated balance sheets as either current or long-term deferred revenue. In addition, we record a contract liability for amounts expected to be repaid to GEHC due to customer order reductions. Such amounts aggregated approximately $1,265,000 and $2,315,000 at September 30, 2019 and December 31, 2018, respectively, and are included in accrued expenses and other liabilities in our condensed consolidated balance sheets.

 

In our VasoMedical business, we bill amounts for post-delivery services and varying duration service contracts in advance of performance. Such amounts aggregated approximately $831,000 and $988,000 at September 30, 2019 and December 31, 2018, respectively, and are classified in our condensed consolidated balance sheets as either current or long-term deferred revenue.

 

During the three and nine months ended September 30, 2019, we recognized approximately $2.9 million and $4.8 million of revenues that were included in our contract liability balance at July 1, 2019 and January 1, 2019, respectively.

 

NOTE D – SEGMENT REPORTING AND CONCENTRATIONS

 

Vaso Corporation principally operates in three distinct business segments in the healthcare and information technology industries. We manage and evaluate our operations, and report our financial results, through these three reportable segments.

 

 

 

 

 

 

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 and adjusted EBITDA (net income (loss), plus interest expense (income), net; tax expense; depreciation and amortization; and non-cash stock-based compensation). 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)
	Three months ended September 30,		Nine months ended September 30,
	2019	2018	2019	2018
	(unaudited)	(unaudited)	(unaudited)	(unaudited)
Revenues from external customers
IT	$11,485	$11,002	$34,217	$33,118
Professional sales service	6,336	6,854	14,882	18,868
Equipment	906	932	2,695	2,755
Total revenues	$18,727	$18,788	$51,794	$54,741
Gross Profit
IT	$5,071	$4,439	$14,426	$13,827
Professional sales service	5,196	5,389	12,102	14,965
Equipment	574	623	1,611	1,715
Total gross profit	$10,841	$10,451	$28,139	$30,507
Operating income (loss)
IT	$269	$(782)	$(306)	$(2,064)
Professional sales service	1,028	1,013	(487)	1,123
Equipment	(282)	(181)	(809)	(747)
Corporate	(210)	(291)	(767)	(932)
Total operating income (loss)	$805	$(241)	$(2,369)	$(2,620)
Depreciation and amortization
IT	$562	$476	$1,673	$1,393
Professional sales service	42	45	130	137
Equipment	75	105	221	298
Corporate	-	-	-	-
Total depreciation and amortization	$679	$626	$2,024	$1,828
Capital expenditures
IT	$143	$1,055	$827	$2,107
Professional sales service	-	-	-	-
Equipment	32	37	56	57
Corporate	-	1	6	4
Total cash capital expenditures	$175	$1,093	$889	$2,168