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 June 30, 2021

 

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_10qimg1.jpg

 

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: None

 

Number of Shares Outstanding of Common Stock, $.001 Par Value, at August 12, 2021 – 175,127,878

 

 

 

 

Vaso Corporation and Subsidiaries

 

INDEX

 

PART I – FINANCIAL INFORMATION

 

3

 

 

 

 

 

ITEM 1 - FINANCIAL STATEMENTS

 

3

 

CONDENSED CONSOLIDATED BALANCE SHEETS as of June 30, 2021 (unaudited) and December 31, 2020

 

3

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited) for the Three and Six Months Ended June 30, 2021 and 2020

 

4

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) for the Three and Six Months Ended June 30, 2021 and 2020

 

5

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) for the Six Months Ended June 30, 2021 and 2020

 

6

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

7

 

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

 

20

 

ITEM 4 - CONTROLS AND PROCEDURES

 

28

 

 

 

 

 

PART II - OTHER INFORMATION

 

29

 

ITEM 6 – EXHIBITS

 

29

 

 

 
Page 2

Table of Contents

  

PART I – FINANCIAL INFORMATION

 

ITEM 1 - FINANCIAL STATEMENTS

 

Vaso Corporation and Subsidiaries 

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

ASSETS

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$9,407

 

 

$6,819

 

Short-term investments

 

 

620

 

 

 

766

 

 

 

 

 

 

 

 

 

 

Accounts and other receivables, net of an allowance for doubtful accounts and commission adjustments of $4,813 at June 30, 2021and $4,208 at December 31, 2020

 

 

3,533

 

 

 

9,776

 

Receivables due from related parties

 

 

18

 

 

 

18

 

Inventories

 

 

1,297

 

 

 

1,384

 

Deferred commission expense

 

 

2,376

 

 

 

2,354

 

Prepaid expenses and other current assets

 

 

882

 

 

 

1,151

 

Total current assets

 

 

18,133

 

 

 

22,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $9,577 at June 30, 2021 and $8,833 at December 31, 2020

 

 

2,992

 

 

 

3,885

 

OPERATING LEASE RIGHT OF USE ASSETS

 

 

942

 

 

 

1,009

 

GOODWILL

 

 

15,702

 

 

 

15,688

 

INTANGIBLES, net

 

 

3,549

 

 

 

3,949

 

OTHER ASSETS, net

 

 

2,358

 

 

 

2,190

 

INVESTMENT IN EECP GLOBAL

 

 

1,096

 

 

 

1,116

 

DEFERRED TAX ASSETS, net

 

 

271

 

 

 

271

 

Total assets

 

$45,043

 

 

$50,376

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$3,533

 

 

$6,285

 

Accrued commissions

 

 

241

 

 

 

1,474

 

Accrued expenses and other liabilities

 

 

6,314

 

 

 

4,867

 

Finance lease liabilities - current

 

 

185

 

 

 

190

 

Operating lease liabilities - current

 

 

621

 

 

 

540

 

Sales tax payable

 

 

563

 

 

 

621

 

Deferred revenue - current portion

 

 

12,613

 

 

 

11,516

 

Notes payable - current portion

 

 

5,129

 

 

 

5,970

 

Due to related party

 

 

31

 

 

 

236

 

Total current liabilities

 

 

29,230

 

 

 

31,699

 

 

 

 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

 

 

 

 

 

Notes payable, net of current portion

 

 

27

 

 

 

5,779

 

Finance lease liabilities, net of current portion

 

 

135

 

 

 

246

 

Operating lease liabilities, net of current portion

 

 

321

 

 

 

469

 

Deferred revenue, net of current portion

 

 

7,054

 

 

 

6,188

 

Other long-term liabilities

 

 

1,007

 

 

 

910

 

Total long-term liabilities

 

 

8,544

 

 

 

13,592

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (NOTE N)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $.01 par value; 1,000,000 shares authorized; nil shares issued and outstanding at June 30, 2021 and December 31, 2020

 

 

-

 

 

 

-

 

Common stock, $.001 par value; 250,000,000 shares authorized;185,435,965 and 185,244,299 shares issued at June 30, 2021 and December 31, 2020 respectively;175,127,878 and 174,936,212 shares outstanding at June 30, 2021 and December 31, 2020 respectively

 

 

185

 

 

 

185

 

Additional paid-in capital

 

 

63,903

 

 

 

63,886

 

Accumulated deficit

 

 

(54,865)

 

 

(57,002)

Accumulated other comprehensive income

 

 

46

 

 

 

16

 

Treasury stock, at cost, 10,308,087 shares at June 30, 2021 and December 31, 2020

 

 

(2,000)

 

 

(2,000)

Total stockholders’ equity

 

 

7,269

 

 

 

5,085

 

 

 

$45,043

 

 

$50,376

 

  

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

 

 
Page 3

Table of Contents

     

Vaso Corporation and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

 

 

 

Three months ended

 

 

Six months ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Managed IT systems and services

 

$10,442

 

 

$10,776

 

 

$21,696

 

 

$22,059

 

Professional sales services

 

 

4,971

 

 

 

4,720

 

 

 

9,626

 

 

 

9,887

 

Equipment sales and services

 

 

718

 

 

 

798

 

 

 

1,329

 

 

 

1,577

 

Total revenues

 

 

16,131

 

 

 

16,294

 

 

 

32,651

 

 

 

33,523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of managed IT systems and services

 

 

6,348

 

 

 

6,650

 

 

 

13,195

 

 

 

13,462

 

Cost of professional sales services

 

 

995

 

 

 

950

 

 

 

1,985

 

 

 

1,970

 

Cost of equipment sales and services

 

 

148

 

 

 

320

 

 

 

271

 

 

 

577

 

Total cost of revenues

 

 

7,491

 

 

 

7,920

 

 

 

15,451

 

 

 

16,009

 

Gross profit

 

 

8,640

 

 

 

8,374

 

 

 

17,200

 

 

 

17,514

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

9,192

 

 

 

8,823

 

 

 

18,148

 

 

 

19,141

 

Research and development

 

 

170

 

 

 

183

 

 

 

314

 

 

 

365

 

Total operating expenses

 

 

9,362

 

 

 

9,006

 

 

 

18,462

 

 

 

19,506

 

Operating loss

 

 

(722)

 

 

(632)

 

 

(1,262)

 

 

(1,992)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and financing costs

 

 

(71)

 

 

(153)

 

 

(206)

 

 

(414)

Interest and other income, net

 

 

(23)

 

 

(11)

 

 

27

 

 

 

16

 

Gain on forgiveness of PPP loan

 

 

3,646

 

 

 

-

 

 

 

3,646

 

 

 

-

 

Gain on sale of equity in EECP Global

 

 

-

 

 

 

110

 

 

 

-

 

 

 

110

 

Total other (expense) income, net

 

 

3,552

 

 

 

(54)

 

 

3,467

 

 

 

(288)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

2,830

 

 

 

(686)

 

 

2,205

 

 

 

(2,280)

Income tax (expense) benefit

 

 

(50)

 

 

(11)

 

 

(68)

 

 

108

 

Net income (loss)

 

 

2,780

 

 

 

(697)

 

 

2,137

 

 

 

(2,172)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation income (loss)

 

 

51

 

 

 

(14)

 

 

30

 

 

 

(79)

Comprehensive income (loss)

 

$2,831

 

 

$(711)

 

$2,167

 

 

$(2,251)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- basic and diluted

 

$0.02

 

 

$(0.00)

 

$0.01

 

 

$(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- basic

 

 

171,438

 

 

 

169,746

 

 

 

171,139

 

 

 

169,071

 

- diluted

 

 

173,582

 

 

 

169,746

 

 

 

172,211

 

 

 

169,071

 

  

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

   

 
Page 4

Table of Contents

    

Vaso Corporation and Subsidiaries 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

-Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at January 1, 2020

 

 

183,744

 

 

$184

 

 

 

(10,308)

 

 

(2,000)

 

$63,803

 

 

$(57,360)

 

$(313)

 

$4,314

 

Share-based compensation

 

 

1,000

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

26

 

 

 

-

 

 

 

-

 

 

 

27

 

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(65)

 

 

(65)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,475)

 

 

-

 

 

 

(1,475)

Balance at March 31, 2020 (unaudited)

 

 

184,744

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,829

 

 

$(58,835)

 

$(378)

 

$2,801

 

Share-based compensation

 

 

224

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

27

 

 

 

-

 

 

 

-

 

 

 

27

 

Reclassify accumulated translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

187

 

 

 

187

 

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(14)

 

 

(14)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(697)

 

 

-

 

 

 

(697)

Balance at June 30, 2020 (unaudited)

 

 

184,968

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,856

 

 

$(59,532)

 

$(205)

 

$2,304

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

 

 

185,244

 

 

$185

 

 

 

(10,308)

 

 

(2,000)

 

$63,886

 

 

$(57,002)

 

$16

 

 

$5,085

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9

 

 

 

-

 

 

 

-

 

 

 

9

 

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(21)

 

 

(21)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(643)

 

 

-

 

 

 

(643)

Balance at March 31, 2021 (unaudited)

 

 

185,244

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,895

 

 

$(57,645)

 

$(5)

 

$4,430

 

Share-based compensation

 

 

192

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8

 

 

 

-

 

 

 

-

 

 

 

8

 

Foreign currency translation gain

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

51

 

 

 

51

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,780

 

 

 

-

 

 

 

2,780

 

Balance at June 30, 2021 (unaudited)

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,903

 

 

$(54,865)

 

$46

 

 

$7,269

 

 

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

 

 
Page 5

Table of Contents

     

Vaso Corporation and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

  

 

 

 Six months ended

 June 30, 

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

(unaudited)

 

 

(unaudited)

 

Net income (loss)

 

$2,137

 

 

$(2,172)

Adjustments to reconcile net income (loss) to net cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,124

 

 

 

1,251

 

Deferred income taxes

 

 

-

 

 

 

(122)

Loss from investment in EECP Global

 

 

20

 

 

 

39

 

Gain on forgiveness of PPP loan

 

 

(3,646)

 

 

-

 

Gain on sale of equity in EECP Global

 

 

-

 

 

 

(110)

Provision for doubtful accounts and commission adjustments

 

 

455

 

 

 

295

 

Write-down of inventory

 

 

175

 

 

 

-

 

Share-based compensation

 

 

17

 

 

 

54

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and other receivables

 

 

5,792

 

 

 

10,971

 

Due from related parties

 

 

-

 

 

 

(85)

Inventories

 

 

134

 

 

 

158

 

Deferred commission expense

 

 

(22)

 

 

714

 

Prepaid expenses and other current assets

 

 

271

 

 

 

53

 

Other assets, net

 

 

(151)

 

 

(359)

Accounts payable

 

 

(2,753)

 

 

(2,171)

Accrued commissions

 

 

(1,087)

 

 

(1,322)

Accrued expenses and other liabilities

 

 

1,331

 

 

 

(946)

Sales tax payable

 

 

(59)

 

 

(219)

Deferred revenue

 

 

1,963

 

 

 

(2,094)

Due to related party

 

 

(205)

 

 

(15)

Other long-term liabilities

 

 

97

 

 

 

94

 

Net cash provided by operating activities

 

 

5,593

 

 

 

4,014

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of equipment and software

 

 

(124)

 

 

(434)

Redemption of short-term investments

 

 

155

 

 

 

-

 

Proceeds from sale of equity in EECP Global

 

 

-

 

 

 

1,150

 

Net cash provided by investing activities

 

 

31

 

 

 

716

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Repayment on revolving lines of credit

 

 

(1,575)

 

 

(1,325)

Proceeds from notes payable

 

 

-

 

 

 

3,752

 

Repayment of notes payable and finance lease obligations

 

 

(1,526)

 

 

(1,581)

Repayment of notes payable - related parties

 

 

-

 

 

 

(718)

Net cash (used in) provided by financing activities

 

 

(3,101)

 

 

128

 

Effect of exchange rate differences on cash and cash equivalents

 

 

65

 

 

 

(38)

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

2,588

 

 

 

4,820

 

Cash and cash equivalents - beginning of period

 

 

6,819

 

 

 

2,124

 

Cash and cash equivalents - end of period

 

$9,407

 

 

$6,944

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION

 

 

 

 

 

 

 

 

Interest paid

 

$242

 

 

$454

 

Income taxes paid

 

$97

 

 

$28

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Initial recognition of operating lease right of use asset and liability

 

$251

 

 

$513

 

 

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

 

 
Page 6

Table of Contents

 

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.

 

 

·

IT segment, operating through a wholly-owned subsidiary VasoTechnology, Inc., primarily focuses on healthcare IT and managed network technology services;

 

 

 

 

·

Professional sales service segment, operating through a wholly-owned subsidiary Vaso Diagnostics, Inc. d/b/a VasoHealthcare, primarily focuses on the sale of healthcare capital equipment for General Electric Healthcare (“GEHC”) into the healthcare provider middle market; and

 

 

 

 

·

Equipment segment, operating through a wholly-owned subsidiary VasoMedical, Inc., primarily focuses on the design, manufacture, sale and service of proprietary medical devices and software.

  

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 division. Its current offerings include:

 

 

·

Managed radiology and imaging applications (channel partner of select vendors of healthcare IT products).

 

·

Managed network infrastructure (routers, switches and other core equipment).

 

·

Managed network transport (FCC licensed carrier reselling over 175 facility partners).

 

·

Managed security services.

  

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 (“GE”), 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:

 

 

·

GEHC diagnostic imaging capital equipment.

 

·

GEHC service agreements for the above equipment.

 

·

GEHC training services for use of the above equipment.

 

·

GEHC and third party financial services.

 

 
Page 7

Table of Contents

 

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 (see Note M). These devices are primarily for cardiovascular monitoring and diagnostic systems. Its current offerings consist of:

 

 

·

Biox™ series Holter monitors and ambulatory blood pressure recorders.

 

·

ARCS® series analysis, reporting and communication software for ECG and blood pressure signals.

 

·

MobiCare™ multi-parameter wireless vital-sign monitoring system.

 

·

EECP® therapy systems for non-invasive, outpatient treatment of ischemic heart disease.

  

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.

 

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, 2020, as filed with the SEC on May 5, 2021.

 

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 and Recent Accounting Pronouncements

 

Recently Adopted Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how we determine our allowance for estimated uncollectible receivables. In November 2019, the FASB issued ASU 2019-10, which changed the effective date of ASU 2016-13 for smaller reporting companies as defined by the SEC from first quarter of 2020 to the first quarter of 2023, with early adoption permitted. We are currently evaluating the effect that ASU 2016-13 will have on our consolidated financial statements and related disclosures.

 

 
Page 8

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

      

Prior Periods’ Financial Statement Revisions

 

As disclosed in our 2020 Annual Report, we identified certain misstatements in our previously issued financial statements. The misstatements included misappropriation of funds by a mid-level management employee and partially recording certain regulatory fees billed to our customers as revenue. We assessed the materiality of the misstatements on prior periods’ financial statements in accordance with SEC Staff Accounting Bulletin (“SAB”) Topic 1.M, Materiality, codified in Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections, (“ASC 250”) and concluded that the misstatements were not material to the prior annual or interim periods. However, in our 2020 Annual Report, we revised our previously issued 2019 consolidated financial statements to correct for these misstatements.

 

In connection with the filing of this Quarterly Report, we have revised the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), Cash Flows, and Changes in Stockholders’ Equity for the three and six months ended June 30, 2020, and the related notes to revise for those misstatements that impacted such periods. We will revise the remaining previously issued 2020 quarterly financial statements in connection with corresponding 2021 quarterly filings on Form 10-Q in the future.

 

 

 

Consolidated Statement of Operations and

Comprehensive Income (Loss)

 

 

Consolidated Statement of Operations and

Comprehensive Income (Loss)

 

 

 

Three months ended June 30, 2020 (unaudited)

 

 

Six months ended June 30, 2020 (unaudited)

 

(in thousands, except per share data)

 

As Reported

 

 

Adjustment

 

 

As Revised

 

 

As Reported

 

 

Adjustment

 

 

As Revised

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Managed IT systems and services

 

$10,822

 

 

$(46)

 

$10,776

 

 

$22,161

 

 

$(102)

 

$22,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit - IT segment

 

 

4,172

 

 

 

(46)

 

 

4,126

 

 

 

8,699

 

 

 

(102)

 

 

8,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

8,769

 

 

 

54

 

 

 

8,823

 

 

 

19,035

 

 

 

106

 

 

 

19,141

 

Operating loss

 

$(532)

 

$(100)

 

$(632)

 

$(1,784)

 

$(208)

 

$(1,992)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(597)

 

$(100)

 

$(697)

 

$(1,964)

 

$(208)

 

$(2,172)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

$(611)

 

$(100)

 

$(711)

 

$(2,043)

 

$(208)

 

$(2,251)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- basic and diluted

 

$(0.01)

 

$(0.00)

 

$(0.00)

 

$(0.01)

 

$(0.00)

 

$(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Cash Flows 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2020 (unaudited)

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

As Reported

 

 

Adjustment

 

 

As Revised

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

$(1,964)

 

$(208)

 

$(2,172)

Accounts payable

 

 

 

 

 

 

 

 

 

 

 

 

 

$(2,379)

 

$208

 

 

$(2,171)

 

 
Page 9

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Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

      

 

 

Consolidated Statement of Changes in Stockholders’ Equity

 

 

 

Accumulated Deficit

 

 

Total Stockholders’ Equity

 

(in thousands)

 

As Reported

 

 

Adjustment

 

 

As Revised

 

 

As Reported

 

 

Adjustment

 

 

As Revised

 

Balance at January 1, 2020

 

$(55,885)

 

$(1,475)

 

$(57,360)

 

$5,789

 

 

$(1,475)

 

$4,314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(1,367)

 

$(108)

 

$(1,475)

 

$(1,367)

 

$(108)

 

$(1,475)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020 (unaudited)

 

$(57,252)

 

$(1,583)

 

$(58,835)

 

$4,384

 

 

$(1,583)

 

$2,801

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(597)

 

$(100)

 

$(697)

 

$(597)

 

$(100)

 

$(697)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2020 (unaudited)

 

$(57,849)

 

$(1,683)

 

$(59,532)

 

$3,987

 

 

$(1,683)

 

$2,304

 

  

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 June 30, 2021 (unaudited)

 

 

Three Months Ended June 30, 2020 (unaudited)

 

 

 

 

 

 

Professional

 

 

 

 

 

 

 

 

 

 

Professional

 

 

 

 

 

 

 

 

IT segment

 

 

sales service

segment

 

 

Equipment

segment

 

 

Total

 

 

IT segment

 

 

sales service

segment

 

 

Equipment

segment

 

 

Total

 

Network services

 

$9,371

 

 

$-

 

 

$-

 

 

$9,371

 

 

$

9,555

 

 

$-

 

 

$-

 

 

$9,555

 

Software sales and support

 

 

1,071

 

 

 

-

 

 

 

-

 

 

 

1,071

 

 

 

1,221

 

 

 

-

 

 

 

-

 

 

 

1,221

 

Commissions

 

 

-

 

 

 

4,971

 

 

 

-

 

 

 

4,971

 

 

 

-

 

 

 

4,720

 

 

 

-

 

 

 

4,720

 

Medical equipment sales

 

 

-

 

 

 

-

 

 

 

686

 

 

 

686

 

 

 

-

 

 

 

-

 

 

 

598

 

 

 

598

 

Medical equipment service

 

 

-

 

 

 

-

 

 

 

32

 

 

 

32

 

 

 

-

 

 

 

-

 

 

 

200

 

 

 

200

 

 

 

$10,442

 

 

$4,971

 

 

$718

 

 

$16,131

 

 

$10,776

 

 

$4,720

 

 

$798

 

 

$16,294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2021 (unaudited)

 

 

 

Six Months Ended June 30, 2020 (unaudited) 

 

 

 

 

 

 

 

Professional

 

 

 

 

 

 

 

 

 

 

 

 

Professional

 

 

 

 

 

 

 

 

 

IT segment

 

 

sales service

segment

 

 

Equipment

segment

 

 

Total

 

 

IT segment

 

 

sales service

segment

 

 

Equipment

segment

 

 

Total

 

Network services

 

$19,490

 

 

$-

 

 

$-

 

 

$19,490

 

 

$19,931

 

 

$-

 

 

$-

 

 

$19,931

 

Software sales and support

 

 

2,206

 

 

 

-

 

 

 

-

 

 

 

2,206

 

 

 

2,128

 

 

 

-

 

 

 

-

 

 

 

2,128

 

Commissions

 

 

-

 

 

 

9,626

 

 

 

-

 

 

 

9,626

 

 

 

-

 

 

 

9,887

 

 

 

-

 

 

 

9,887

 

Medical equipment sales

 

 

-

 

 

 

-

 

 

 

1,263

 

 

 

1,263

 

 

 

-

 

 

 

-

 

 

 

1,169

 

 

 

1,169

 

Medical equipment service

 

 

-

 

 

 

-

 

 

 

66

 

 

 

66

 

 

 

-

 

 

 

-

 

 

 

408

 

 

 

408

 

 

 

$21,696

 

 

$9,626

 

 

$1,329

 

 

$32,651

 

 

$22,059

 

 

$9,887

 

 

$1,577

 

 

 

33,523

 

 

 
Page 10

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

      

 

 

Three Months Ended June 30, 2021 (unaudited)

 

 

Three Months Ended June 30, 2020 (unaudited)

 

 

 

 

 

 

Professional

 

 

 

 

 

 

 

 

 

 

 

Professional

 

 

 

 

 

 

 

 

 

IT segment

 

 

sales service

segment

 

 

Equipment

segment

 

 

Total

 

 

IT segment

 

 

sales service

segment

 

 

Equipment

segment

 

 

Total

 

Revenue recognized over time

 

$9,246

 

 

$-

 

 

$31

 

 

$9,277

 

 

$9,762

 

 

$-

 

 

$165

 

 

$9,927

 

Revenue recognized at a point in time

 

 

1,196

 

 

 

4,971

 

 

 

687

 

 

 

6,854

 

 

 

1,014

 

 

 

4,720

 

 

 

633

 

 

 

6,367

 

 

 

$10,442

 

 

$4,971

 

 

$718

 

 

$16,131

 

 

$10,776

 

 

$4,720

 

 

$798

 

 

$16,294

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2021 (unaudited)

 

 

Six Months Ended June 30, 2020 (unaudited)

 

 

 

 

 

 

 

Professional

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional

 

 

 

 

 

 

 

 

 

 

IT segment

 

 

sales service

segment

 

 

Equipment

segment

 

 

Total

 

 

IT segment

 

 

sales service segment

 

 

Equipment

segment

 

 

Total

 

Revenue recognized over time

 

$19,271

 

 

$-

 

 

$63

 

 

$19,334

 

 

$20,257

 

 

$-

 

 

$305

 

 

$20,562

 

Revenue recognized at a point in time

 

 

2,425

 

 

 

9,626

 

 

 

1,266

 

 

 

13,317

 

 

 

1,802

 

 

 

9,887

 

 

 

1,272

 

 

 

12,961

 

 

 

$21,696

 

 

$9,626

 

 

$1,329

 

 

$32,651

 

 

$22,059

 

 

$9,887

 

 

$1,577

 

 

$33,523

 

 

Transaction Price Allocated to Remaining Performance Obligations

 

As of June 30, 2021, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $67.8 million, of which we expect to recognize revenue as follows:

 

 

 

(in thousands)

 

 

 

Fiscal years of revenue recognition (unaudited)

 

 

 

remainder of 2021

 

 

2022

 

 

2023

 

 

Thereafter

 

Unfulfilled performance obligations

 

$24,710

 

 

$23,897

 

 

$8,499

 

 

$10,664

 

    

Contract Liabilities

 

Contract liabilities arise in our healthcare IT, VasoHealthcare, and VasoMedical businesses. In our healthcare IT 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 $378,000 and $553,000 at June 30, 2021 and December 31, 2020, 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 $19,655,000 and $17,689,000 at June 30, 2021 and December 31, 2020, 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 $1,194,000 and $1,118,000 at June 30, 2021 and December 31, 2020, 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 $12,000 and $15,000 at June 30, 2021 and December 31, 2020, respectively, and are classified in our condensed consolidated balance sheets as either current or long-term deferred revenue.

 

During the three and six months ended June 30, 2021, we recognized approximately $3.0 million and $1.9 million of revenues, respectively, that were included in our contract liability balance at January 1, 2021 and April 1, 2021, respectively.

 

 
Page 11

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

       

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.

 

 

·

IT segment, operating through a wholly-owned subsidiary VasoTechnology, Inc., primarily focuses on healthcare IT and managed network technology services;

 

 

 

 

·

Professional sales service segment, operating through a wholly-owned subsidiary Vaso Diagnostics, Inc. d/b/a VasoHealthcare, primarily focuses on the sale of healthcare capital equipment for GEHC into the healthcare provider middle market; and

 

 

 

 

·

Equipment segment, operating through a wholly-owned subsidiary VasoMedical, Inc., primarily focuses on the design, manufacture, sale and service of proprietary 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 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 June 30,

 

 

Six Months ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues from external customers

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$10,442

 

 

$10,776

 

 

$21,696

 

 

$22,059

 

Professional sales service

 

 

4,971

 

 

 

4,720

 

 

 

9,626

 

 

 

9,887

 

Equipment

 

 

718

 

 

 

798

 

 

 

1,329

 

 

 

1,577

 

Total revenues

 

$16,131

 

 

$16,294

 

 

$32,651

 

 

$33,523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$4,094

 

 

$4,126

 

 

$8,501

 

 

$8,597

 

Professional sales service

 

 

3,976

 

 

 

3,770

 

 

 

7,641

 

 

 

7,917

 

Equipment

 

 

570

 

 

 

478

 

 

 

1,058

 

 

 

1,000

 

Total gross profit

 

$8,640

 

 

$8,374

 

 

$17,200

 

 

$17,514

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$(246)

 

$(695)

 

$(179)

 

$(1,287)

Professional sales service

 

 

(47)

 

 

310

 

 

 

(382)

 

 

(123)

Equipment

 

 

(128)

 

 

(94)

 

 

(115)

 

 

(143)

Corporate

 

 

(301)

 

 

(153)

 

 

(586)

 

 

(439)

Total operating income (loss)

 

$(722)

 

$(632)

 

$(1,262)

 

$(1,992)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$415

 

 

$510

 

 

$901

 

 

$1,017

 

Professional sales service

 

 

38

 

 

 

45

 

 

 

76

 

 

 

86

 

Equipment

 

 

75

 

 

 

73

 

 

 

147

 

 

 

148

 

Corporate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total depreciation and amortization

 

$528

 

 

$628

 

 

$1,124

 

 

$1,251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$62

 

 

$261

 

 

$86

 

 

$417

 

Professional sales service

 

 

3

 

 

 

2

 

 

 

3

 

 

 

2

 

Equipment

 

 

-

 

 

 

-

 

 

 

36

 

 

 

13

 

Corporate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2

 

Total cash capital expenditures

 

$65

 

 

$263

 

 

$124

 

 

$434

 

 

 
Page 12

Table of Contents

    

 

 

(in thousands)

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

Identifiable Assets

 

 

 

 

 

 

IT

 

$25,714

 

 

$28,110

 

Professional sales service

 

 

5,792

 

 

 

9,171

 

Equipment

 

 

6,387

 

 

 

6,668

 

Corporate

 

 

7,150

 

 

 

6,427

 

Total assets

 

$45,043

 

 

$50,376

 

 

GE Healthcare acco nted for 31% and 29% of revenue for the three months ended June 30, 2021 and 2020, respectively, and 29% of revenue for each of the six-month periods ended June 30, 2021 and 2020. GE Healthcare also accounted for $0.9 million or 26%, and $5.1 million or 52%, of accounts and other receivables at June 30, 2021 and December 31, 2020, respectively. No other customer accounted for 10% or more of revenue.

   

NOTE E –NET INCOME (LOSS) PER COMMON SHARE

 

Basic earnings 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 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 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)

 

 

 

For the three months ended June 30,

 

 

For the six months ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Basic weighted average shares outstanding

 

 

171,438

 

 

 

169,746

 

 

 

171,139

 

 

 

169,071

 

Dilutive effect of unvested restricted shares

 

 

2,144

 

 

 

-

 

 

 

1,072

 

 

 

-

 

Diluted weighted average shares outstanding

 

 

173,582

 

 

 

169,746

 

 

 

172,211

 

 

 

169,071

 

 

The following table represents common stock equivalents that were excluded from the computation of diluted earnings per share for the three and six months ended June 30, 2021 and 2020, because the effect of their inclusion would be anti-dilutive.

 

 

(in thousands)

 

 

 

Three and six months ended June 30,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

Restricted common stock grants

 

 

9

 

 

 

4,874

 

   

 

 
Page 13

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

NOTE F – ACCOUNTS AND OTHER RECEIVABLES, NET

 

The following table presents information regarding the Company’s accounts and other receivables as of June 30, 2021 and December 31, 2020:

 

(in thousands)

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

Trade receivables

 

$7,436

 

 

$13,960

 

Unbilled receivables

 

 

910

 

 

 

-

 

Due from employees

 

 

-

 

 

 

24

 

Allowance for doubtful accounts and commission adjustments

 

 

(4,813)

 

 

(4,208)

Accounts and other receivables, net

 

$3,533

 

 

$9,776

 

     

Contract receivables under Topic 606 consist of trade receivables and unbilled receivables. Trade receivables include amounts due for shipped products and services rendered. Unbilled receivables represent variable consideration recognized in accordance with Topic 606 but not yet billable. Amounts recorded – billed and unbilled - 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 G – INVENTORIES, NET

 

Inventories, net of reserves, consist of the following:

 

(in thousands)

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

Raw materials

 

$775

 

 

$669

 

Work in process

 

 

32

 

 

 

4

 

Finished goods

 

 

490

 

 

 

711

 

 

 

$1,297

 

 

$1,384

 

 

The Company maintained reserves for slow moving inventories of $166,000 and $167,000 at June 30, 2021 and December 31, 2020, respectively.

 

NOTE H – GOODWILL AND OTHER INTANGIBLES

 

Goodwill of $14,375,000 is allocated to the IT segment. The remaining $1,327,000 of goodwill is attributable to the FGE reporting unit within the Equipment segment. The NetWolves and FGE reporting units had negative net asset carrying amounts at June 30, 2021 and December 31, 2020. The components of the change in goodwill are as follows:

 

 

 

(in thousands)

 

 

 

Six months ended

 

 

Year ended

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

 

Beginning of period

 

$15,688

 

 

$17,271

 

Foreign currency translation adjustment

 

 

14

 

 

 

82

 

Sale of equity in EECP Global

 

 

-

 

 

 

(1,665)

End of period

 

$15,702

 

 

$15,688

 

  

 
Page 14

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

    

The Company’s other intangible assets consist of capitalized customer-related intangibles, patent and technology costs, and software costs, as set forth in the following:

 

(in thousands)

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

Customer-related

 

 

 

 

 

 

Costs

 

$5,831

 

 

$5,831

 

Accumulated amortization

 

 

(4,113)

 

 

(3,947)

 

 

 

1,718

 

 

 

1,884

 

 

 

 

 

 

 

 

 

 

Patents and Technology

 

 

 

 

 

 

 

 

Costs

 

 

1,894

 

 

 

1,894

 

Accumulated amortization

 

 

(1,637)

 

 

(1,521)

 

 

 

257

 

 

 

373

 

 

 

 

 

 

 

 

 

 

Software

 

 

 

 

 

 

 

 

Costs

 

 

3,422

 

 

 

3,394

 

Accumulated amortization

 

 

(1,848)

 

 

(1,702)

 

 

 

1,574

 

 

 

1,692

 

 

 

 

 

 

 

 

 

 

 

 

$3,549

 

 

$3,949

 

   

Patents and technology are amortized on a straight-line basis over their estimated useful lives of ten and eight years, respectively. The cost of significant customer-related intangibles is amortized in proportion to estimated total related revenue; cost of other customer-related intangible assets is amortized on a straight-line basis over the asset’s estimated economic life of seven years. Software costs are amortized on a straight-line basis over its expected useful life of five years.

 

Amortization expense amounted to $214,000 and $226,000 for the three months ended June 30, 2021 and 2020, respectively and $428,000 and $458,000 for the six months ended June 30, 2021 and 2020, respectively.

 

 
Page 15

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Amortization of intangibles for the next five years is:

 

 

(in thousands)

 

Years ending December 31,

 

(unaudited)

 

Remainder of 2021

 

 

634

 

2022

 

 

778

 

2023

 

 

554

 

2024

 

 

485

 

2025

 

 

418

 

 

 

$2,869

 

    

NOTE I – OTHER ASSETS, NET

 

Other assets, net consist of the following at June 30, 2021 and December 31, 2020:

 

 

 

(in thousands)

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

Deferred commission expense - noncurrent

 

$1,910

 

 

$1,683

 

Trade receivables - noncurrent

 

 

384

 

 

 

448

 

Other, net of allowance for loss on loan receivable of  $412 at June 30, 2021 and December 31, 2020

 

 

64

 

 

 

59

 

 

 

$2,358

 

 

$2,190

 

   

NOTE J – ACCRUED EXPENSES AND OTHER LIABILITIES

 

Accrued expenses and other liabilities consist of the following at June 30, 2021 and December 31, 2020:

 

(in thousands)

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

Accrued compensation

 

$1,048

 

 

$1,044

 

Accrued expenses - other

 

 

1,693

 

 

 

1,854

 

Other liabilities

 

 

3,573

 

 

 

1,969

 

 

 

$6,314

 

 

$4,867

 

 

 
Page 16

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

      

NOTE K - DEFERRED REVENUE

 

The changes in the Company’s deferred revenues are as follows:

 

 

 

(in thousands)

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Deferred revenue at beginning of period

 

$18,484

 

 

$18,675

 

 

$17,704

 

 

$19,343

 

Deconsolidate EECP Global

 

 

-

 

 

 

(769)

 

 

-

 

 

 

(769)

Net additions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred extended service contracts

 

 

-

 

 

 

-

 

 

 

(1)

 

 

142

 

Deferred in-service and training

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3

 

Deferred service arrangements

 

 

-

 

 

 

-

 

 

 

-

 

 

 

5

 

Deferred commission revenues

 

 

3,092

 

 

 

475

 

 

 

5,705

 

 

 

1,879

 

Recognized as revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred extended service contracts

 

 

(1)

 

 

(1)

 

 

(2)

 

 

(137)

Deferred in-service and training

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Deferred service arrangements

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5)

Deferred commission revenues

 

 

(1,908)

 

 

(1,900)

 

 

(3,739)

 

 

(3,981)

Deferred revenue at end of period

 

 

19,667

 

 

 

16,480

 

 

 

19,667

 

 

 

16,480

 

Less: current portion

 

 

12,613

 

 

 

9,187

 

 

 

12,613

 

 

 

9,187

 

Long-term deferred revenue at end of period

 

$7,054

 

 

$7,293

 

 

$7,054

 

 

$7,293

 

   

 

NOTE L – NOTES PAYABLE

 

Notes payable consist of the following:

 

(in thousands)

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

Line of credit

 

$2,771

 

 

$4,346

 

Notes payable

 

 

35

 

 

 

3,803

 

Notes payable - MedTech

 

 

2,350

 

 

 

3,600

 

Total debt

 

 

5,156

 

 

 

11,749

 

Less: current portion

 

 

(5,129)

 

 

(5,970)

 

 

$27

 

 

$5,779

 

  

 

NetWolves maintains a $4.0 million line of credit with a lending institution. In March 2021, the line’s expiration date was extended to June 30, 2022 upon repayment of $825,000 and subsequent quarterly payments of $