vaso_10q.htm

0001654954-21-009103.txt : 20210816 0001654954-21-009103.hdr.sgml : 20210816 20210816165232 ACCESSION NUMBER: 0001654954-21-009103 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 76 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210816 DATE AS OF CHANGE: 20210816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VASO Corp 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: 211179326 BUSINESS ADDRESS: STREET 1: 137 COMMERCIAL STREET, STE. 200 CITY: PLAINVIEW STATE: NY ZIP: 11803 BUSINESS PHONE: 516-997-4600 MAIL ADDRESS: STREET 1: 137 COMMERCIAL STREET, STE. 200 CITY: PLAINVIEW STATE: NY ZIP: 11803 FORMER COMPANY: FORMER CONFORMED NAME: VASOMEDICAL, INC DATE OF NAME CHANGE: 20120606 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 10-Q 1 vaso_10q.htm PRIMARY DOCUMENT vaso_10q.htm

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 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

Table of Contents

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