vaso_10q.htm

0001654954-21-012209.txt : 20211115 0001654954-21-012209.hdr.sgml : 20211115 20211115160736 ACCESSION NUMBER: 0001654954-21-012209 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 75 CONFORMED PERIOD OF REPORT: 20210930 FILED AS OF DATE: 20211115 DATE AS OF CHANGE: 20211115 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: 211410459 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 QUARTERLY REPORT 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 September 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 November 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 September 30, 2021 (unaudited) and December 31, 2020		3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited) for the Three and Nine Months Ended September 30, 2021 and 2020		4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) for the Three and Nine Months Ended September 30, 2021 and 2020		5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) for the Nine Months Ended September 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 5 – OTHER INFORMATION		29
ITEM 6 – EXHIBITS		30

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PART I – FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

Vaso Corporation and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	September 30, 2021			December 31, 2020
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	6,190		$	6,819
Short-term investments		620			766
Accounts and other receivables, net of an allowance for doubtful accounts and commission adjustments of $4,913 at September 30, 2021 and $4,208 at December 31, 2020		6,567			9,776
Receivables due from related parties		100			18
Inventories		1,419			1,384
Deferred commission expense		2,944			2,354
Prepaid expenses and other current assets		712			1,151
Total current assets		18,552			22,268

Property and equipment, net of accumulated depreciation of $9,823 at September 30, 2021 and $8,833 at December 31, 2020		3,022			3,885
Operating lease right of use assets		993			1,009
Goodwill		15,704			15,688
Intangibles, net		3,337			3,949
Other assets, net		2,130			2,190
Investment in EECP Global		1,081			1,116
Deferred tax assets, net		271			271
Total assets	$	45,090		$	50,376

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	2,719		$	6,285
Accrued commissions		1,558			1,474
Accrued expenses and other liabilities		7,292			4,867
Finance lease liabilities - current		228			190
Operating lease liabilities - current		615			540
Sales tax payable		532			621
Deferred revenue - current portion		13,365			11,516
Notes payable - current portion		2,429			5,970
Due to related party		3			236
Total current liabilities		28,741			31,699

LONG-TERM LIABILITIES
Notes payable, net of current portion		25			5,779
Finance lease liabilities, net of current portion		269			246
Operating lease liabilities, net of current portion		378			469
Deferred revenue, net of current portion		6,820			6,188
Other long-term liabilities		918			910
Total long-term liabilities		8,410			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 September 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 September 30, 2021 and December 31, 2020; 175,127,878 and 174,936,212 shares outstanding at September 30, 2021 and December 31, 2020		185			185
Additional paid-in capital		63,911			63,886
Accumulated deficit		(54,214	)		(57,002	)
Accumulated other comprehensive income		57			16
Treasury stock, at cost, 10,308,087 shares at September 30, 2021 and December 31, 2020		(2,000	)		(2,000	)
Total stockholders’ equity		7,939			5,085
	$	45,090		$	50,376

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

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Vaso Corporation and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

	Three months ended						Nine months ended
	September 30,						September 30,
	2021			2020			2021			2020
Revenues	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Managed IT systems and services	$	10,580		$	10,733		$	32,275		$	32,792
Professional sales services		7,246			5,801			16,872			15,688
Equipment sales and services		603			900			1,932			2,477
Total revenues		18,429			17,434			51,079			50,957

Cost of revenues
Cost of managed IT systems and services		6,341			6,350			19,536			19,812
Cost of professional sales services		1,692			1,092			3,677			3,062
Cost of equipment sales and services		136			213			407			790
Total cost of revenues		8,169			7,655			23,620			23,664
Gross profit		10,260			9,779			27,459			27,293

Operating expenses
Selling, general and administrative		9,501			8,495			27,646			27,636
Research and development		123			174			437			539
Total operating expenses		9,624			8,669			28,083			28,175
Operating income (loss)		636			1,110			(624	)		(882	)

Other (expense) income
Interest and financing costs		(61	)		(145	)		(267	)		(558	)
Interest and other income, net		95			48			120			63
Gain on forgiveness of PPP loan		-			-			3,646			-
Gain on sale of equity in EECP Global		-			-			-			110
Total other (expense) income, net		34			(97	)		3,499			(385	)

Income (loss) before income taxes		670			1,013			2,875			(1,267	)
Income tax (expense) benefit		(19	)		(11	)		(87	)		97
Net income (loss)		651			1,002			2,788			(1,170	)

Other comprehensive income
Foreign currency translation income (loss)		11			118			41			39
Comprehensive income (loss)	$	662		$	1,120		$	2,829		$	(1,131	)

Income (loss) per common share
- basic and diluted	$	0.00		$	0.01		$	0.02		$	(0.01	)

Weighted average common shares outstanding
- basic		172,228			170,515			171,506			169,279
- diluted		174,196			171,167			173,562			169,279

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

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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
Share-based compensation		55		-		-			-			16		-			-			16
Foreign currency translation gain		-		-		-			-			-		-			118			118
Net income		-		-		-			-			-		1,002			-			1,002
Balance at September 30, 2020 (unaudited)		185,023	$	185		(10,308	)	$	(2,000	)	$	63,872	$	(58,530	)	$	(87	)	$	3,440

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
Share-based compensation		-		-		-			-			8		-			-			8
Foreign currency translation gain		-		-		-			-			-		-			11			11
Net income		-		-		-			-			-		651			-			651
Balance at September 30, 2021 (unaudited)		185,436	$	185		(10,308	)	$	(2,000	)	$	63,911	$	(54,214	)	$	57		$	7,939

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

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Vaso Corporation and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine months ended
	September 30,
	2021			2020
Cash flows from operating activities	(unaudited)			(unaudited)
Net income (loss)	$	2,788		$	(1,170	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization		1,748			1,861
Deferred income taxes		-			(124	)
Loss from investment in EECP Global		35			17
Gain on forgiveness of PPP loan		(3,646	)		-
Gain on sale of equity in EECP Global		-			(110	)
Provision for doubtful accounts and commission adjustments		545			425
Write-down of inventory		282			-
Share-based compensation		25			69
Changes in operating assets and liabilities:
Accounts and other receivables		2,669			8,615
Due from related parties		(80	)		(29	)
Inventories		13			107
Deferred commission expense		(589	)		770
Prepaid expenses and other current assets		441			37
Other assets, net		81			(126	)
Accounts payable		(3,569	)		(1,955	)
Accrued commissions		146			(1,171	)
Accrued expenses and other liabilities		2,388			(376	)
Sales tax payable		(89	)		(204	)
Deferred revenue		2,480			(1,923	)
Due to related party		(233	)		(15	)
Other long-term liabilities		9			36
Net cash provided by operating activities		5,444			4,734

Cash flows from investing activities
Purchases of equipment and software		(367	)		(635	)
Redemption of short-term investments		155			-
Proceeds from sale of equity in EECP Global		-			1,150
Net cash (used in) provided by investing activities		(212	)		515

Cash flows from financing activities
Repayment on revolving lines of credit		(3,025	)		(1,351	)
Proceeds from notes payable		-			3,754
Payroll taxes paid by withholding shares		-			(1	)
Repayment of notes payable and finance lease obligations		(2,823	)		(1,615	)
Repayment of notes payable - related parties		-			(1,252	)
Net cash (used in) provided by financing activities		(5,848	)		(465	)
Effect of exchange rate differences on cash and cash equivalents		(13	)		(43	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(629	)		4,741
Cash and cash equivalents - beginning of period		6,819			2,124
Cash and cash equivalents - end of period	$	6,190		$	6,865

SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
Interest paid	$	284		$	582
Income taxes paid	$	101		$	65

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Initial recognition of operating lease right of use asset and liability	$	639		$	599
Equipment acquired through note payable	$	-		$	42

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

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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.

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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.

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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 nine months ended September 30, 2020, and the related notes to revise for those misstatements that impacted such periods.

	Consolidated Statement of Operations and Comprehensive Income (Loss)							Consolidated Statement of Operations and Comprehensive Income (Loss)
	Three months ended September 30, 2020 (unaudited)							Nine months ended September 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	$	10,833	$	(100	)	$	10,733	$	32,994		$	(202	)	$	32,792

Gross Profit - IT segment		4,483		(100	)		4,383		13,182			(202	)		12,980

Operating expenses
Selling, general and administrative		8,451		44			8,495		27,486			150			27,636
Operating income/(loss)	$	1,254	$	(144	)	$	1,110	$	(530	)	$	(352	)	$	(882	)

Net income/(loss)	$	1,146	$	(144	)	$	1,002	$	(818	)	$	(352	)	$	(1,170	)

Comprehensive income/(loss)	$	1,264	$	(144	)	$	1,120	$	(779	)	$	(352	)	$	(1,131	)

Income/(loss) per common share
- basic and diluted	$	0.01	$	(0.00	)	$	0.01	$	(0.00	)	$	(0.00	)	$	(0.01	)

									Consolidated Statement of Cash Flows
									Nine months ended September 30, 2020 (unaudited)
(in thousands)								As Reported			Adjustment			As Revised
Net loss								$	(818	)	$	(352	)	$	(1,170	)
Accounts payable								$	(2,307	)	$	352		$	(1,955	)

	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

Net income	$	1,146		$	(144	)	$	1,002		$	1,146		$	(144	)	$	1,002

Balance at September 30, 2020 (unaudited)	$	(56,703	)	$	(1,827	)	$	(58,530	)	$	5,267			(1,827	)	$	3,440

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Notes to Condensed Consolidated Financial Statements (unaudited)

NOTE C – REVENUE RECOGNITION

Disaggregation of Revenue

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

	(in thousands)
	Three Months Ended September 30, 2021 (unaudited)								Three Months Ended September 30, 2020 (unaudited)
			Professional sales service		Equipment						Professional sales service		Equipment
	IT segment		segment		segment		Total		IT segment		segment		segment		Total
Network services	$	9,181	$	-	$	-	$	9,181	$	9,872	$	-	$	-	$	9,872
Software sales and support		1,399		-		-		1,399		861		-		-		861
Commissions		-		7,246		-		7,246		-		5,801		-		5,801
Medical equipment sales		-		-		570		570		-		-		868		868
Medical equipment service		-		-		33		33		-		-		32		32
	$	10,580	$	7,246	$	603	$	18,429	$	10,733	$	5,801	$	900	$	17,434

	Nine Months Ended September 30, 2021 (unaudited)								Nine Months Ended September 30, 2020 (unaudited)
			Professional sales service		Equipment						Professional sales service		Equipment
	IT segment		segment		segment		Total		IT segment		segment		segment		Total
Network services	$	28,670	$	-	$	-	$	28,670	$	29,803	$	-	$	-	$	29,803
Software sales and support		3,605		-		-		3,605		2,989		-		-		2,989
Commissions		-		16,872		-		16,872		-		15,688		-		15,688
Medical equipment sales		-		-		1,835		1,835		-		-		2,038		2,038
Medical equipment service		-		-		97		97		-		-		439		439
	$	32,275	$	16,872	$	1,932	$	51,079	$	32,792	$	15,688	$	2,477		50,957

	Three Months Ended September 30, 2021 (unaudited)								Three Months Ended September 30, 2020 (unaudited)
			Professional sales service		Equipment						Professional sales service		Equipment
	IT segment		segment		segment		Total		IT segment		segment		segment		Total
Revenue recognized over time	$	9,561	$	-	$	76	$	9,637	$	10,083	$	-	$	31	$	10,114
Revenue recognized at a point in time		1,019		7,246		527		8,792		650		5,801		869		7,320
	$	10,580	$	7,246	$	603	$	18,429	$	10,733	$	5,801	$	900	$	17,434

	Nine Months Ended September 30, 2021 (unaudited)								Nine Months Ended September 30, 2020 (unaudited)
			Professional sales service		Equipment						Professional sales service		Equipment
	IT segment		segment		segment		Total		IT segment		segment		segment		Total
Revenue recognized over time	$	28,831	$	-	$	139	$	28,970	$	30,340	$	-	$	336	$	30,676
Revenue recognized at a point in time		3,444		16,872		1,793		22,109		2,452		15,688		2,141		20,281
	$	32,275	$	16,872	$	1,932	$	51,079	$	32,792	$	15,688	$	2,477	$	50,957

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Notes to Condensed Consolidated Financial Statements (unaudited)

Transaction Price Allocated to Remaining Performance Obligations

As of September 30, 2021, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $74.5 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	$	12,467	$	33,350	$	13,757	$	14,959

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 $370,000 and $553,000 at September 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 $20,174,000 and $17,689,000 at September 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 $1,378,000 and $1,118,000 at September 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 $11,000 and $15,000 at September 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 nine months ended September 30, 2021, we recognized approximately $3.0 million and $4.8 million of revenues, respectively, that were included in our contract liability balance at July 1, 2021 and January 1, 2021, respectively.

NOTE D – SEGMENT REPORTING AND CONCENTRATIONS

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

	·	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.

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Notes to Condensed Consolidated Financial Statements (unaudited)

The chief operating decision maker is the Company’s Chief Executive Officer, who, in conjunction with upper management, evaluates segment performance based on operating income and adjusted EBITDA (net income (loss), plus interest expense (income), net; tax expense; depreciation and amortization; and non-cash stock-based compensation). Administrative functions such as finance, human resources, and information technology are centralized and related expenses allocated to each segment. Other costs not directly attributable to operating segments, such as audit, legal, director fees, investor relations, and others, as well as certain assets – primarily cash balances – are reported in the Corporate entity below. There are no intersegment revenues. Summary financial information for the segments is set forth below:

	(in thousands)
	Three months ended September 30,						Nine Months ended September 30,
	2021			2020			2021			2020
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues from external customers
IT	$	10,580		$	10,733		$	32,275		$	32,792
Professional sales service		7,246			5,801			16,872			15,688
Equipment		603			900			1,932			2,477
Total revenues	$	18,429		$	17,434		$	51,079		$	50,957

Gross Profit
IT	$	4,239		$	4,383		$	12,739		$	12,980
Professional sales service		5,554			4,709			13,195			12,626
Equipment		467			687			1,525			1,687
Total gross profit	$	10,260		$	9,779		$	27,459		$	27,293

Operating income (loss)
IT	$	(77	)	$	15		$	(254	)	$	(1,272	)
Professional sales service		1,091			1,161			709			1,038
Equipment		(96	)		142			(212	)		(1	)
Corporate		(282	)		(208	)		(867	)		(647	)
Total operating income (loss)	$	636		$	1,110		$	(624	)	$	(882	)

Depreciation and amortization
IT	$	512		$	500		$	1,413		$	1,517
Professional sales service		39			37			115			123
Equipment		73			73			220			221
Corporate		-			-			-			-
Total depreciation and amortization	$	624		$	610		$	1,748		$	1,861

Capital expenditures
IT	$	238		$	182		$	324		$	600
Professional sales service		-			3			3			5
Equipment		1			-			37			28
Corporate		3			-			3			2
Total cash capital expenditures	$	242		$	185		$	367		$	635

	(in thousands)
	September 30, 2021		December 31, 2020
	(unaudited)
Identifiable Assets
IT	$	25,453	$	28,110
Professional sales service		8,786		9,171
Equipment		6,564		6,668
Corporate		4,287		6,427
Total assets	$	45,090	$	50,376

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Notes to Condensed Consolidated Financial Statements (unaudited)

GE Healthcare accounted for 39% and 33% of revenue for the three months ended September 30, 2021 and 2020, respectively, and 33% and 31% of revenue for the nine months ended September 30, 2021 and 2020, respectively. GE Healthcare also accounted for $3.5 million or 53%, and $5.1 million or