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, 2022

 

 

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)

 

(516) 997-4600

Registrant’s Telephone Number

 

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 11, 2022 – 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, 2022 (unaudited) and December 31, 2021

 

3

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021

 

4

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) for the Three and Nine Months Ended September 30, 2022 and 2021

 

5

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) for the Nine Months Ended September 30, 2022 and 2021

 

6

 

 

 

 

 

 

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

7

 

 

 

 

 

 

ITEM 2 -

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

21

 

 

 

 

 

 

ITEM 4 -

CONTROLS AND PROCEDURES

 

29

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

30

 

 

 

 

 

 

ITEM 6 –

EXHIBITS

 

30

 

 

 
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)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$13,283

 

 

$6,025

 

Short-term investments

 

 

5,438

 

 

 

629

 

Accounts and other receivables, net of an allowance for doubtful accounts and commission adjustments of $6,281 at September 30, 2022 and $5,804 at December 31, 2021

 

 

8,594

 

 

 

15,393

 

Receivables due from related parties

 

 

407

 

 

 

66

 

Inventories, net

 

 

1,714

 

 

 

1,147

 

Deferred commission expense

 

 

3,716

 

 

 

3,549

 

Prepaid expenses and other current assets

 

 

1,183

 

 

 

994

 

Total current assets

 

 

34,335

 

 

 

27,803

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of  $9,681 at September 30, 2022 and $10,512 at December 31, 2021

 

 

1,478

 

 

 

2,172

 

Operating lease right of use assets

 

 

1,696

 

 

 

915

 

Goodwill

 

 

15,581

 

 

 

15,722

 

Intangibles, net

 

 

1,600

 

 

 

2,041

 

Other assets, net

 

 

2,791

 

 

 

2,446

 

Investment in EECP Global

 

 

948

 

 

 

1,043

 

Deferred tax assets, net

 

 

219

 

 

 

219

 

Total assets

 

$58,648

 

 

$52,361

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$3,049

 

 

$2,797

 

Accrued commissions

 

 

1,996

 

 

 

2,705

 

Accrued expenses and other liabilities

 

 

8,400

 

 

 

7,489

 

Finance lease liabilities - current

 

 

156

 

 

 

222

 

Operating lease liabilities - current

 

 

770

 

 

 

562

 

Sales tax payable

 

 

716

 

 

 

719

 

Deferred revenue - current portion

 

 

17,525

 

 

 

16,495

 

Notes payable - current portion

 

 

8

 

 

 

8

 

Due to related party

 

 

3

 

 

 

3

 

Total current liabilities

 

 

32,623

 

 

 

31,000

 

 

 

 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

 

 

 

 

 

Notes payable, net of current portion

 

 

17

 

 

 

23

 

Finance lease liabilities, net of current portion

 

 

112

 

 

 

218

 

Operating lease liabilities, net of current portion

 

 

927

 

 

 

352

 

Deferred revenue, net of current portion

 

 

9,367

 

 

 

8,470

 

Other long-term liabilities

 

 

1,071

 

 

 

988

 

Total long-term liabilities

 

 

11,494

 

 

 

10,051

 

 

 

 

 

 

 

 

 

 

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, 2022 and December 31, 2021

 

 

-

 

 

 

-

 

Common stock, $.001 par value; 250,000,000 shares authorized; 185,435,965 shares issued at September 30, 2022 and December 31, 2021; 175,127,878 shares outstanding at September 30, 2022 and December 31, 2021

 

 

185

 

 

 

185

 

Additional paid-in capital

 

 

63,939

 

 

 

63,917

 

Accumulated deficit

 

 

(47,253)

 

 

(50,902)

Accumulated other comprehensive income

 

 

(340)

 

 

110

 

Treasury stock, at cost, 10,308,087 shares at September 30, 2022 and December 31, 2021

 

 

(2,000)

 

 

(2,000)

Total stockholders equity

 

 

14,531

 

 

 

11,310

 

 

 

$58,648

 

 

$52,361

 

 

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

(in thousands, except per share data)

 

 

 

Three months ended

September 30,

 

 

Nine months ended

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Managed IT systems and services

 

$9,836

 

 

 

10,580

 

 

$29,858

 

 

$32,275

 

Professional sales services

 

 

9,439

 

 

 

7,246

 

 

 

24,900

 

 

 

16,872

 

Equipment sales and services

 

 

760

 

 

 

603

 

 

 

1,789

 

 

 

1,932

 

Total revenues

 

 

20,035

 

 

 

18,429

 

 

 

56,547

 

 

 

51,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of managed IT systems and services

 

 

5,741

 

 

 

6,341

 

 

 

17,952

 

 

 

19,536

 

Cost of professional sales services

 

 

1,570

 

 

 

1,692

 

 

 

4,545

 

 

 

3,677

 

Cost of equipment sales and services

 

 

188

 

 

 

136

 

 

 

409

 

 

 

407

 

Total cost of revenues

 

 

7,499

 

 

 

8,169

 

 

 

22,906

 

 

 

23,620

 

Gross profit

 

 

12,536

 

 

 

10,260

 

 

 

33,641

 

 

 

27,459

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

9,978

 

 

 

9,501

 

 

 

29,584

 

 

 

27,646

 

Research and development

 

 

130

 

 

 

123

 

 

 

422

 

 

 

437

 

Total operating expenses

 

 

10,108

 

 

 

9,624

 

 

 

30,006

 

 

 

28,083

 

Operating income (loss)

 

 

2,428

 

 

 

636

 

 

 

3,635

 

 

 

(624)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and financing costs

 

 

(14)

 

 

(61)

 

 

(38)

 

 

(267)

Interest and other income, net

 

 

96

 

 

 

95

 

 

 

96

 

 

 

120

 

Gain on forgiveness of PPP loan

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,646

 

Loss on disposal of fixed assets

 

 

-

 

 

 

-

 

 

 

(2)

 

 

-

 

Total other income, net

 

 

82

 

 

 

34

 

 

 

56

 

 

 

3,499

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

2,510

 

 

 

670

 

 

 

3,691

 

 

 

2,875

 

Income tax expense

 

 

(12)

 

 

(19)

 

 

(42)

 

 

(87)

Net income

 

 

2,498

 

 

 

651

 

 

 

3,649

 

 

 

2,788

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

 

(234)

 

 

11

 

 

 

(450)

 

 

41

 

Comprehensive income

 

$2,264

 

 

 

662

 

 

$3,199

 

 

$2,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- basic and diluted

 

$0.01

 

 

 

0.00

 

 

$0.02

 

 

$0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- basic

 

 

173,528

 

 

 

172,228

 

 

 

172,909

 

 

 

171,506

 

- diluted

 

 

174,892

 

 

 

174,196

 

 

 

174,513

 

 

 

173,562

 

 

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, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2022

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

 

(2,000)

 

$63,917

 

 

$(50,902)

 

$110

 

 

$11,310

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7

 

 

 

-

 

 

 

-

 

 

 

7

 

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1)

 

 

(1)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(344)

 

 

-

 

 

 

(344)

Balance at March 31, 2022 (unaudited)

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,924

 

 

$(51,246)

 

$109

 

 

$10,972

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

6

 

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(215)

 

 

(215)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,495

 

 

 

-

 

 

 

1,495

 

Balance at June 30, 2022 (unaudited)

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,930

 

 

$(49,751)

 

$(106)

 

$12,258

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9

 

 

 

-

 

 

 

-

 

 

 

9

 

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(234)

 

 

(234)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,498

 

 

 

-

 

 

 

2,498

 

Balance at September 30, 2022 (unaudited)

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,939

 

 

$(47,253)

 

$(340)

 

$14,531

 

 

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)

 

 

 

Nine months ended September 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

(unaudited)

 

 

(unaudited)

 

Net income

 

$3,649

 

 

$2,788

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,576

 

 

 

1,748

 

Loss from investment in EECP Global

 

 

95

 

 

 

35

 

Gain on forgiveness of PPP loan

 

 

-

 

 

 

(3,646)

Provision for doubtful accounts and commission adjustments

 

 

236

 

 

 

545

 

Write-down of inventory

 

 

-

 

 

 

282

 

Share-based compensation

 

 

22

 

 

 

25

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and other receivables

 

 

6,502

 

 

 

2,669

 

Due from related parties

 

 

(343

 

 

(80)

Inventories

 

 

(697)

 

 

13

 

Deferred commission expense

 

 

(167)

 

 

(589)

Prepaid expenses and other current assets

 

 

(239)

 

 

441

 

Other assets, net

 

 

(539)

 

 

81

 

Accounts payable

 

 

261

 

 

 

(3,569)

Accrued commissions

 

 

(560)

 

 

146

 

Accrued expenses and other liabilities

 

 

849

 

 

 

2,388

 

Sales tax payable

 

 

20

 

 

 

(89)

Deferred revenue

 

 

1,927

 

 

 

2,480

 

Due to related party

 

 

-

 

 

(233)

Other long-term liabilities

 

 

84

 

 

 

9

 

Net cash provided by operating activities

 

 

12,676

 

 

 

5,444

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of equipment and software

 

 

(447)

 

 

(367)

Purchases of short-term investments

 

 

(5,000)

 

 

-

 

Redemption of short-term investments

 

 

151

 

 

 

155

 

Net cash used in investing activities

 

 

(5,296)

 

 

(212)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Repayment on revolving lines of credit

 

 

-

 

 

 

(3,025)

Repayment of notes payable and finance lease obligations

 

 

(177)

 

 

(2,823)

Net cash used in financing activities

 

 

(177)

 

 

(5,848)

Effect of exchange rate differences on cash and cash equivalents

 

 

55

 

 

 

(13)

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

7,258

 

 

 

(629)

Cash and cash equivalents - beginning of period

 

 

6,025

 

 

 

6,819

 

Cash and cash equivalents - end of period

 

$13,283

 

 

$6,190

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION

 

 

 

 

 

 

 

 

Interest paid

 

$37

 

 

$284

 

Income taxes paid

 

$60

 

 

$101

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Initial recognition of operating lease right of use asset and liability

 

$1,332

 

 

$639

 

 

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

 

Vaso Technology, 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

 

Vaso Healthcare 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

 

Vaso Medical is the Company’s business division for its proprietary medical device operations, including the design, development, manufacturing, sales and service of various medical devices in the domestic and international markets and includes the Vasomedical Global and Vasomedical Solutions business units.  These devices are primarily for cardiovascular monitoring 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, 2021, as filed with the SEC on March 31, 2022.

 

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

 

Recent Accounting Pronouncements Not Yet Adopted

 

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)

 

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, 2022 (unaudited)

 

 

Three Months Ended September 30, 2021 (unaudited) 

 

 

 

 

 

 

Professional

sales

 

 

 

 

 

 

 

 

 

 

Professional

sales

 

 

 

 

 

 

 

 

 

 

 

service

 

 

Equipment

 

 

 

 

 

 

 

 

service

 

 

Equipment

 

 

 

 

 

 

IT segment

 

 

segment

 

 

segment

 

 

Total

 

 

IT segment

 

 

segment

 

 

segment

 

 

Total

 

Network services

 

$8,786

 

 

$-

 

 

$-

 

 

$8,786

 

 

$9,181

 

 

$-

 

 

$-

 

 

$9,181

 

Software sales and support

 

 

1,049

 

 

 

-

 

 

 

-

 

 

 

1,049

 

 

 

1,399

 

 

 

-

 

 

 

-

 

 

 

1,399

 

Commissions

 

 

-

 

 

 

9,439

 

 

 

-

 

 

 

9,439

 

 

 

-

 

 

 

7,246

 

 

 

-

 

 

 

7,246

 

Medical equipment sales

 

 

-

 

 

 

-

 

 

 

727

 

 

 

727

 

 

 

-

 

 

 

-

 

 

 

570

 

 

 

570

 

Medical equipment service

 

 

-

 

 

 

-

 

 

 

32

 

 

 

32

 

 

 

-

 

 

 

-

 

 

 

33

 

 

 

33

 

 

 

$9,836

 

 

$9,439

 

 

$760

 

 

$20,035

 

 

$10,580

 

 

$7,246

 

 

$603

 

 

$18,429

 

 

 

 

Nine Months Ended September 30, 2022 (unaudited)

 

 

Nine Months Ended September 30, 2021 (unaudited) 

 

 

 

 

 

Professional

sales

 

 

 

 

 

 

 

 

Professional

sales

 

 

 

 

 

 

 

 

 

 

service

 

 

Equipment

 

 

 

 

 

 

 

 

service

 

 

Equipment

 

 

 

 

 

 

IT segment

 

 

segment

 

 

segment

 

 

Total

 

 

IT segment

 

 

segment

 

 

segment

 

 

Total

 

Network services

 

$26,705

 

 

$-

 

 

$-

 

 

$26,705

 

 

$28,670

 

 

$-

 

 

$-

 

 

$28,670

 

Software sales and support

 

 

3,153

 

 

 

-

 

 

 

-

 

 

 

3,153

 

 

 

3,605

 

 

 

-

 

 

 

-

 

 

 

3,605

 

Commissions

 

 

-

 

 

 

24,900

 

 

 

-

 

 

 

24,900

 

 

 

-

 

 

 

16,872

 

 

 

-

 

 

 

16,872

 

Medical equipment sales

 

 

-

 

 

 

-

 

 

 

1,696

 

 

 

1,696

 

 

 

-

 

 

 

-

 

 

 

1,835

 

 

 

1,835

 

Medical equipment service

 

 

-

 

 

 

-

 

 

 

93

 

 

 

93

 

 

 

-

 

 

 

-

 

 

 

97

 

 

 

97

 

 

 

$29,858

 

 

$24,900

 

 

$1,789

 

 

$56,547

 

 

$32,275

 

 

$16,872

 

 

$1,932

 

 

$51,079

 

 

 
Page 9

Table of Contents

 

 

 

Three Months Ended September 30, 2022 (unaudited)

 

 

Three Months Ended September 30, 2021 (unaudited) 

 

 

 

 

 

 

Professional

sales

 

 

 

 

 

 

 

 

 

 

Professional

sales

 

 

 

 

 

 

 

 

 

 

 

service

 

 

Equipment

 

 

 

 

 

 

 

 

service

 

 

Equipment

 

 

 

 

 

 

IT segment

 

 

segment

 

 

segment

 

 

Total

 

 

IT segment

 

 

segment

 

 

segment

 

 

Total

 

Revenue recognized over time

 

$9,220

 

 

$-

 

 

$84

 

 

$9,305

 

 

$9,561

 

 

$-

 

 

$76

 

 

$9,637

 

Revenue recognized at a point in time

 

 

616

 

 

 

9,439

 

 

 

676

 

 

 

10,730

 

 

 

1,019

 

 

 

7,246

 

 

 

527

 

 

 

8,792

 

 

 

$9,836

 

 

$9,439

 

 

$760

 

 

$20,035

 

 

$10,580

 

 

$7,246

 

 

$603

 

 

$18,429

 

 

 

 

Nine Months Ended September 30, 2022 (unaudited)

 

 

Nine Months Ended September 30, 2021 (unaudited) 

 

 

 

 

 

 

Professional

sales

 

 

 

 

 

 

 

 

 

 

Professional

sales

 

 

 

 

 

 

 

 

 

 

 

service

 

 

Equipment

 

 

 

 

 

 

 

 

service

 

 

Equipment

 

 

 

 

 

 

IT segment

 

 

segment

 

 

segment

 

 

Total

 

 

IT segment

 

 

segment

 

 

segment

 

 

Total

 

Revenue recognized over time

 

$27,530

 

 

$-

 

 

$232

 

 

$27,762

 

 

$28,831

 

 

$-

 

 

$139

 

 

$28,970

 

Revenue recognized at a point in time

 

 

2,328

 

 

 

24,900

 

 

 

1,557

 

 

 

28,785

 

 

 

3,444

 

 

 

16,872

 

 

 

1,793

 

 

 

22,109

 

 

 

$29,858

 

 

$24,900

 

 

$1,789

 

 

$56,547

 

 

$32,275

 

 

$16,872

 

 

$1,932

 

 

$51,079

 

 

Transaction Price Allocated to Remaining Performance Obligations

 

As of September 30, 2022, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $86.0 million, of which we expect to recognize revenue as follows:

 

 

 

(in thousands)

 

 

 

Fiscal years of revenue recognition (unaudited)   

 

 

 

2022

 

 

2023

 

 

2024

 

 

Thereafter

 

Unfulfilled performance obligations

 

$13,214

 

 

$41,017

 

 

$12,280

 

 

$19,503

 

 

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 $503,000 and $407,000 at September 30, 2022 and December 31, 2021, 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 $26,886,000 and $24,956,000 at September 30, 2022 and December 31, 2021, 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 $3,513,000 and $1,518,000 at September 30, 2022 and December 31, 2021, respectively, and are included in accrued expenses and other liabilities in our condensed consolidated balance sheets.

 

 
Page 10

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

In our Vaso Medical business, we bill amounts for post-delivery services and varying duration service contracts in advance of performance.  Such amounts aggregated approximately $6,000 and $9,000 at September 30, 2022 and December 31, 2021, 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, 2022, we recognized approximately $3.5 million and $7.7 million of revenues, respectively, that were included in our contract liability balance at July 1, 2022 and January 1, 2022, respectively.

 

Significant Judgments when Applying Topic 606

 

Contract transaction price is allocated to performance obligations using estimated stand-alone selling price. Judgment is required in estimating stand-alone selling price for each distinct performance obligation. We determine stand-alone selling price maximizing observable inputs such as stand-alone sales when they exist or substantive renewal price charged to clients. In instances where stand-alone selling price is not observable, we utilize an estimate of stand-alone selling price based on historical pricing and industry practices.

 

Certain revenue we record in our professional sales service segment contains an estimate for variable consideration.  Due to the tiered structure of our commission rate, which increases as annual targets are achieved, under Topic 606 we record revenue and deferred revenue at the rate we expect to be achieved by year end.  We base our estimate of variable consideration on historical results of previous years’ achievement under the GEHC agreement.  Such estimate is reviewed each quarter and adjusted as necessary.  In addition, the Company records commissions for arranging financing at an estimated rate which is subject to later revision based on certain factors. 

 

The Company also records commission adjustments to contract liabilities in its professional sales service segment based on estimates of future order cancellations.

 

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 Vaso Technology, 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 Vaso Healthcare, 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 Vaso Medical, Inc., primarily focuses on the design, manufacture, sale and service of proprietary medical devices.

 

 
Page 11

Table of Contents

 

Vaso Corporation and Subsidiaries

 

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Revenues from external customers

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$9,836

 

 

$10,580

 

 

$29,858

 

 

$32,275

 

Professional sales service

 

 

9,439

 

 

 

7,246

 

 

 

24,900

 

 

 

16,872

 

Equipment

 

 

760

 

 

 

603

 

 

 

1,789

 

 

 

1,932

 

Total revenues

 

$20,035

 

 

$18,429

 

 

$56,547

 

 

$51,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$4,095

 

 

$4,239

 

 

$11,906

 

 

$12,739

 

Professional sales service

 

 

7,869

 

 

 

5,554

 

 

 

20,355

 

 

 

13,195

 

Equipment

 

 

572

 

 

 

467

 

 

 

1,380

 

 

 

1,525

 

Total gross profit

 

$12,536

 

 

$10,260

 

 

$33,641

 

 

$27,459

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$(474)

 

$(77)

 

$(1,531)

 

$(254)

Professional sales service

 

 

3,143

 

 

 

1,091

 

 

 

6,133

 

 

 

709

 

Equipment

 

 

24

 

 

 

(96)

 

 

(132)

 

 

(212)

Corporate

 

 

(265)

 

 

(282)

 

 

(835)

 

 

(867)

Total operating income (loss)

 

$2,428

 

 

$636

 

 

$3,635

 

 

$(624)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$263

 

 

$512

 

 

$1,367

 

 

$1,413

 

Professional sales service

 

 

10

 

 

 

39

 

 

 

32

 

 

 

115

 

Equipment

 

 

45

 

 

 

73

 

 

 

177

 

 

 

220

 

Corporate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total depreciation and amortization

 

$318

 

 

$624

 

 

$1,576

 

 

$1,748

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$86

 

 

$238

 

 

$383

 

 

$324

 

Professional sales service

 

 

-

 

 

 

-

 

 

 

40

 

 

 

3

 

Equipment

 

 

2

 

 

 

1

 

 

 

23

 

 

 

37

 

Corporate

 

 

-

 

 

 

3

 

 

 

1

 

 

 

3

 

Total cash capital expenditures

 

$88

 

 

$242

 

 

$447

 

 

$367

 

 

 

 

(in thousands)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

 

Identifiable Assets

 

 

 

 

 

 

IT

 

$22,771

 

 

$23,144

 

Professional sales service

 

 

14,419

 

 

 

18,718

 

Equipment

 

 

7,258

 

 

 

7,144

 

Corporate

 

 

14,200

 

 

 

3,355

 

Total assets

 

$58,648

 

 

$52,361

 

 

 
Page 12

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Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

GE Healthcare accounted for 47% and 39% of revenue for the three months ended September 30, 2022 and 2021, respectively, and 39% and 33% of revenue for the nine months ended September 30, 2022 and 2021, respectively.  GE Healthcare also accounted for $7.1 million or 82%, and $12.3 million or 80%, of accounts and other receivables at September 30, 2022 and December 31, 2021, respectively.  No other customer accounted for 10% or more of revenue.

 

NOTE E –NET INCOME 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)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Basic weighted average shares outstanding

 

 

173,528

 

 

 

172,228

 

 

 

172,909

 

 

 

171,506

 

Dilutive effect of unvested restricted shares

 

 

1,364

 

 

 

1,968

 

 

 

1,604

 

 

 

2,056

 

Diluted weighted average shares outstanding

 

 

174,892

 

 

 

174,196

 

 

 

174,513

 

 

 

173,562

 

 

The following table represents common stock equivalents that were excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2022 and 2021, because the effect of their inclusion would be anti-dilutive.

 

 

 

(in thousands)

 

 

Three months ended September 30,

 

 

Nine months ended September 30, 

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Restricted common stock grants

 

 

-

 

 

 

-

 

 

 

2

 

 

 

-

 

 

NOTE F – SHORT-TERM INVESTMENTS AND FINANCIAL INSTRUMENTS

 

The Company’s short-term investments consist of bank deposits with yields based on underlying debt and equity securities and six-month US Treasury bills.  The bank deposits are carried at fair value and are classified as available-for-sale.  Realized gains or losses are included in net income.  The US Treasury bills, yielding 3.069%, are carried at amortized cost of approximately $5,016,000, classified as held-to-maturity, and accretion of discount is included in interest income.

 

Cash and cash equivalents represent cash and short-term, highly liquid investments either in certificates of deposit, treasury bills, money market funds, or investment grade commercial paper issued by major corporations and financial institutions that generally have maturities of three months or less from the date of acquisition.

 

The Company complies with the provisions of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”).  Under ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

 

 
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Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

In determining fair value, the Company uses various valuation approaches.  ASC 820 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.  Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.  Unobservable inputs reflect the Company’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.  The fair value hierarchy is categorized into three levels based on the inputs as follows:

 

Level 1

 

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

 

Level 2

 

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

 

Level 3

 

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

 

The carrying amounts shown of the Company’s financial instruments including cash and cash equivalents and accounts payable approximate fair value due to the short-term maturities of these instruments.

 

 
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Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

The following table presents information about the Company’s assets measured at fair value as of September 30, 2022 and December 31, 2021:

 

 

 

Quoted Prices

 

 

Significant

 

 

 

 

 

 

 

in Active

 

 

Other

 

 

Significant

 

 

Balance

 

 

 

Markets for

 

 

Observable

 

 

Unobservable

 

 

as of

 

 

 

Identical Assets

 

 

Inputs

 

 

Inputs

 

 

September 30,

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

2022

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents invested in money market funds

 

$7,826

 

 

$-

 

 

$-

 

 

$7,826

 

Bank deposits (included in short term investments)

 

 

422

 

 

 

 

 

 

 

 

 

 

 

422

 

 

 

$8,248

 

 

$-

 

 

$-

 

 

$8,248

 

 

 

 

Quoted Prices

 

 

Significant

 

 

 

 

 

 

 

in Active

 

 

Other

 

 

Significant

 

 

Balance

 

 

 

Markets for

 

 

Observable

 

 

Unobservable

 

 

as of

 

 

 

Identical Assets

 

 

Inputs

 

 

Inputs

 

 

December 31,

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents invested in money market funds

 

$802

 

 

$-

 

 

$-

 

 

$802

 

Bank deposits (included in short term investments)

 

 

629

 

 

 

 

 

 

 

 

 

 

 

629

 

 

 

$1,431

 

 

$-

 

 

$-

 

 

$1,431

 

 

NOTE G – ACCOUNTS AND OTHER RECEIVABLES, NET

 

The following table presents information regarding the Company’s accounts and other receivables as of September 30, 2022 and December 31, 2021:

 

 

 

 

(in thousands)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

 

Trade receivables

 

$11,762

 

 

$21,197

 

Unbilled receivables

 

 

3,113

 

 

 

-

 

Allowance for doubtful accounts and

 

 

 

 

 

 

 

 

commission adjustments

 

 

(6,281)

 

 

(5,804)
Accounts and other receivables, net

 

$8,594

 

 

$15,393

 

 

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. 

 

 
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Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

NOTE H – INVENTORIES, NET

 

Inventories, net of reserves, consist of the following:

 

 

 

(in thousands)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

 

Raw materials

 

$798

 

 

$744

 

Work in process

 

 

71

 

 

 

4

 

Finished goods

 

 

845

 

 

 

399

 

 

 

$1,714

 

 

$1,147

 

 

The Company maintained reserves for slow moving inventories of $163,000 and $165,000 at September 30, 2022 and December 31, 2021, respectively.

 

NOTE I – GOODWILL AND OTHER INTANGIBLES

 

Goodwill of $14,375,000 is allocated to the IT segment.  The remaining $1,206,000 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 September 30, 2022 and December 31, 2021.  The components of the change in goodwill are as follows:

 

 

 

 

(in thousands)

 

 

 

Nine months ended

 

 

Year ended

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

 

Beginning of period

 

$15,722

 

 

$15,688

 

Foreign currency translation adjustment

 

 

(141)

 

 

34

 

End of period

 

$15,581

 

 

$15,722

 

 

 
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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)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

 

 

Customer-related

 

 

 

 

 

 

Costs

 

$5,831

 

 

$5,831

 

Accumulated amortization

 

 

(4,487)

 

 

(4,279)

 

 

 

1,344

 

 

 

1,552

 

 

 

 

 

 

 

 

 

 

Patents and Technology

 

 

 

 

 

 

 

 

Costs

 

 

1,894

 

 

 

1,894

 

Accumulated amortization

 

 

(1,894)

 

 

(1,754)

 

 

 

-

 

 

 

140

 

 

 

 

 

 

 

 

 

 

Software

 

 

 

 

 

 

 

 

Costs

 

 

2,351

 

 

 

3,459

 

Accumulated amortization

 

 

(2,095)

 

 

(3,110)

 

 

 

256

 

 

 

349

 

 

 

 

 

 

 

 

 

 

 

 

$1,600

 

 

$2,041

 

 

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 $136,000 and $213,000 for the three months ended September 30, 2022 and 2021, respectively and $451,000 and $641,000 for the nine months ended September 30, 2022 and 2021, respectively.

 

Amortization of intangibles for the next five years is:

 

 

 

 

(in thousands)

 

Years ending December 31,

 

(unaudited)

 

Remainder of 2022

 

$100

 

2023

 

 

340

 

2024

 

 

271

 

2025

 

 

201

 

2026

 

 

145

 

 

 

$1,057

 

 

 
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Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)