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, 2023

 

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_10qimg28.jpg

 

VASO CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

 

11-2871434

(State or other jurisdiction of .

incorporation or organization)

 

(IRS Employer

Identification Number)

 

137 Commercial St., Suite 200, Plainview, New York 11803

 

(Address of principal executive offices)

 

Registrant’s Telephone Number  

 

(516) 997-4600

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No

 

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

 

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

 

 

Emerging Growth Company

 

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

 

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

 

Securities registered pursuant to Section 12 (b) of the Act: None

 

Number of Shares Outstanding of Common Stock, $.001 Par Value, at November 10, 2023 – 175,319,296

 

 

 

 

Vaso Corporation and Subsidiaries

 

INDEX

 

PART I – FINANCIAL INFORMATION

 

3

 

 

 

 

 

 

ITEM 1 - FINANCIAL STATEMENTS

 

3

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS as of September 30, 2023 (unaudited) and December 31, 2022

 

3

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022

 

4

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022

 

5

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) for the Nine Months Ended September 30, 2023 and 2022

 

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

 

27

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

28

 

 

 

 

 

 

ITEM 6 – EXHIBITS

 

28

 

  

 
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, 2023

 

 

December 31, 2022

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$11,055

 

 

$11,821

 

Short-term investments

 

 

15,838

 

 

 

8,504

 

Accounts and other receivables, net of an allowance for credit losses and commission adjustments of $7,483 at September 30, 2023 and $6,947 at December 31, 2022

 

 

8,355

 

 

 

14,514

 

Receivables due from related parties

 

 

837

 

 

 

421

 

Inventories, net

 

 

1,396

 

 

 

1,473

 

Deferred commission expense

 

 

3,614

 

 

 

3,249

 

Prepaid expenses and other current assets

 

 

2,111

 

 

 

1,008

 

Total current assets

 

 

43,206

 

 

 

40,990

 

 

 

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $10,233 at September 30, 2023 and $9,787 at December 31, 2022

 

 

1,223

 

 

 

1,340

 

Operating lease right of use assets

 

 

1,656

 

 

 

1,568

 

Goodwill

 

 

15,551

 

 

 

15,614

 

Intangibles, net

 

 

1,355

 

 

 

1,511

 

Other assets, net

 

 

4,252

 

 

 

4,726

 

Investment in EECP Global

 

 

788

 

 

 

889

 

Deferred tax assets, net

 

 

5,007

 

 

 

5,007

 

Total assets

 

$73,038

 

 

$71,645

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$2,369

 

 

$2,270

 

Accrued commissions

 

 

1,456

 

 

 

3,518

 

Accrued expenses and other liabilities

 

 

6,353

 

 

 

8,891

 

Finance lease liabilities - current

 

 

69

 

 

 

122

 

Operating lease liabilities - current

 

 

831

 

 

 

745

 

Sales tax payable

 

 

673

 

 

 

809

 

Deferred revenue - current portion

 

 

18,535

 

 

 

15,139

 

Notes payable - current portion

 

 

9

 

 

 

9

 

Due to related party

 

 

3

 

 

 

3

 

Total current liabilities

 

 

30,298

 

 

 

31,506

 

 

 

 

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

 

 

 

 

 

Notes payable, net of current portion

 

 

8

 

 

 

15

 

Finance lease liabilities, net of current portion

 

 

54

 

 

 

96

 

Operating lease liabilities, net of current portion

 

 

826

 

 

 

823

 

Deferred revenue, net of current portion

 

 

14,705

 

 

 

15,664

 

Other long-term liabilities

 

 

1,538

 

 

 

1,474

 

Total long-term liabilities

 

 

17,131

 

 

 

18,072

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (NOTE N)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value; 1,000,000 shares authorized; nil shares issued and outstanding at September 30, 2023 and December 31, 2022

 

 

-

 

 

 

-

 

Common stock, $0.001 par value; 250,000,000 shares authorized; 185,627,383 and 185,435,965 shares issued at September 30, 2023 and December

31, 2022, respectively; 175,319,296 and 175,127,878 shares outstanding at September 30, 2023 and December 31, 2022, respectively

 

 

186

 

 

 

185

 

Additional paid-in capital

 

 

63,983

 

 

 

63,952

 

Accumulated deficit

 

 

(36,113)

 

 

(39,837)

Accumulated other comprehensive loss

 

 

(447)

 

 

(233)

Treasury stock, at cost, 10,308,087 shares at September 30, 2023 and December 31, 2022

 

 

(2,000)

 

 

(2,000)

Total stockholders’ equity

 

 

25,609

 

 

 

22,067

 

 

 

$73,038

 

 

$71,645

 

 

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

(unaudited)

 

(in thousands, except per share data)

 

 

 

 Three months ended

 

 

 Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Managed IT systems and services

 

$9,867

 

 

$9,836

 

 

$30,576

 

 

$29,858

 

Professional sales services

 

 

8,837

 

 

 

9,237

 

 

 

26,401

 

 

 

24,424

 

Equipment sales and services

 

 

745

 

 

 

760

 

 

 

2,130

 

 

 

1,789

 

Total revenues

 

 

19,449

 

 

 

19,833

 

 

 

59,107

 

 

 

56,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of managed IT systems and services

 

 

5,593

 

 

 

5,741

 

 

 

17,121

 

 

 

17,952

 

Cost of professional sales services

 

 

1,636

 

 

 

1,530

 

 

 

4,921

 

 

 

4,450

 

Cost of equipment sales and services

 

 

177

 

 

 

188

 

 

 

525

 

 

 

409

 

Total cost of revenues

 

 

7,406

 

 

 

7,459

 

 

 

22,567

 

 

 

22,811

 

Gross profit

 

 

12,043

 

 

 

12,374

 

 

 

36,540

 

 

 

33,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

10,927

 

 

 

9,978

 

 

 

32,731

 

 

 

29,584

 

Research and development

 

 

209

 

 

 

130

 

 

 

584

 

 

 

422

 

Total operating expenses

 

 

11,136

 

 

 

10,108

 

 

 

33,315

 

 

 

30,006

 

Operating income

 

 

907

 

 

 

2,266

 

 

 

3,225

 

 

 

3,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and financing costs

 

 

(14)

 

 

(14)

 

 

(46)

 

 

(38)

Interest and other income, net

 

 

322

 

 

 

96

 

 

 

583

 

 

 

96

 

Loss on disposal of fixed assets

 

 

(1)

 

 

-

 

 

 

(3)

 

 

(2)

Total other income, net

 

 

307

 

 

 

82

 

 

 

534

 

 

 

56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

1,214

 

 

 

2,348

 

 

 

3,759

 

 

 

3,310

 

Income tax expense

 

 

(16)

 

 

(12)

 

 

(35)

 

 

(42)

Net income

 

 

1,198

 

 

 

2,336

 

 

 

3,724

 

 

 

3,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

(19)

 

 

(234)

 

 

(213)

 

 

(450)

Comprehensive income

 

$1,179

 

 

$2,102

 

 

$3,511

 

 

$2,818

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- basic and diluted

 

$0.01

 

 

$0.01

 

 

$0.02

 

 

$0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- basic

 

 

174,938

 

 

 

173,528

 

 

 

174,246

 

 

 

172,909

 

- diluted

 

 

175,846

 

 

 

174,892

 

 

 

175,394

 

 

 

174,513

 

 

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

(unaudited)

 

(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, 2022

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

 

(2,000)

 

$63,917

 

 

$(51,131)

 

$110

 

 

$11,081

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7

 

 

 

-

 

 

 

-

 

 

 

7

 

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1)

 

 

(1)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(403)

 

 

-

 

 

 

(403)

Balance at March 31, 2022

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,924

 

 

$(51,534)

 

$109

 

 

$10,684

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

6

 

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(215)

 

 

(215)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,335

 

 

 

-

 

 

 

1,335

 

Balance at June 30, 2022

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,930

 

 

$(50,199)

 

$(106)

 

$11,810

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

9

 

 

 

-

 

 

 

-

 

 

 

9

 

Shares not issued for employee tax liability

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(234)

 

 

(234)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,336

 

 

 

-

 

 

 

2,336

 

Balance at September 30, 2022

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,939

 

 

$(47,863)

 

$(340)

 

$13,921

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2023

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

 

(2,000)

 

$63,952

 

 

$(39,837)

 

$(233)

 

$22,067

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

-

 

 

 

13

 

Foreign currency translation gain

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15

 

 

 

15

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

454

 

 

 

-

 

 

 

454

 

Balance at March 31, 2023

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,965

 

 

$(39,383)

 

$(218)

 

$22,549

 

Share-based compensation

 

 

13

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15

 

 

 

-

 

 

 

-

 

 

 

15

 

Shares withheld for employee tax liability

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1)

 

 

-

 

 

 

-

 

 

 

(1)

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(210)

 

 

(210)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,072

 

 

 

-

 

 

 

2,072

 

Balance at June 30, 2023

 

 

185,449

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,979

 

 

$(37,311)

 

$(428)

 

$24,425

 

Share-based compensation

 

 

178

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

9

 

 

 

-

 

 

 

-

 

 

 

10

 

Shares withheld for employee tax liability

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(5)

 

 

-

 

 

 

-

 

 

 

(5)

Foreign currency translation loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(19)

 

 

(19)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,198

 

 

 

-

 

 

 

1,198

 

Balance at September 30, 2023

 

 

185,627

 

 

$186

 

 

 

(10,308)

 

$(2,000)

 

$63,983

 

 

$(36,113)

 

$(447)

 

$25,609

 

 

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

(unaudited)

 

(in thousands)

 

 

 

 Nine months ended

 

 

 

September 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$3,724

 

 

$3,268

 

Adjustments to reconcile net income to net

 

 

 

 

 

 

 

 

cash provided by operating activities

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

762

 

 

 

1,576

 

Loss from investment in EECP Global

 

 

101

 

 

 

95

 

Provision for credit losses and commission adjustments

 

 

85

 

 

 

236

 

Share-based compensation

 

 

38

 

 

 

22

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and other receivables

 

 

6,052

 

 

 

6,978

 

Inventories

 

 

12

 

 

 

(697)

Deferred commission expense

 

 

(364)

 

 

(167)

Prepaid expenses and other current assets

 

 

(1,474)

 

 

(239)

Other assets, net

 

 

424

 

 

 

(539)

Accounts payable

 

 

104

 

 

 

261

 

Accrued commissions

 

 

(2,006)

 

 

(655)

Accrued expenses and other liabilities

 

 

(2,559)

 

 

849

 

Sales tax payable

 

 

(130)

 

 

20

 

Deferred revenue

 

 

2,437

 

 

 

1,927

 

Due to related party

 

 

(411)

 

 

(343)

Other long-term liabilities

 

 

65

 

 

 

84

 

Net cash provided by operating activities

 

 

6,860

 

 

 

12,676

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of equipment and software

 

 

(536)

 

 

(447)

Purchases of short-term investments

 

 

(20,330)

 

 

(5,000)

Redemption of short-term investments

 

 

13,330

 

 

 

151

 

Net cash used in investing activities

 

 

(7,536)

 

 

(5,296)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Payroll taxes paid by withholding shares

 

 

(6)

 

 

-

 

Repayment of notes payable and finance lease obligations

 

 

(101)

 

 

(177)

Net cash used in financing activities

 

 

(107)

 

 

(177)

Effect of exchange rate differences on cash and cash equivalents

 

 

17

 

 

 

55

 

 

 

 

 

 

 

 

 

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(766)

 

 

7,258

 

Cash and cash equivalents - beginning of period

 

 

11,821

 

 

 

6,025

 

Cash and cash equivalents - end of period

 

$11,055

 

 

$13,283

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION

 

 

 

 

 

 

 

 

Interest paid

 

$14

 

 

$37

 

Income taxes paid

 

$80

 

 

$60

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Initial recognition of operating lease right of use asset and liability

 

$661

 

 

$1,332

 

 

 

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 GE Healthcare (“GEHC”) into the healthcare provider middle market; and

 

 

 

 

·

Equipment segment, primarily focuses on the design, manufacture, sale and service of proprietary medical devices and software, operating through a wholly-owned subsidiary VasoMedical, Inc., which in turn operates through Vasomedical Solutions, Inc. for domestic business and Vasomedical Global Corp. for international business, respectively.

 

VasoTechnology

 

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

 

·

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.  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, 2022, as filed with the SEC on March 31, 2023.

 

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.

 

Correction of Prior Period Financial Statements

 

We record commission revenue for certain products in our professional sales service segment based on GEHC’s reporting and payment of such commissions to us. In late August 2023, GEHC informed the Company that its calculations for such products were partially inaccurate and had remitted excess commissions.  The Company has taken immediate steps to implement additional internal control procedures whereby GEHC will provide additional information sufficient to assess the accuracy of such commission payments going forward. We assessed the materiality of this misstatement 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.

 

 
Page 8

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Accordingly, in accordance with ASC 250 (SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), we have increased the accumulated deficit at January 1, 2022 by $229,000 to reflect $287,000 lower commission revenue and $58,000 lower commission expense, and corrected the accompanying Condensed Consolidated Balance Sheets as of December 31, 2022 and the Condensed Consolidated Statements of Operations and Comprehensive Income, Cash Flows, and Changes in Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2023, and the related notes to revise for those misstatements that impacted such periods.

 

The following are selected line items from the Company's Condensed Consolidated Financial Statements illustrating the effect of these corrections:

 

 

 

 Condensed Consolidated Balance Sheet

 

 

 

 As of December 31, 2022

 

(in thousands)

 

As Reported

 

 

Adjustment

 

 

As Revised

 

Accounts and other receivables

 

$15,524

 

 

$(1,010)

 

$14,514

 

Accrued commissions

 

$3,720

 

 

$(202)

 

$3,518

 

Accumulated deficit

 

$(39,029)

 

$(808)

 

$(39,837)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Condensed Consolidated Statement of Cash Flows

 

 

 

 Nine months ended September 30, 2022

 

(in thousands)

 

As Reported

 

 

Adjustment

 

 

As Revised

 

Net income

 

$3,649

 

 

$(381)

 

$3,268

 

Accounts and other receivables

 

$6,502

 

 

$476

 

 

$6,978

 

Accrued commissions

 

$(560)

 

$(95)

 

$(655)

 

 

 

 

    Condensed Consolidated Statement of Operations and Comprehensive Income    

 

 

 

Three months ended September 30, 2022

 

 

Nine months ended September 30, 2022

 

(in thousands, except per share data)

 

As Reported

 

 

Adjustment

 

 

As Revised

 

 

As Reported

 

 

Adjustment

 

 

As Revised

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Professional sales services

 

$9,439

 

 

$(202)

 

$9,237

 

 

$24,900

 

 

$(476)

 

$24,424

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of professional sales services

 

$1,570

 

 

$(40)

 

$1,530

 

 

$4,545

 

 

$(95)

 

$4,450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit - professional sales services segment

 

$7,869

 

 

$(162)

 

$7,707

 

 

$20,355

 

 

$(381)

 

$19,974

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$2,428

 

 

$(162)

 

$2,266

 

 

$3,635

 

 

$(381)

 

$3,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$2,498

 

 

$(162)

 

$2,336

 

 

$3,649

 

 

$(381)

 

$3,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income/(loss)

 

$2,264

 

 

$(162)

 

$2,102

 

 

$3,199

 

 

$(381)

 

$2,818

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income/(loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- basic and diluted

 

$0.01

 

 

$(0.00)

 

$0.01

 

 

$0.02

 

 

$(0.00)

 

$0.02

 

 

 
Page 9

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

 

 

Condensed 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, 2022

 

$(50,902)

 

$(229)

 

$(51,131)

 

$11,310

 

 

$(229)

 

$11,081

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(344)

 

$(59)

 

$(403)

 

$(344)

 

$(59)

 

$(403)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2022

 

$(51,246)

 

$(288)

 

$(51,534)

 

$10,972

 

 

$(288)

 

$10,684

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$1,495

 

 

$(160)

 

$1,335

 

 

$1,495

 

 

$(160)

 

$1,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2022

 

$(49,751)

 

$(448)

 

$(50,199)

 

$12,258

 

 

$(448)

 

$11,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$2,498

 

 

$(162)

 

$2,336

 

 

$2,498

 

 

$(162)

 

$2,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2022

 

$(47,253)

 

$(610)

 

$(47,864)

 

$14,531

 

 

$(610)

 

$13,921

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2023

 

$(39,029)

 

$(808)

 

$(39,837)

 

$22,875

 

 

$(808)

 

$22,067

 

 

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, 2023

 

 

Three Months Ended September 30, 2022

 

 

 

 

 

Professional sales

 

 

 Equipment

 

 

 

 

 

 

Professional sales

 

 

 Equipment

 

 

 

 

 

IT segment

 

 

service segment

 

 

segment

 

 

Total

 

 

IT segment

 

 

service segment

 

 

segment

 

 

Total

 

Network services

 

$8,849

 

 

$-

 

 

$-

 

 

$8,849

 

 

$8,787

 

 

$-

 

 

$-

 

 

$8,787

 

Software sales and support

 

 

1,018

 

 

 

-

 

 

 

-

 

 

 

1,018

 

 

 

1,049

 

 

 

-

 

 

 

-

 

 

 

1,049

 

Commissions

 

 

-

 

 

 

8,837

 

 

 

-

 

 

 

8,837

 

 

 

-

 

 

 

9,237

 

 

 

-

 

 

 

9,237

 

Medical equipment sales

 

 

-

 

 

 

-

 

 

 

714

 

 

 

714

 

 

 

-

 

 

 

-

 

 

 

728

 

 

 

728

 

Medical equipment service

 

 

-

 

 

 

-

 

 

 

31

 

 

 

31

 

 

 

-

 

 

 

-

 

 

 

32

 

 

 

32

 

 

 

$9,867

 

 

$8,837

 

 

$745

 

 

$19,449

 

 

$9,836

 

 

$9,237

 

 

$760

 

 

$19,833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2023

Nine Months Ended September 30, 2022

 

 

 

 

 

 

 

Professional sales

 

 

Equipment

 

 

 

 

 

 

 

 

 

 

Professional sales

 

 

Equipment

 

 

 

 

 

 

 

IT segment

 

 

service segment

 

 

segment

 

 

Total

 

 

IT segment

 

 

service segment

 

 

segment

 

 

Total

 

Network services

 

$26,833

 

 

$-

 

 

$-

 

 

$26,833

 

 

$26,705

 

 

$-

 

 

$-

 

 

$26,705

 

Software sales and support

 

 

3,743

 

 

 

-

 

 

 

-

 

 

 

3,743

 

 

 

3,153

 

 

 

-

 

 

 

-

 

 

 

3,153

 

Commissions

 

 

-

 

 

 

26,401

 

 

 

-

 

 

 

26,401

 

 

 

-

 

 

 

24,424

 

 

 

-

 

 

 

24,424

 

Medical equipment sales

 

 

-

 

 

 

-

 

 

 

2,036

 

 

 

2,036

 

 

 

-

 

 

 

-

 

 

 

1,696

 

 

 

1,696

 

Medical equipment service

 

 

-

 

 

 

-

 

 

 

94

 

 

 

94

 

 

 

-

 

 

 

-

 

 

 

93

 

 

 

93

 

 

 

$30,576

 

 

$26,401

 

 

$2,130

 

 

$59,107

 

 

$29,858

 

 

$24,424

 

 

$1,789

 

 

$56,071

 

 

 
Page 10

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

 

 

Three Months Ended September 30, 2023

 

 

Three Months Ended September 30, 2022

 

 

 

 

 

Professional sales

 

 

Equipment

 

 

 

 

 

 

Professional sales

 

 

Equipment

 

 

 

 

 

IT segment

 

 

service segment

 

 

segment

 

 

Total

 

 

IT segment

 

 

service segment

 

 

segment

 

 

Total

 

Revenue recognized over time

 

$9,302

 

 

$-

 

 

$221

 

 

$9,523

 

 

$9,220

 

 

$-

 

 

$84

 

 

$9,304

 

Revenue recognized at a point in time

 

 

565

 

 

 

8,837

 

 

 

524

 

 

 

9,926

 

 

 

616

 

 

 

9,237

 

 

 

676

 

 

 

10,529

 

 

 

$9,867

 

 

$8,837

 

 

$745

 

 

$19,449

 

 

$9,836

 

 

$9,237

 

 

$760

 

 

$19,833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2023

Nine Months Ended September 30, 2022

 

 

 

 

 

 

 

Professional sales

 

 

Equipment

 

 

 

 

 

 

 

 

 

 

Professional sales

 

 

Equipment

 

 

 

 

 

 

 

IT segment

 

 

service segment

 

 

segment

 

 

Total

 

 

IT segment

 

 

service segment

 

 

segment

 

 

Total

 

Revenue recognized over time

 

$28,180

 

 

$-

 

 

$462

 

 

$28,642

 

 

$27,530

 

 

$-

 

 

$232

 

 

$27,762

 

Revenue recognized at a point in time

 

 

2,396

 

 

 

26,401

 

 

 

1,668

 

 

 

30,465

 

 

 

2,328

 

 

 

24,424

 

 

 

1,557

 

 

 

28,309

 

 

 

$30,576

 

 

$26,401

 

 

$2,130

 

 

$59,107

 

 

$29,858

 

 

$24,424

 

 

$1,789

 

 

$56,071

 

 

Transaction Price Allocated to Remaining Performance Obligations

 

As of September 30, 2023, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $98.5 million, of which we expect to recognize revenue as follows:

 

 

 

 

 

(in thousands)

 

 

 

Fiscal years of revenue recognition

 

 

 

2023

 

 

2024

 

 

2025

 

 

Thereafter

 

Unfulfilled performance obligations

 

$13,525

 

 

$42,368

 

 

$16,455

 

 

$26,118

 

 

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 $335,000 and $481,000 at September 30, 2023 and December 31, 2022, 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 $33,232,000 and $30,794,000 at September 30, 2023 and December 31, 2022, 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 $1,198,000 and $2,577,000 at September 30, 2023 and December 31, 2022, respectively, and are included in accrued expenses and other liabilities in our condensed consolidated balance sheets.

 

 
Page 11

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

In our VasoMedical business, we bill amounts for post-delivery services and varying duration service contracts in advance of performance.  Such amounts aggregated approximately $7,000 and $9,000 at September 30, 2023 and December 31, 2022, 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, 2023, we recognized approximately $3.1 million and $7.6 million of revenues, respectively, that were included in our contract liability balance at July 1, 2023 and January 1, 2023, respectively.

 

The following table summarizes the Company’s contract receivable and contract liability balances:

 

 

 

 (in thousands)

 

 

2023

 

 

2022

 

Contract receivables - January 1

 

 

15,306

 

 

 

15,474

 

Contract receivables - September 30

 

 

9,185

 

 

 

8,132

 

Increase (decrease)

 

 

(6,121)

 

 

(7,342)

 

 

 

 

 

 

 

 

 

Contract liabilities - January 1

 

 

33,861

 

 

 

26,890

 

Contract liabilities - September 30

 

 

34,773

 

 

 

30,908

 

Increase (decrease)

 

 

911

 

 

 

4,018

 

 

The decrease in contract receivables in the first nine months of 2023 and 2022 was due primarily to collections exceeding billings.  The increase in contract liabilities in the same periods is mainly attributable to orders exceeding deliveries.

 

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:

 

 
Page 12

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

 

 

 

 

(in thousands)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues from external customers

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$9,867

 

 

$9,836

 

 

$30,576

 

 

$29,858

 

Professional sales service

 

 

8,837

 

 

 

9,237

 

 

 

26,401

 

 

 

24,424

 

Equipment

 

 

745

 

 

 

760

 

 

 

2,130

 

 

 

1,789

 

Total revenues

 

$19,449

 

 

$19,833

 

 

$59,107

 

 

$56,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$4,274

 

 

$4,095

 

 

$13,455

 

 

$11,906

 

Professional sales service

 

 

7,201

 

 

 

7,707

 

 

 

21,480

 

 

 

19,974

 

Equipment

 

 

568

 

 

 

572

 

 

 

1,605

 

 

 

1,380

 

Total gross profit

 

$12,043

 

 

$12,374

 

 

$36,540

 

 

$33,260

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$(187)

 

$(474)

 

$(133)

 

$(1,531)

Professional sales service

 

 

1,648

 

 

 

2,981

 

 

 

4,784

 

 

 

5,752

 

Equipment

 

 

(83)

 

 

24

 

 

 

(214)

 

 

(132)

Corporate

 

 

(471)

 

 

(265)

 

 

(1,212)

 

 

(835)

Total operating income

 

$907

 

 

$2,266

 

 

$3,225

 

 

$3,254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$196

 

 

$263

 

 

$678

 

 

$1,367

 

Professional sales service

 

 

21

 

 

 

10

 

 

 

62

 

 

 

32

 

Equipment

 

 

8

 

 

 

45

 

 

 

22

 

 

 

177

 

Corporate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total depreciation and amortization

 

$225

 

 

$318

 

 

$762<