UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 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_10qimg25.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. YesNo

 

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). YesNo

 

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

 

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

 

Emerging Growth Company

 

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

 

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

 

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

 

Number of Shares Outstanding of Common Stock, $.001 Par Value, at August 12, 2023 – 175,141,005

 

 

 

 

Vaso Corporation and Subsidiaries

 

INDEX

 

PART I – FINANCIAL INFORMATION

3

ITEM 1 - FINANCIAL STATEMENTS

3

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

3

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

4

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

5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) for the Six Months Ended June 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

19

ITEM 4 - CONTROLS AND PROCEDURES

26

PART II - OTHER INFORMATION

27

ITEM 6 – EXHIBITS

27

 

 
Page 2

Table of Contents

 

PART I – FINANCIAL INFORMATION

 

ITEM 1 - FINANCIAL STATEMENTS

Vaso Corporation and Subsidiaries

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(in thousands, except share and per share data)

 

June 30, 2023

December 31, 2022

(unaudited)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$14,399$11,821

Short-term investments

11,6758,504

Accounts and other receivables, net of an allowance for credit losses and commission adjustments of $7,526 at June 30, 2023 and $6,947 at December 31, 2022

9,49015,524

Receivables due from related parties

779421

Inventories, net

1,5411,473

Deferred commission expense

3,4053,249

Prepaid expenses and other current assets

1,6851,008

Total current assets

42,97442,000

Property and equipment, net of accumulated depreciation of $10,095 at June 30, 2023 and $9,787 at December 31, 2022

1,2681,340

Operating lease right of use assets

1,6691,568

Goodwill

15,55815,614

Intangibles, net

1,4001,511

Other assets, net

4,9364,726

Investment in EECP Global

764889

Deferred tax assets, net

5,0075,007

Total assets

$73,576$72,655

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable

$2,528$2,270

Accrued commissions

2,0543,720

Accrued expenses and other liabilities

6,1228,891

Finance lease liabilities - current

67122

Operating lease liabilities - current

822745

Sales tax payable

612809

Deferred revenue - current portion

16,85915,139

Notes payable - current portion

99

Due to related party

33

Total current liabilities

29,07631,708

LONG-TERM LIABILITIES

Notes payable, net of current portion

1015

Finance lease liabilities, net of current portion

5696

Operating lease liabilities, net of current portion

847823

Deferred revenue, net of current portion

16,72715,664

Other long-term liabilities

1,6271,474

Total long-term liabilities

19,26718,072

COMMITMENTS AND CONTINGENCIES (NOTE M)

STOCKHOLDERS' EQUITY

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

--

Common stock, $0.001 par value; 250,000,000 shares authorized; 185,449,092 and 185,435,965 shares issued at June 30, 2023 and December 31, 2022, respectively; 175,141,005 and 175,127,878 shares outstanding at June 30, 2023 and December 31, 2022, respectively

185185

Additional paid-in capital

63,97963,952

Accumulated deficit

(36,503)(39,029)

Accumulated other comprehensive loss

(428)(233)

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

(2,000)(2,000)

Total stockholders’ equity

25,23322,875
$73,576$72,655

 

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

 

 

 Six months ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Managed IT systems and services

 

$10,435

 

 

$10,019

 

 

$20,709

 

 

$20,022

 

Professional sales services

 

 

9,254

 

 

 

8,854

 

 

 

17,564

 

 

 

15,461

 

Equipment sales and services

 

 

748

 

 

 

629

 

 

 

1,385

 

 

 

1,029

 

Total revenues

 

 

20,437

 

 

 

19,502

 

 

 

39,658

 

 

 

36,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of managed IT systems and services

 

 

5,693

 

 

 

6,342

 

 

 

11,527

 

 

 

12,211

 

Cost of professional sales services

 

 

1,766

 

 

 

1,674

 

 

 

3,285

 

 

 

2,975

 

Cost of equipment sales and services

 

 

191

 

 

 

150

 

 

 

349

 

 

 

221

 

Total cost of revenues

 

 

7,650

 

 

 

8,166

 

 

 

15,161

 

 

 

15,407

 

Gross profit

 

 

12,787

 

 

 

11,336

 

 

 

24,497

 

 

 

21,105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

10,662

 

 

 

9,604

 

 

 

21,804

 

 

 

19,606

 

Research and development

 

 

217

 

 

 

170

 

 

 

375

 

 

 

292

 

Total operating expenses

 

 

10,879

 

 

 

9,774

 

 

 

22,179

 

 

 

19,898

 

Operating income

 

 

1,908

 

 

 

1,562

 

 

 

2,318

 

 

 

1,207

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and financing costs

 

 

(5)

 

 

(1)

 

 

(33)

 

 

(24)

Interest and other income, net

 

 

179

 

 

 

(48)

 

 

262

 

 

 

-

 

Loss on disposal of fixed assets

 

 

(1)

 

 

-

 

 

 

(2)

 

 

(2)

Total other income, net

 

 

173

 

 

 

(49)

 

 

227

 

 

 

(26)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

2,081

 

 

 

1,513

 

 

 

2,545

 

 

 

1,181

 

Income tax expense

 

 

(9)

 

 

(18)

 

 

(19)

 

 

(30)

Net income

 

 

2,072

 

 

 

1,495

 

 

 

2,526

 

 

 

1,151

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation loss

 

 

(210)

 

 

(215)

 

 

(195)

 

 

(216)

Comprehensive income

 

$1,862

 

 

$1,280

 

 

$2,331

 

 

$935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- basic and diluted

 

$0.01

 

 

$0.01

 

 

$0.01

 

 

$0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- basic

 

 

174,159

 

 

 

172,858

 

 

 

173,895

 

 

 

172,594

 

- diluted

 

 

175,120

 

 

 

174,059

 

 

 

175,162

 

 

 

173,195

 

 

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

 

 

$(50,902)

 

$110

 

 

$11,310

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7

 

 

 

-

 

 

 

-

 

 

 

7

 

Foreign currency translation (loss) gain

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1)

 

 

(1)

Net (loss) income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(344)

 

 

-

 

 

 

(344)

Balance at March 31, 2022

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,924

 

 

$(51,246)

 

$109

 

 

$10,972

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6

 

 

 

-

 

 

 

-

 

 

 

6

 

Foreign currency translation (loss) gain

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(215)

 

 

(215)

Net (loss) income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,495

 

 

 

-

 

 

 

1,495

 

Balance at June 30, 2022

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,930

 

 

$(49,751)

 

$(106)

 

$12,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2023

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

 

(2,000)

 

$63,952

 

 

$(39,029)

 

$(233)

 

$22,875

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

-

 

 

 

13

 

Foreign currency translation (loss) gain

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15

 

 

 

15

 

Net (loss) income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

454

 

 

 

-

 

 

 

454

 

Balance at March 31, 2023

 

 

185,436

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,965

 

 

$(38,575)

 

$(218)

 

$23,357

 

Share-based compensation

 

 

13

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15

 

 

 

-

 

 

 

-

 

 

 

15

 

Shares withheld for employee tax liability

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1)

 

 

-

 

 

 

-

 

 

 

(1)

Foreign currency translation (loss) gain

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(210)

 

 

(210)

Net (loss) income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,072

 

 

 

-

 

 

 

2,072

 

Balance at June 30, 2023

 

 

185,449

 

 

$185

 

 

 

(10,308)

 

$(2,000)

 

$63,979

 

 

$(36,503)

 

$(428)

 

$25,233

 

  

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)

 

 

 

 Six months ended

 

 

 

June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net income

 

$2,526

 

 

$1,151

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

537

 

 

 

1,258

 

Loss from investment in EECP Global

 

 

125

 

 

 

55

 

Provision for credit losses and commission adjustments

 

 

44

 

 

 

157

 

Share-based compensation

 

 

28

 

 

 

13

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and other receivables

 

 

5,972

 

 

 

8,376

 

Inventories

 

 

(129)

 

 

(509)

Deferred commission expense

 

 

(156)

 

 

(27)

Prepaid expenses and other current assets

 

 

(884)

 

 

120

 

Other assets, net

 

 

(291)

 

 

(216)

Accounts payable

 

 

268

 

 

 

(628)

Accrued commissions

 

 

(1,553)

 

 

(1,040)

Accrued expenses and other liabilities

 

 

(2,856)

 

 

(941)

Sales tax payable

 

 

(194)

 

 

26

 

Deferred revenue

 

 

2,783

 

 

 

2,132

 

Due to related party

 

 

(354)

 

 

(275)

Other long-term liabilities

 

 

153

 

 

 

79

 

Net cash provided by operating activities

 

 

6,019

 

 

 

9,731

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of equipment and software

 

 

(360)

 

 

(358)

Purchases of short-term investments

 

 

(11,134)

 

 

-

 

Redemption of short-term investments

 

 

8,134

 

 

 

154

 

Net cash used in investing activities

 

 

(3,360)

 

 

(204)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Payroll taxes paid by withholding shares

 

 

(1)

 

 

-

 

Repayment of notes payable and finance lease obligations

 

 

(99)

 

 

(125)

Net cash used in financing activities

 

 

(100)

 

 

(125)

Effect of exchange rate differences on cash and cash equivalents

 

 

19

 

 

 

9

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

2,578

 

 

 

9,411

 

Cash and cash equivalents - beginning of period

 

 

11,821

 

 

 

6,025

 

Cash and cash equivalents - end of period

 

$14,399

 

 

$15,436

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION

 

 

 

 

 

 

 

 

Interest paid

 

$10

 

 

$29

 

Income taxes paid

 

$23

 

 

$54

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Initial recognition of operating lease right of use asset and liability

 

$474

 

 

$1,072

 

 

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

 

 
Page 6

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Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

NOTE A - ORGANIZATION AND PLAN OF OPERATIONS

 

Vaso Corporation was incorporated in Delaware in July 1987. Unless the context requires otherwise, all references to “we”, “our”, “us”, “Company”, “registrant”, “Vaso” or “management” refer to Vaso Corporation and its subsidiaries.

 

Overview

 

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

 

 

·

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

 

·

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

 

 
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 June 30, 2023 

 

 

Three Months Ended June 30, 2022

 

 

 

 

 

 

Professional sales

 

 

 

 

 

 

 

 

 

 

Professional sales

 

 

 

 

 

 

 

 

IT segment

 

 

service

segment

 

 

Equipment

segment

 

 

Total

 

 

IT segment

 

 

service

segment

 

 

Equipment

segment

 

 

Total

 

Network services

 

$8,946

 

 

$-

 

 

$-

 

 

$8,946

 

 

$8,890

 

 

$-

 

 

$-

 

 

$8,890

 

Software sales and support

 

 

1,489

 

 

 

-

 

 

 

-

 

 

 

1,489

 

 

 

1,129

 

 

 

-

 

 

 

-

 

 

 

1,129

 

Commissions

 

 

-

 

 

 

9,254

 

 

 

-

 

 

 

9,254

 

 

 

-

 

 

 

8,854

 

 

 

-

 

 

 

8,854

 

Medical equipment sales

 

 

-

 

 

 

-

 

 

 

716

 

 

 

716

 

 

 

-

 

 

 

-

 

 

 

597

 

 

 

597

 

Medical equipment service

 

 

-

 

 

 

-

 

 

 

32

 

 

 

32

 

 

 

-

 

 

 

-

 

 

 

32

 

 

 

32

 

 

 

$10,435

 

 

$9,254

 

 

$748

 

 

$20,437

 

 

$10,019

 

 

$8,854

 

 

$629

 

 

$19,502

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2023

 

 

Six Months Ended June 30, 2022

 

 

 

 

 

 

 

Professional sales

 

 

 

 

 

 

 

 

 

 

 

 

Professional sales

 

 

 

 

 

 

 

 

 

IT segment

 

 

service

segment

 

 

Equipment

segment

 

 

Total

 

 

IT segment

 

 

service

segment

 

 

Equipment

segment

 

 

Total

 

Network services

 

$17,984

 

 

$-

 

 

$-

 

 

$17,984

 

 

$17,919

 

 

$-

 

 

$-

 

 

$17,919

 

Software sales and support

 

 

2,725

 

 

 

-

 

 

 

-

 

 

 

2,725

 

 

 

2,103

 

 

 

-

 

 

 

-

 

 

 

2,103

 

Commissions

 

 

-

 

 

 

17,564

 

 

 

-

 

 

 

17,564

 

 

 

-

 

 

 

15,461

 

 

 

-

 

 

 

15,461

 

Medical equipment sales

 

 

-

 

 

 

-

 

 

 

1,322

 

 

 

1,322

 

 

 

-

 

 

 

-

 

 

 

967

 

 

 

967

 

Medical equipment service

 

 

-

 

 

 

-

 

 

 

63

 

 

 

63

 

 

 

-

 

 

 

-

 

 

 

62

 

 

 

62

 

 

 

$20,709

 

 

$17,564

 

 

$1,385

 

 

$39,658

 

 

$20,022

 

 

$15,461

 

 

$1,029

 

 

$36,512

 

 

 

 

Three Months Ended June 30, 2023

Three Months Ended June 30, 2022

 

 

 

 

 

Professional sales

 

 

 

 

 

 

 

 

Professional sales

 

 

 

 

 

 

 

IT segment

 

 

service

segment

 

 

 Equipment

segment

 

 

Total

 

 

IT segment

 

 

service

segment

 

 

 Equipment

segment

 

 

Total

 

Revenue recognized over time

 

$9,357

 

 

$-

 

 

$131

 

 

$9,488

 

 

$9,075

 

 

$-

 

 

$84

 

 

$9,159

 

Revenue recognized at a point in time

 

 

1,078

 

 

 

9,254

 

 

 

617

 

 

 

10,949

 

 

 

944

 

 

 

8,854

 

 

 

545

 

 

 

10,343

 

 

 

$10,435

 

 

$9,254

 

 

$748

 

 

$20,437

 

 

$10,019

 

 

$8,854

 

 

$629

 

 

$19,502

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2023

 

 

Six Months Ended June 30, 2022

 

 

 

 

 

 

 

Professional sales

 

 

 

 

 

 

 

 

 

 

 

 

Professional sales

 

 

 

 

 

 

 

 

 

IT segment

 

 

service segment

 

 

 Equipment

segment

 

 

Total

 

 

IT segment

 

 

service segment

 

 

 Equipment

segment

 

 

Total

 

Revenue recognized over time

 

$18,878

 

 

$-

 

 

$241

 

 

$19,119

 

 

$18,309

 

 

$-

 

 

$148

 

 

$18,457

 

Revenue recognized at a point in time

 

 

1,831

 

 

 

17,564

 

 

 

1,144

 

 

 

20,539

 

 

 

1,713

 

 

 

15,461

 

 

 

881

 

 

 

18,055

 

 

 

$20,709

 

 

$17,564

 

 

$1,385

 

 

$39,658

 

 

$20,022

 

 

$15,461

 

 

$1,029

 

 

$36,512

 

 

Transaction Price Allocated to Remaining Performance Obligations

 

As of June 30, 2023, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $98.6 million, of which we expect to recognize revenue as follows:

 

 

 

(in thousands)

 

 

 

 

 

 

 

Fiscal years of revenue recognition

 

 

 

2023

 

 

2024

 

 

2025

 

 

Thereafter

 

Unfulfilled performance obligations

 

$24,935

 

 

$31,497

 

 

$12,648

 

 

$29,553

 

 

 
Page 9

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

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 $379,000 and $481,000 at June 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 $33,578,000 and $30,794,000 at June 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 $1,124,000 and $2,577,000 at June 30, 2023 and December 31, 2022, respectively, and are included in accrued expenses and other liabilities in our condensed consolidated balance sheets.

 

In our VasoMedical business, we bill amounts for post-delivery services and varying duration service contracts in advance of performance.  Such amounts aggregated approximately $8,000 and $9,000 at June 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 six months ended June 30, 2023, we recognized approximately $3.4 million and $5.6 million of revenues, respectively, that were included in our contract liability balance at April 1, 2023 and January 1, 2023, respectively.

 

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

 

 

 

2023

 

 

2022

 

Contract receivables - January 1

 

 

16,316

 

 

 

15,761

 

Contract receivables - June 30

 

 

10,541

 

 

 

7,171

 

Increase (decrease)

 

 

(5,775)

 

 

(8,590)

 

 

 

 

 

 

 

 

 

Contract liabilities - January 1

 

 

33,861

 

 

 

26,890

 

Contract liabilities - June 30

 

 

35,090

 

 

 

30,012

 

Increase (decrease)

 

 

1,229

 

 

 

3,122

 

 

The decrease in contract receivables in the first halves of 2023 and 2022 was due primarily to collections exceeding billings.

 

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.

 

 
Page 10

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 June 30,

 

 

Six months ended June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues from external customers

 

 

 

 

 

 

 

 

 

 

 

IT

 

$10,435

 

 

$10,019

 

 

$20,709

 

 

$20,022

 

Professional sales service

 

 

9,254

 

 

 

8,854

 

 

 

17,564

 

 

 

15,461

 

Equipment

 

 

748

 

 

 

629

 

 

 

1,385

 

 

 

1,029

 

Total revenues

 

$20,437

 

 

$19,502

 

 

$39,658

 

 

$36,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$4,742

 

 

$3,677

 

 

$9,182

 

 

$7,811

 

Professional sales service

 

 

7,488

 

 

 

7,180

 

 

 

14,279

 

 

 

12,486

 

Equipment

 

 

557

 

 

 

479

 

 

 

1,036

 

 

 

808

 

Total gross profit

 

$12,787

 

 

$11,336

 

 

$24,497

 

 

$21,105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$163

 

 

$(918)

 

$53

 

 

$(1,057)

Professional sales service

 

 

2,149

 

 

 

2,754

 

 

 

3,136

 

 

 

2,990

 

Equipment

 

 

(106)

 

 

(77)

 

 

(131)

 

 

(156)

Corporate

 

 

(298)

 

 

(197)

 

 

(740)

 

 

(570)

Total operating income

 

$1,908

 

 

$1,562

 

 

$2,318

 

 

$1,207

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$236

 

 

$729

 

 

$482

 

 

$1,104

 

Professional sales service

 

 

21

 

 

 

11

 

 

 

41

 

 

 

22

 

Equipment

 

 

7

 

 

 

65

 

 

 

14

 

 

 

132

 

Corporate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total depreciation and amortization

 

$264

 

 

$805

 

 

$537

 

 

$1,258

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IT

 

$137

 

 

$145

 

 

$222

 

 

$296

 

Professional sales service

 

 

2

 

 

 

7

 

 

 

52

 

 

 

40

 

Equipment

 

 

73

 

 

 

11

 

 

 

86

 

 

 

21

 

Corporate

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

Total cash capital expenditures

 

$212

 

 

$163

 

 

$360

 

 

$358

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

June 30,

2023

December 31, 2022

Identifiable Assets

IT

$22,386$22,201

Professional sales service

16,35621,684

Equipment

6,5646,957

Corporate

28,27021,813

Total assets

$73,576$72,656

 

GE Healthcare accounted for 45% of revenue for both of the three-month periods ended June 30, 2023 and 2022, and 44% and 42% of revenue for the six-month periods ended June 30, 2023 and 2022, respectively.  GE Healthcare also accounted for $6.8 million or 72%, and $12.8 million or 83%, of accounts and other receivables at June 30, 2023 and December 31, 2022, respectively.  No other customer accounted for 10% or more of revenue.

 

 
Page 11

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

NOTE E –NET INCOME PER COMMON SHARE

 

Basic earnings per common share is based on the weighted average number of common shares outstanding, including vested restricted shares, without consideration of potential common stock. Diluted earnings per common share is based on the weighted average number of common and potential dilutive common shares outstanding. 

 

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 June 30,

 

 

Six months ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Basic weighted average shares outstanding

 

 

174,159

 

 

 

172,858

 

 

 

173,895

 

 

 

172,594

 

Dilutive effect of unvested restricted shares

 

 

961

 

 

 

1,201

 

 

 

1,267

 

 

 

601

 

Diluted weighted average shares outstanding

 

 

175,120

 

 

 

174,059

 

 

 

175,162

 

 

 

173,195

 

                                                         

 

The following table represents common stock equivalents that were excluded from the computation of diluted earnings per share for the three and six months ended June 30, 2023 and 2022, because the effect of their inclusion would be anti-dilutive.

 

 

 

(in thousands) 

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Restricted common stock grants

 

 

-

 

 

 

2

 

 

 

-

 

 

 

2,249

 

 

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 of approximately $413,000 and $433,000 at June 30, 2023 and December 31, 2022, respectively, and are classified as available-for-sale.  Realized gains or losses on the bank deposits are included in net income.  The US Treasury bills are classified as held-to-maturity and are carried at amortized cost of approximately $11,261,000 and $8,071,000 at June 30, 2023 and December 31, 2022, respectively.  Their fair value at June 30, 2023 and December 31, 2022 is approximately $11,257,000 and $8,064,000, respectively, and the unrecognized holding (loss) gain is $(8,000) and $4,000 for the three and six months ended June 30, 2023, respectively.  The Company does not expect a credit loss for its short-term investments.

 

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.

 

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:

 

 
Page 12

Table of Contents

 

Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

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 amount of assets and liabilities including cash and cash equivalents, short-term investments, accounts receivable, prepaids, accounts payable, accrued expenses and other current liabilities approximated their fair value as of June 30, 2023 and December 31, 2022, due to the relative short maturity of these instruments. Property and equipment, intangible assets, capital lease obligations, and goodwill are not required to be re-measured to fair value on a recurring basis. These assets are evaluated for impairment if certain triggering events occur. If such evaluation indicates that impairment exists, the respective asset is written down to its fair value.

 

 
Page 13

Table of Contents

 

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 June 30, 2023 and December 31, 2022:

 

 

 

(in thousands)

 

 

 

Quoted Prices

 

 

Significant

 

 

 

 

 

 

 

 

 

 in Active

 

 

Other

 

 

Significant

 

 

Balance

 

 

 

Markets for

 

 

Observable

 

 

Unobservable

 

 

as of

 

 

 

Identical Assets

 

 

Inputs

 

 

Inputs

 

 

June 30,

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

2023

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents invested in money market funds

 

$11,660

 

 

$-

 

 

$-

 

 

$11,660

 

Bank deposits (included in short term investments)

 

 

413

 

 

 

 

 

 

 

 

 

 

 

413

 

 

 

$12,073

 

 

$-

 

 

$-

 

 

$12,073

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

 

2022

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents invested in money market funds

 

$7,934

 

 

$-

 

 

$-

 

 

$7,934

 

Bank deposits (included in short term investments)

 

 

433

 

 

 

 

 

 

 

 

 

 

 

433

 

 

 

$8,367

 

 

$-

 

 

$-

 

 

$8,367

 

 

NOTE G – ACCOUNTS AND OTHER RECEIVABLES, NET

 

The following table presents information regarding the Company’s accounts and other receivables as of June 30, 2023 and December 31, 2022:

 

        

 

 

 

(in thousands)

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Trade receivables

 

$14,885

 

 

$22,471

 

Unbilled receivables

 

 

2,131

 

 

 

-

 

Allowance for credit losses and commission adjustments

 

 

(7,526)

 

 

(6,947)

Accounts and other receivables, net

 

$9,490

 

 

$15,524

 

 

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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Notes to Condensed Consolidated Financial Statements (unaudited)

 

NOTE G – INVENTORIES, NET

 

                Inventories, net of reserves, consist of the following:

 

 

 

(in thousands)

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Raw materials

 

$810

 

 

$751

 

Work in process

 

 

35

 

 

 

6

 

Finished goods

 

 

696

 

 

 

716

 

 

 

$1,541

 

 

$1,473

 

The Company maintained reserves for slow moving inventories of $163,000 at June 30, 2023 and December 31, 2022.

 

NOTE H – GOODWILL AND OTHER INTANGIBLES

 

Goodwill of $14,375,000 is allocated to the IT segment.  The remaining $1,183,000 of goodwill is attributable to the FGE reporting unit within the Equipment segment.  The NetWolves and FGE reporting units had negative net asset carrying amounts at June 30, 2023 and December 31, 2022.  The components of the change in goodwill are as follows:

 

                            

 

 

 

(in thousands)

 

 

 

Six months ended

 

 

Year ended

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Beginning of period

 

$15,614

 

 

$15,722

 

Foreign currency translation adjustment

 

 

(56)

 

 

(108)

End of period

 

$15,558

 

 

$15,614

 

 

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

 

 

 

(in thousands)

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Customer-related

 

 

 

 

 

 

Costs

 

$5,831

 

 

$5,831

 

Accumulated amortization

 

 

(4,674)

 

 

(4,557)

 

 

 

1,157

 

 

 

1,274

 

 

 

 

 

 

 

 

 

 

Patents and Technology

 

 

 

 

 

 

 

 

Costs

 

 

1,894

 

 

 

1,894

 

Accumulated amortization

 

 

(1,894)

 

 

(1,894)

 

 

 

 

 

 

 

 

 

Software

 

 

 

 

 

 

 

 

Costs

 

 

2,431

 

 

 

2,362

 

Accumulated amortization

 

 

(2,188)

 

 

(2,125)

 

 

 

243

 

 

 

237

 

 

 

 

 

 

 

 

 

 

 

 

$1,400

 

 

$1,511

 

 

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.  

 

 
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Notes to Condensed Consolidated Financial Statements (unaudited)

 

Amortization expense amounted to $90,000 and $164,000 for the three months ended June 30, 2023 and 2022, respectively and $180,000 and $315,000 for the six months ended June 30, 2023 and 2022, respectively.

 

Amortization of intangibles for the next five years is:

 

 

 

(in thousands)

 

Years ending December 31,

 

 

 

Remainder of 2023

 

 

167

 

2024

 

 

287

 

2025

 

 

217

 

2026

 

 

161

 

2027

 

 

568

 

 

 

$1,400

 

 

NOTE I – OTHER ASSETS, NET

 

Other assets, net consist of the following at June 30, 2023 and December 31, 2022:

 

 

 

(in thousands)

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Deferred commission expense - noncurrent

 

$3,799

 

 

$3,864

 

Trade receivables - noncurrent

 

 

1,052

 

 

 

792

 

Other, net of allowance for loss on loan receivable of $412 at June 30, 2023 and December 31, 2022

 

 

85

 

 

 

70

 

 

 

$4,936

 

 

$4,726

 

 

NOTE J – ACCRUED EXPENSES AND OTHER LIABILITIES

 

                Accrued expenses and other liabilities consist of the following at June 30, 2023 and December 31, 2022:

 

 

 

(in thousands)

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Accrued compensation

 

$1,452

 

 

$2,652

 

Accrued expenses - other

 

 

1,594

 

 

 

2,012

 

Order reduction liability

 

 

1,124

 

 

 

2,577

 

Other liabilities

 

 

1,952

 

 

 

1,650

 

 

 

$6,122

 

 

$8,891

 

 

 
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Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

NOTE K - DEFERRED REVENUE

 

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

 

 

 

(in thousands)

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Deferred revenue at beginning of period

 

$31,553

 

 

$26,954

 

 

$30,803

 

 

$24,965

 

Net additions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred extended service contracts

 

 

-

 

 

 

-

 

 

 

2

 

 

 

-

 

Deferred commission revenues

 

 

5,467

 

 

 

3,575

 

 

 

9,482

 

 

 

8,267

 

Recognized as revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred extended service contracts

 

 

(1)

 

 

(1)

 

 

(2)

 

 

(3)

Deferred commission revenues

 

 

(3,433)

 

 

(3,431)

 

 

(6,699)

 

 

(6,132)

Deferred revenue at end of period

 

 

33,586

 

 

 

27,097

 

 

 

33,586

 

 

 

27,097

 

Less: current portion

 

 

16,859

 

 

 

18,583

 

 

 

16,859

 

 

 

18,583

 

Long-term deferred revenue at end of period

 

$16,727

 

 

$8,514

 

 

$16,727

 

 

$8,514

 

 

NOTE L – RELATED-PARTY TRANSACTIONS

 

The Company uses the equity method to account for its interest in EECP Global as it has the ability to exercise significant influence over the entity and reports its share of EECP Global operations in Other Income (Expense) on its condensed consolidated statements of operations.  For the three months ended June 30, 2023 and 2022, the Company’s share of EECP Global’s loss was approximately $47,000 and $71,000, respectively, and for the six months ended June 30, 2023 and 2022, the Company’s share of EECP Global’s loss was approximately $125,000 and $55,000, respectively, and included in Other (Expense) Income in its condensed consolidated statements of operations. At June 30, 2023 and December 31, 2022 the Company recorded a net receivable from related parties of approximately $757,000 and $403,000, respectively, on its condensed consolidated balance sheet for amounts due from EECP Global for fees and cost reimbursements net of amounts due to EECP Global for receivables collected on its behalf.

 

NOTE M – COMMITMENTS AND CONTINGENCIES

 

Litigation

 

                The Company is currently, and has been in the past, a party to various legal proceedings, primarily employee related matters, incident to its business. The Company believes that the outcome of all pending legal proceedings in the aggregate is unlikely to have a material adverse effect on the business or consolidated financial condition of the Company.

 

Sales Representation Agreement

 

In October 2021, the Company concluded an amendment of the GEHC Agreement with GEHC, originally signed on May 19, 2010 and previously extended in 2012, 2015 and 2017. The amendment extended the term of the original agreement, which began on July 1, 2010, through December 31, 2026, subject to early termination by GEHC without cause with certain conditions.  Under the agreement, VasoHealthcare is the exclusive representative for the sale of select GEHC diagnostic imaging products to specific market accounts in the 48 contiguous states of the United States and the District of Columbia.  The circumstances under which early termination of the agreement may occur with cause include: not materially achieving certain sales goals, not maintaining a minimum number of sales representatives, and not meeting various legal and GEHC policy requirements.

 

 
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Vaso Corporation and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

Employment Agreements

 

On May 10, 2019, the Company modified its Employment Agreement with its President and Chief Executive Officer, Dr. Jun Ma, to provide for a five-year term with extensions, unless earlier terminated by the Company, but in no event can it extend beyond May 31, 2026. The Employment Agreement provides for annual compensation of $500,000. Dr. Ma shall be eligible to receive a bonus for each fiscal year during the employment term. The amount and the occasion for payment of such bonus, if any, shall be at the discretion of the Board of Directors. Dr. Ma shall also be eligible for an award under any long-term incentive compensation plan and grants of options and awards of shares of the Company's stock, as determined at the Board of Directors' discretion. The Employment Agreement further provides for reimbursement of certain expenses, and certain severance benefits in the event of termination prior to the expiration date of the Employment Agreement.

 

On December 31, 2022, the Company executed an Employment Agreement with the President of its VasoHealthcare subsidiary, Ms. Jane Moen, to provide for a twenty-seven month initial term with extensions, unless earlier terminated by the Company, but in no event can it extend beyond December 31, 2026 or the earlier termination of the GEHC Agreement. The Employment Agreement provides for annual base compensation of $350,000. Ms. Moen shall be eligible to receive bonuses for each fiscal year during the employment term. The amount and the occasion for payment of such bonuses, if any, shall be based on employment status as well as achieving certain operating targets. Ms. Moen shall also be eligible for an award under any long-term incentive compensation plan and grants of options and awards of shares of the Company’s stock, as determined at the Board of Directors’ discretion. The Employment Agreement further provides for reimbursement of certain expenses, and certain severance benefits in the event of termination prior to the expiration date of the Employment Agreement.

 

 
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Vaso Corporation and Subsidiaries

 

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

 

Except for historical information contained in this report, the matters discussed are forward-looking statements that involve risks and uncertainties. When used in this report, words such as “anticipates”, “believes”, “could”, “estimates”, “expe