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, 2017
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from _______________ to ______________
Commission File Number: 0-18105
VASO CORPORATION | |
(Exact name of registrant as specified in its charter) |
Delaware | 11-2871434 | |
(State or other jurisdiction of | ||
. incorporation or organization) | (IRS Employer Identification Number) |
137 Commercial Street,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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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.
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 9, 201710, 2023 – 175,390,196
Vaso Corporation and Subsidiaries
INDEX
Table of Contents |
Vaso Corporation and Subsidiaries
(in thousands, except share and per share data)
September 30, 2017 | December 31, 2016 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 5,522 | $ | 7,087 | ||||
Accounts and other receivables, net of an allowance for doubtful | ||||||||
accounts and commission adjustments of $4,710 at September 30, | ||||||||
2017 and $4,159 at December 31, 2016 | 10,944 | 12,741 | ||||||
Receivables due from related parties | 19 | 18 | ||||||
Inventories, net | 2,658 | 2,395 | ||||||
Deferred commission expense | 2,899 | 1,917 | ||||||
Prepaid expenses and other current assets | 1,138 | 925 | ||||||
Total current assets | 23,180 | 25,083 | ||||||
PROPERTY AND EQUIPMENT, net of accumulated depreciation of | ||||||||
$4,723 at September 30, 2017 and $3,835 at December 31, 2016 | 4,777 | 4,021 | ||||||
GOODWILL | 17,407 | 17,280 | ||||||
INTANGIBLES, net | 5,452 | 5,996 | ||||||
OTHER ASSETS, net | 3,898 | 5,001 | ||||||
$ | 54,714 | $ | 57,381 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 5,074 | $ | 5,219 | ||||
Accrued commissions | 1,399 | 2,139 | ||||||
Accrued expenses and other liabilities | 4,617 | 5,275 | ||||||
Sales tax payable | 773 | 718 | ||||||
Income taxes payable | 42 | 30 | ||||||
Deferred revenue - current portion | 12,651 | 7,628 | ||||||
Notes payable and capital lease obligations - current portion | 4,142 | 4,245 | ||||||
Notes payable - related parties - current portion | 127 | - | ||||||
Due to related party | 311 | 396 | ||||||
Total current liabilities | 29,136 | 25,650 | ||||||
LONG-TERM LIABILITIES | ||||||||
Notes payable and capital lease obligations | 4,858 | 4,935 | ||||||
Notes payable - related parties | 380 | 648 | ||||||
Deferred revenue | 9,427 | 11,776 | ||||||
Deferred tax liability | 292 | 112 | ||||||
Other long-term liabilities | 1,114 | 1,349 | ||||||
Total long-term liabilities | 16,071 | 18,820 | ||||||
COMMITMENTS AND CONTINGENCIES (NOTE M) | ||||||||
STOCKHOLDERS' EQUITY | ||||||||
Preferred stock, $.01 par value; 1,000,000 shares authorized; nil shares | ||||||||
issued and outstanding at September 30, 2017 and December 31, 2016 | - | - | ||||||
Common stock, $.001 par value; 250,000,000 shares authorized; | ||||||||
175,387,306 and 173,811,533 shares issued at September 30, 2017 and | ||||||||
December 31, 2016, respectively; 165,079,219 and 163,503,446 shares | ||||||||
outstanding at September 30, 2017 and December 31, 2016, respectively | 175 | 174 | ||||||
Additional paid-in capital | 63,269 | 62,856 | ||||||
Accumulated deficit | (51,724 | ) | (47,790 | ) | ||||
Accumulated other comprehensive loss | (213 | ) | (329 | ) | ||||
Treasury stock, at cost, 10,308,087 shares at September 30, 2017 and December 31, 2016 | (2,000 | ) | (2,000 | ) | ||||
Total stockholders' equity | 9,507 | 12,911 | ||||||
$ | 54,714 | $ | 57,381 |
|
| 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
(unaudited)
(in thousands, except per share data)
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenues | ||||||||||||||||
Managed IT systems and services | $ | 10,827 | $ | 9,679 | $ | 31,438 | $ | 29,530 | ||||||||
Professional sales services | 6,305 | 6,583 | 18,181 | 20,289 | ||||||||||||
Equipment sales and services | 909 | 1,282 | 2,649 | 3,481 | ||||||||||||
Total revenues | 18,041 | 17,544 | 52,268 | 53,300 | ||||||||||||
Cost of revenues | ||||||||||||||||
Cost of managed IT systems and services | 6,311 | 5,550 | 18,526 | 17,436 | ||||||||||||
Cost of professional sales services | 1,386 | 1,325 | 3,946 | 4,318 | ||||||||||||
Cost of equipment sales and services | 316 | 519 | 900 | 1,271 | ||||||||||||
Total cost of revenues | 8,013 | 7,394 | 23,372 | 23,025 | ||||||||||||
Gross profit | 10,028 | 10,150 | 28,896 | 30,275 | ||||||||||||
Operating expenses | ||||||||||||||||
Selling, general and administrative | 10,412 | 9,531 | 31,349 | 28,981 | ||||||||||||
Research and development | 235 | 117 | 716 | 369 | ||||||||||||
Total operating expenses | 10,647 | 9,648 | 32,065 | 29,350 | ||||||||||||
Operating (loss) income | (619 | ) | 502 | (3,169 | ) | 925 | ||||||||||
Other income (expense) | ||||||||||||||||
Interest and financing costs | (166 | ) | (162 | ) | (506 | ) | (474 | ) | ||||||||
Interest and other income, net | 63 | 91 | 55 | 140 | ||||||||||||
Total other expense, net | (103 | ) | (71 | ) | (451 | ) | (334 | ) | ||||||||
(Loss) income before income taxes | (722 | ) | 431 | (3,620 | ) | 591 | ||||||||||
Income tax expense | (94 | ) | (103 | ) | (314 | ) | (154 | ) | ||||||||
Net (loss) income | (816 | ) | 328 | (3,934 | ) | 437 | ||||||||||
Other comprehensive (loss) income | ||||||||||||||||
Foreign currency translation gain (loss) | 25 | 34 | 116 | (58 | ) | |||||||||||
Comprehensive (loss) income | $ | (791 | ) | $ | 362 | $ | (3,818 | ) | $ | 379 | ||||||
(Loss) income per common share | ||||||||||||||||
- basic and diluted | $ | (0.00 | ) | $ | 0.00 | $ | (0.02 | ) | $ | 0.00 | ||||||
Weighted average common shares outstanding | ||||||||||||||||
- basic | 163,307 | 160,268 | 161,817 | 158,730 | ||||||||||||
- diluted | 163,307 | 161,675 | 161,817 | 159,479 |
|
| 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
(unaudited)
(in thousands)
Accumulated | ||||||||||||||||||||||||||||||||
Additional | Other | Total | ||||||||||||||||||||||||||||||
Common Stock | Treasury Stock | Paid-in- | Accumulated | Comprehensive | Stockholders' | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Income (Loss) | Equity | |||||||||||||||||||||||||
Balance at December 31, 2015 | 168,750 | $ | 168 | (10,308 | ) | $ | (2,000 | ) | $ | 62,263 | $ | (48,610 | ) | $ | (80 | ) | $ | 11,741 | ||||||||||||||
Share-based compensation | 3,949 | 4 | - | - | 424 | - | - | 428 | ||||||||||||||||||||||||
Shares issued to settle liability | 1,113 | 2 | - | - | 176 | - | - | 178 | ||||||||||||||||||||||||
Shares not issued for employee tax liability | - | - | - | - | (7 | ) | - | - | (7 | ) | ||||||||||||||||||||||
Foreign currency translation loss | - | - | - | - | - | - | (249 | ) | (249 | ) | ||||||||||||||||||||||
Net income | - | - | - | - | - | 820 | - | 820 | ||||||||||||||||||||||||
Balance at December 31, 2016 | 173,812 | $ | 174 | (10,308 | ) | $ | (2,000 | ) | $ | 62,856 | $ | (47,790 | ) | $ | (329 | ) | $ | 12,911 | ||||||||||||||
Share-based compensation | 1,576 | 1 | - | - | 416 | - | - | 417 | ||||||||||||||||||||||||
Shares not issued for employee tax liability | - | - | - | - | (3 | ) | - | - | (3 | ) | ||||||||||||||||||||||
Foreign currency translation gain | - | - | - | - | - | - | 116 | 116 | ||||||||||||||||||||||||
Net loss | - | - | - | - | - | (3,934 | ) | - | (3,934 | ) | ||||||||||||||||||||||
Balance at September 30, 2017 (unaudited) | 175,388 | $ | 175 | (10,308 | ) | $ | (2,000 | ) | $ | 63,269 | $ | (51,724 | ) | $ | (213 | ) | $ | 9,507 | ||||||||||||||
. |
|
| 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
Nine months ended | ||||||||
September 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net (loss) income | $ | (3,934 | ) | $ | 437 | |||
Adjustments to reconcile net (loss) income to | ||||||||
net cash provided by operating activities | ||||||||
Depreciation and amortization | 1,781 | 1,584 | ||||||
Deferred income taxes | 287 | 135 | ||||||
Loss from interest in joint venture | 30 | 29 | ||||||
Provision for doubtful accounts and commission adjustments | 145 | 96 | ||||||
Amortization of debt issue costs | 24 | 24 | ||||||
Share-based compensation | 417 | 342 | ||||||
Provision for allowance for loss on loan receivable | - | 412 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts and other receivables | 1,671 | 2,214 | ||||||
Receivables due from related parties | (96 | ) | 396 | |||||
Inventories, net | (235 | ) | (374 | ) | ||||
Deferred commission expense | (982 | ) | 448 | |||||
Prepaid expenses and other current assets | (211 | ) | (422 | ) | ||||
Other assets, net | 861 | (285 | ) | |||||
Accounts payable | (153 | ) | 74 | |||||
Accrued commissions | (763 | ) | (613 | ) | ||||
Accrued expenses and other liabilities | (658 | ) | (488 | ) | ||||
Sales tax payable | 52 | (27 | ) | |||||
Income taxes payable | 11 | (164 | ) | |||||
Deferred revenue | 2,674 | (100 | ) | |||||
Deferred tax liability | 180 | - | ||||||
Other long-term liabilities | (235 | ) | 38 | |||||
Net cash provided by operating activities | 866 | 3,756 | ||||||
Cash flows from investing activities | ||||||||
Purchases of equipment and software | (1,981 | ) | (1,412 | ) | ||||
Redemption of short-term investments | - | 38 | ||||||
Investment in VSK | - | (422 | ) | |||||
Net cash used in investing activities | (1,981 | ) | (1,796 | ) | ||||
Cash flows from financing activities | ||||||||
Net borrowings on revolving line of credit | 78 | 2,124 | ||||||
Debt issuance costs | - | (130 | ) | |||||
Payroll taxes paid by withholding shares | (3 | ) | (6 | ) | ||||
Repayment of notes payable and capital lease obligations | (288 | ) | (211 | ) | ||||
Proceeds from note payable - related party | - | 300 | ||||||
Payments on notes payable - related parties | (170 | ) | (566 | ) | ||||
Net cash (used in) provided by financing activities | (383 | ) | 1,511 | |||||
Effect of exchange rate differences on cash and cash equivalents | (67 | ) | 64 | |||||
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (1,565 | ) | 3,535 | |||||
Cash and cash equivalents - beginning of period | 7,087 | 2,160 | ||||||
Cash and cash equivalents - end of period | $ | 5,522 | $ | 5,695 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION | ||||||||
Interest paid | $ | 483 | $ | 589 | ||||
Income taxes paid | $ | 35 | $ | 474 | ||||
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
Inventories transferred to property and equipment, net | $ | - | $ | 149 | ||||
Equipment acquired through capital lease | $ | - | $ | 387 | ||||
Liability settled through issuance of common stock | $ | - | $ | 178 |
Notes to Condensed Consolidated Financial Statements (unaudited)
Vaso Corporation was incorporated in Delaware in July 1987. Unless the context requires otherwise, all references to "we"“we”, "our"“our”, "us"“us”, "Company"“Company”, "registrant"“registrant”, "Vaso"“Vaso” or "management"“management” refer to Vaso Corporation and its subsidiaries. The Company changed its name from Vasomedical, Inc. to Vaso Corporation in November 2016 at its annual shareholders meeting. The name was changed because the Company in the several years prior to the name change had substantially diversified its business and the original name, Vasomedical, Inc., no longer portrayed the nature of its overall business. In addition, the Company retained the name of VasoMedical, Inc. and now uses it exclusively for its proprietary medical device business, as the name originally represented.
Overview
Vaso Corporation principally operates in three distinct business segments in the healthcare and information technology ("IT"(“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., primarily focuses on healthcare IT and managed network technology services;
· | 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'sCompany’s execution of its exclusive sales representation agreement ("(“GEHC Agreement"Agreement”) with GEHC which is the healthcare business division of the General Electric Company, 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'sCompany’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 diagnostic and therapeuticdiagnostic systems. Its current offerings consist of:
· | Biox™ series Holter monitors and ambulatory blood pressure recorders. | |
· | ARCS® series analysis, reporting and communication software for |
· | MobiCare® multi-parameter wireless vital-sign monitoring system. | |
· | EECP® therapy |
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 as well as a global joint venture arrangement, to sell its products. It also provides engineering and OEM services to other medical device companies.
NOTE B - BASIS OF– INTERIM STATEMENT PRESENTATION AND CRITICAL ACCOUNTING POLICIES
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 connectionconjunction 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, 2016,2022, as filed with the SEC on March 30, 2017.
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 Recent Accounting Pronouncements
The following are selected line items from the date of adoption of this new guidance, we expect to record an asset in our consolidated balance sheets for the amount of unamortized sales commissions for prior periods, as calculated under the new guidance. Such amount will subsequently be amortized to expense over the remaining performance periods of the related contracts with remaining performance obligations. Our analysis and evaluation of the new standard will continue through the effective date on January 1, 2018.
|
| 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)
(in thousands) | ||||||||
As of September 30, 2017 | As of December 31, 2016 | |||||||
(unaudited) | ||||||||
Cash and cash equivalents | $ | 35 | $ | 13 | ||||
Total assets | $ | 1,443 | $ | 1,451 | ||||
Total liabilities | $ | 1,700 | $ | 1,133 |
(in thousands) | ||||||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Total net revenue | $ | 318 | $ | 399 | $ | 1,049 | $ | 1,314 | ||||||||
Net (loss) income | $ | (90 | ) | $ | 84 | $ | (626 | ) | $ | 244 | ||||||
|
| 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'sCompany’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 | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Revenues from external customers | ||||||||||||||||
IT | $ | 10,827 | $ | 9,679 | $ | 31,438 | $ | 29,530 | ||||||||
Professional sales service | 6,305 | 6,583 | 18,181 | 20,289 | ||||||||||||
Equipment | 909 | 1,282 | 2,649 | 3,481 | ||||||||||||
Total revenues | $ | 18,041 | $ | 17,544 | $ | 52,268 | $ | 53,300 | ||||||||
Gross Profit | ||||||||||||||||
IT | $ | 4,516 | $ | 4,129 | $ | 12,912 | $ | 12,094 | ||||||||
Professional sales service | 4,919 | 5,258 | 14,235 | 15,971 | ||||||||||||
Equipment | 593 | 763 | 1,749 | 2,210 | ||||||||||||
Total gross profit | $ | 10,028 | $ | 10,150 | $ | 28,896 | $ | 30,275 | ||||||||
Operating (loss) income | ||||||||||||||||
IT | $ | (555 | ) | $ | (785 | ) | $ | (2,186 | ) | $ | (2,379 | ) | ||||
Professional sales service | 488 | 1,606 | 806 | 5,015 | ||||||||||||
Equipment | (273 | ) | 10 | (805 | ) | (700 | ) | |||||||||
Corporate | (279 | ) | (329 | ) | (984 | ) | (1,011 | ) | ||||||||
Total operating (loss) income | $ | (619 | ) | $ | 502 | $ | (3,169 | ) | $ | 925 | ||||||
Capital expenditures | ||||||||||||||||
IT | $ | 641 | $ | 446 | $ | 1,830 | $ | 1,187 | ||||||||
Professional sales service | 3 | 57 | 117 | 168 | ||||||||||||
Equipment | - | 2 | 21 | 57 | ||||||||||||
Corporate | 13 | - | 13 | - | ||||||||||||
Total cash capital expenditures | $ | 657 | $ | 505 | $ | 1,981 | $ | 1,412 |
(in thousands) | ||||||||
September 30, 2017 | December 31, 2016 | |||||||
(unaudited) | ||||||||
Identifiable Assets | ||||||||
IT | $ | 28,512 | $ | 27,724 | ||||
Professional sales service | 12,572 | 14,611 | ||||||
Equipment | 7,728 | 7,446 | ||||||
Corporate | 5,902 | 7,600 | ||||||
Total assets | $ | 54,714 | $ | 57,381 |
|
| (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 |
|
| $ | 1,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IT |
| $ | 71 |
|
| $ | 86 |
|
| $ | 293 |
|
| $ | 383 |
|
Professional sales service |
|
| 23 |
|
|
| - |
|
|
| 75 |
|
|
| 40 |
|
Equipment |
|
| 82 |
|
|
| 2 |
|
|
| 168 |
|
|
| 23 |
|
Corporate |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1 |
|
Total cash capital expenditures |
| $ | 176 |
|
| $ | 88 |
|
| $ | 536 |
|
| $ | 447 |
|
|
| (in thousands) |
| |||||
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Identifiable Assets |
|
|
|
|
|
| ||
IT |
| $ | 22,334 |
|
| $ | 22,201 |
|
Professional sales service |
|
| 15,088 |
|
|
| 20,674 |
|
Equipment |
|
| 6,725 |
|
|
| 6,957 |
|
Corporate |
|
| 28,891 |
|
|
| 21,813 |
|
Total assets |
| $ | 73,038 |
|
| $ | 71,645 |
|
Page 13 |
Table of Contents |
Vaso Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
GE Healthcare accounted for 45% and 47% of 2016, the Company revised its method for allocating certain corporate expenses to its reportable segments resulting in lower amounts allocated to the IT segment and higher amounts allocated to the professional sales service and equipment segments. Consequently, due primarily to the change in allocation method, as well as to a $102,000 decrease in total corporate costs allocated, the IT segment received $177,000 lower allocations, and the professional sales service segment received $75,000 higher allocations, respectively,revenue for the three months ended September 30, 2017 as compared to the corresponding period2023 and 2022, respectively, and 45% and 44% of the prior year. Similarly,revenue for the nine months ended September 30, 2017, total corporate costs allocated decreased $85,000, the IT segment received $430,000 lower allocations,2023 and the professional sales service segment and equipment segment received $334,000 and $11,000 higher allocations, respectively, as compared to the corresponding period of the prior year.
NOTE D – (LOSS) EARNINGSE –NET INCOME PER COMMON SHARE
Basic (loss) earnings per common share is computed as (loss) earnings applicable to common stockholders divided by the weighted-average number of common shares outstanding for the period. Diluted (loss) earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted to common stock.
Diluted (loss) earnings per common share were computed based on the weighted average number of shares outstanding plus all potentially dilutive common shares. A reconciliation of basic to diluted shares used in the earnings per share calculation is as follows:
(in thousands) | ||||||||||||||||
For the three months ended | For the nine months ended | |||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Basic weighted average shares outstanding | 163,307 | 160,268 | 161,817 | 158,730 | ||||||||||||
Dilutive effect of options and unvested restricted shares | - | 1,407 | - | 749 | ||||||||||||
Diluted weighted average shares outstanding | 163,307 | 161,675 | 161,817 | 159,479 | ||||||||||||
|
| (in thousands) |
| |||||||||||||
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Basic weighted average shares outstanding |
|
| 174,938 |
|
|
| 173,528 |
|
|
| 174,246 |
|
|
| 172,909 |
|
Dilutive effect of unvested restricted shares |
|
| 908 |
|
|
| 1,364 |
|
|
| 1,148 |
|
|
| 1,604 |
|
Diluted weighted average shares outstanding |
|
| 175,846 |
|
|
| 174,892 |
|
|
| 175,394 |
|
|
| 174,513 |
|
The following table represents common stock equivalents that were excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 20172023 and 2016,2022, because the effect of their inclusion would be anti-dilutive.
(in thousands) | ||||||||||||||||
For the three months ended | For the nine months ended | |||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Restricted common stock grants | 4,613 | 2,246 | 4,613 | 500 |
|
| (in thousands) |
| |||||||||||||
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Restricted common stock grants |
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2 |
|
NOTE F – SHORT-TERM INVESTMENTS AND FINANCIAL INSTRUMENTS
The Company's short-term investments consist of bank deposits with yields based on underlying debt and equity securities and six-month US Treasury bills. The bank deposits are carried at fair value of approximately $411,000 and $433,000 at September 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 $15,427,000 and $8,071,000 at September 30, 2023 and December 31, 2022, respectively. Their fair value at September 30, 2023 and December 31, 2022 is approximately $15,426,000 and $8,064,000, respectively, and the unrecognized holding gain (loss) is $3,000 and $(1,000) for the three and nine months ended September 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.
Page 14 |
Table of Contents |
Vaso Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
In determining fair value, the Company uses various valuation approaches. ASC 820 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The carrying 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 September 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 15 |
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 September 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 |
|
| September 30, |
| ||||
|
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
|
| 2023 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash equivalents invested in money market funds |
| $ | 9,706 |
|
| $ | - |
|
| $ | - |
|
| $ | 9,706 |
|
Bank deposits (included in short term investments) |
|
| 411 |
|
|
|
|
|
|
|
|
|
|
| 411 |
|
|
| $ | 10,117 |
|
| $ | - |
|
| $ | - |
|
| $ | 10,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 EG – ACCOUNTS AND OTHER RECEIVABLES, NET
The following table presents information regarding the Company'sCompany’s accounts and other receivables as of September 30, 20172023 and December 31, 2016:
(in thousands) | ||||||||
September 30, 2017 | December 31, 2016 | |||||||
(unaudited) | ||||||||
Trade receivables | $ | 15,549 | $ | 16,470 | ||||
Due from employees | 105 | 430 | ||||||
Allowance for doubtful accounts and | ||||||||
commission adjustments | (4,710 | ) | (4,159 | ) | ||||
Accounts and other receivables, net | $ | 10,944 | $ | 12,741 |
|
| (in thousands) |
| |||||
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Trade receivables |
| $ | 12,788 |
|
| $ | 21,461 |
|
Unbilled receivables |
|
| 3,050 |
|
|
| - |
|
Allowance for credit losses and commission adjustments |
|
| (7,483 | ) |
|
| (6,947 | ) |
Accounts and other receivables, net |
| $ | 8,355 |
|
| $ | 14,514 |
|
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 currently duerecorded – billed and unbilled - under the GEHC Agreement are subject to adjustment in subsequent periods should the underlying sales order amount, upon which the receivable is based, change.
Allowance for doubtful accounts and commission adjustments include estimated losses resulting from the inability of our customers to make required payments, and adjustments arising from subsequent changes in sales order amounts that may reduce the amount the Company will ultimately receive under the GEHC Agreement. Due from employees is primarily commission advances made
Page 16 |
Table of Contents |
Vaso Corporation and Subsidiaries
Notes to sales personnel.
NOTE FH – INVENTORIES, NET
Inventories, net of reserves, consist of the following:
(in thousands) | ||||||||
September 30, 2017 | December 31, 2016 | |||||||
(unaudited) | ||||||||
Raw materials | $ | 553 | $ | 501 | ||||
Work in process | 536 | 727 | ||||||
Finished goods | 1,569 | 1,167 | ||||||
$ | 2,658 | $ | 2,395 | |||||
|
| (in thousands) |
| |||||
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Raw materials |
| $ | 731 |
|
| $ | 751 |
|
Work in process |
|
| 35 |
|
|
| 6 |
|
Finished goods |
|
| 630 |
|
|
| 716 |
|
|
| $ | 1,396 |
|
| $ | 1,473 |
|
The Company maintained reserves for slow moving inventories of $810,000$164,000 and $827,000,$163,000 at September 30, 2023 and December 31, 2022, respectively.
NOTE GI – GOODWILL AND OTHER INTANGIBLES
Goodwill aggregating $17,407,000 and $17,280,000 was recorded on the Company's condensed consolidated balance sheets at September 30, 2017 and December 31, 2016, respectively, of which $14,375,000 is allocated to the IT segment, resulted from the acquisition of NetWolves in May 2015.segment. The remaining $3,032,000$1,176,000 of goodwill is allocatedattributable to the Company's equipmentFGE reporting unit within the Equipment segment. The NetWolves and FGE reporting units had negative carrying values at September 30, 2023 and December 31, 2022. The components of the change in goodwill are as follows:
(in thousands) | ||||
Carrying Amount | ||||
Balance at December 31, 2016 | $ | 17,280 | ||
Foreign currency translation adjustment | 127 | |||
Balance at September 30, 2017 (unaudited) | $ | 17,407 | ||
|
| (in thousands) |
| |||||
|
| Nine months ended |
|
| Year ended |
| ||
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Beginning of period |
| $ | 15,614 |
|
| $ | 15,722 |
|
Foreign currency translation adjustment |
|
| (63 | ) |
|
| (108 | ) |
End of period |
| $ | 15,551 |
|
| $ | 15,614 |
|
The Company'sCompany’s other intangible assets consist of capitalized customer-related intangibles, patent and technology costs, and software costs, as set forth in the following:
(in thousands) | ||||||||
September 30, 2017 | December 31, 2016 | |||||||
(unaudited) | ||||||||
Customer-related | ||||||||
Costs | $ | 5,831 | $ | 5,831 | ||||
Accumulated amortization | (2,318 | ) | (1,768 | ) | ||||
3,513 | 4,063 | |||||||
Patents and Technology | ||||||||
Costs | 2,363 | 2,363 | ||||||
Accumulated amortization | (1,238 | ) | (1,061 | ) | ||||
1,125 | 1,302 | |||||||
Software | ||||||||
Costs | 1,720 | 1,394 | ||||||
Accumulated amortization | (906 | ) | (763 | ) | ||||
814 | 631 | |||||||
$ | 5,452 | $ | 5,996 | |||||
|
| (in thousands) |
| |||||
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Customer-related |
|
|
|
|
|
| ||
Costs |
| $ | 5,831 |
|
| $ | 5,831 |
|
Accumulated amortization |
|
| (4,732 | ) |
|
| (4,557 | ) |
|
|
| 1,099 |
|
|
| 1,274 |
|
|
|
|
|
|
|
|
|
|
Patents and Technology |
|
|
|
|
|
|
|
|
Costs |
|
| 1,894 |
|
|
| 1,894 |
|
Accumulated amortization |
|
| (1,894 | ) |
|
| (1,894 | ) |
|
|
| - |
|
|
| - |
|
Software |
|
|
|
|
|
|
|
|
Costs |
|
| 2,468 |
|
|
| 2,362 |
|
Accumulated amortization |
|
| (2,212 | ) |
|
| (2,125 | ) |
|
|
| 256 |
|
|
| 237 |
|
|
|
|
|
|
|
|
|
|
|
| $ | 1,355 |
|
| $ | 1,511 |
|
Page 17 |
Table of Contents |
Vaso Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
Patents and technology are amortized on a straight-line basis over their estimated useful lives of ten and eight years, respectively. The cost of significant customer-related intangibles is amortized in proportion to estimated total related revenue; cost of other customer-related intangible assets is amortized on a straight-line basis over the asset's estimated economic life of seven years. Software costs are amortized on a straight-line basis over its expected useful life of five years.
Amortization expense amounted to $279,000$81,000 and $284,000$136,000 for the three months ended September 30, 20172023 and 2016,2022, respectively and $870,000$261,000 and $847,000$451,000 for the nine months ended September 30, 20172023 and 2016,2022, respectively.
Amortization of intangibles for the next five years is:
(in thousands) | ||||
Years ending December 31, | (unaudited) | |||
Remainder of 2017 | $ | 292 | ||
2018 | 1,015 | |||
2019 | 893 | |||
2020 | 809 | |||
2021 | 737 | |||
Total | $ | 3,746 |
|
| (in thousands) |
| |
Years ending December 31, |
|
|
| |
Remainder of 2023 |
|
| 86 |
|
2024 |
|
| 295 |
|
2025 |
|
| 224 |
|
2026 |
|
| 169 |
|
2027 |
|
| 581 |
|
|
| $ | 1,355 |
|
NOTE HJ – OTHER ASSETS, NET
Other assets, net consist of the following at September 30, 20172023 and December 31, 2016:
(in thousands) | ||||||||
September 30, 2017 | December 31, 2016 | |||||||
(unaudited) | ||||||||
Deferred commission expense - noncurrent | $ | 2,118 | $ | 2,967 | ||||
Trade receivables - noncurrent | 900 | 1,064 | ||||||
Other, net of allowance for loss on loan receivable of | ||||||||
$412 at September 30, 2017 and December 31, 2016 | 880 | 970 | ||||||
$ | 3,898 | $ | 5,001 |
|
| (in thousands) |
| |||||
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Deferred commission expense - noncurrent |
| $ | 3,363 |
|
| $ | 3,864 |
|
Trade receivables - noncurrent |
|
| 831 |
|
|
| 792 |
|
Other, net of allowance for loss on loan receivable of $412 at September 30, 2023 and December 31, 2022 |
|
| 58 |
|
|
| 70 |
|
|
| $ | 4,252 |
|
| $ | 4,726 |
|
NOTE IK – ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following at September 30, 20172023 and December 31, 2016:
(in thousands) | ||||||||
September 30, 2017 | December 31, 2016 | |||||||
(unaudited) | ||||||||
Accrued compensation | $ | 840 | $ | 1,133 | ||||
Accrued expenses - other | 1,234 | 1,140 | ||||||
Other liabilities | 2,543 | 3,002 | ||||||
$ | 4,617 | $ | 5,275 | |||||
|
| (in thousands) |
| |||||
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Accrued compensation |
| $ | 1,473 |
|
| $ | 2,652 |
|
Accrued expenses - other |
|
| 1,791 |
|
|
| 2,012 |
|
Order reduction liability |
|
| 1,198 |
|
|
| 2,577 |
|
Other liabilities |
|
| 1,891 |
|
|
| 1,650 |
|
|
| $ | 6,353 |
|
| $ | 8,891 |
|
Page 18 |
Table of Contents |
Vaso Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
NOTE JL - DEFERRED REVENUE
The changes in the Company'sCompany’s deferred revenues are as follows:
(in thousands) | ||||||||||||||||
For the three months ended | For the nine months ended | |||||||||||||||
September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Deferred revenue at beginning of period | $ | 20,692 | $ | 17,783 | $ | 19,404 | $ | 18,516 | ||||||||
Additions: | ||||||||||||||||
Deferred extended service contracts | 118 | 159 | 553 | 488 | ||||||||||||
Deferred in-service and training | 5 | 10 | 13 | 18 | ||||||||||||
Deferred service arrangements | 8 | 20 | 28 | 40 | ||||||||||||
Deferred commission revenues | 4,036 | 3,411 | 10,286 | 8,492 | ||||||||||||
Recognized as revenue: | ||||||||||||||||
Deferred extended service contracts | (159 | ) | (186 | ) | (501 | ) | (584 | ) | ||||||||
Deferred in-service and training | (3 | ) | (3 | ) | (13 | ) | (15 | ) | ||||||||
Deferred service arrangements | (11 | ) | (13 | ) | (34 | ) | (33 | ) | ||||||||
Deferred commission revenues | (2,608 | ) | (2,765 | ) | (7,658 | ) | (8,506 | ) | ||||||||
Deferred revenue at end of period | 22,078 | 18,416 | 22,078 | 18,416 | ||||||||||||
Less: current portion | 12,651 | 7,830 | 12,651 | 7,830 | ||||||||||||
Long-term deferred revenue at end of period | $ | 9,427 | $ | 10,586 | $ | 9,427 | $ | 10,586 |
|
| (in thousands) |
| |||||||||||||
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Deferred revenue at beginning of period |
| $ | 33,586 |
|
| $ | 27,096 |
|
| $ | 30,803 |
|
| $ | 24,965 |
|
Net additions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred extended service contracts |
|
| - |
|
|
| - |
|
|
| 2 |
|
|
| - |
|
Deferred commission revenues |
|
| 2,924 |
|
|
| 3,474 |
|
|
| 12,406 |
|
|
| 11,741 |
|
Recognized as revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred extended service contracts |
|
| (1 | ) |
|
| (1 | ) |
|
| (4 | ) |
|
| (4 | ) |
Deferred commission revenues |
|
| (3,269 | ) |
|
| (3,677 | ) |
|
| (9,967 | ) |
|
| (9,810 | ) |
Deferred revenue at end of period |
|
| 33,240 |
|
|
| 26,892 |
|
|
| 33,240 |
|
|
| 26,892 |
|
Less: current portion |
|
| 18,535 |
|
|
| 17,525 |
|
|
| 18,535 |
|
|
| 17,525 |
|
Long-term deferred revenue at end of period |
| $ | 14,705 |
|
| $ | 9,367 |
|
| $ | 14,705 |
|
| $ | 9,367 |
|
NOTE KM – LINE OF CREDIT
The Company uses the equity method to account for its $3.0 million lineinterest in EECP Global as it has the ability to exercise significant influence over the entity and reports its share of credit and,EECP Global operations in September 2016, increased the maximum borrowings to $4.0 million. Advances under the line, which expiredOther Income (Expense) on August 26, 2017 and was extended through March 31, 2018, bear interest at a rate of LIBOR plus 2.25% and are secured by substantially all of the assets of NetWolves Network Services, LLC and guaranteed by Vaso Corporation. At September 30, 2017, the Company had drawn approximately $3.9 million against the line. The draw is included in notes payable and capital lease obligations – current portion in the Company'sits condensed consolidated balance sheet.
NOTE MN – 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 September 2012,October 2021, the Company concluded an amendment of the GEHC Agreement with GEHC, originally signed on May 19, 2010.2010 and previously extended in 2012, 2015 and 2017. The amendment effective July 1, 2012, extended the initial term of three years commencingthe original agreement, which began on July 1, 2010, to five years through September 30, 2015. In December 2014, the Company concluded an additional amendment, effective January 1, 2015, extending the term through December 31, 2018,2026, subject to earlierearly termination under certain circumstances and terminationby GEHC without cause on six months written notice. Thesewith 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 includeunder 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.
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'SMANAGEMENT’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"“anticipates”, "believes"“believes”, "could"“could”, "estimates"“estimates”, "expects"“expects”, "may"“may”, "plans"“plans”, "potential"“potential” and "intends"“intends” and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company'sCompany’s management, as well as assumptions made by and information currently available to the Company'sCompany’s management. Among the factors that could cause actual results to differ materially are the following: the effect of business and economic conditions;conditions, including the current COVID-19 pandemic which has already adversely affected operating results; the effect of the dramatic changes taking place in the healthcare environment;IT and healthcare; the impact of competitive procedures and products and their pricing; medical insurance reimbursement policies; unexpected manufacturing or supplier problems; unforeseen difficulties and delays in the conduct of clinical trials and other product development programs; the actions of regulatory authorities and third-party payers in the United States and overseas; continuation of the GEHC agreementsagreement and the risk factors reported from time to time in the Company'sCompany’s SEC reports, including its recent report on Form 10-K. The Company undertakes no obligation to update forward-looking statements as a result of future events or developments.
Unless the context requires otherwise, all references to "we"“we”, "our"“our”, "us"“us”, "Company"“Company”, "registrant"“registrant”, "Vaso"“Vaso” or "management"“management” refer to Vaso Corporation and its subsidiaries
General Overview
Our Business Segments
Vaso Corporation ("Vaso"(“Vaso”) was incorporated in Delaware in July 1987. We principally operate 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 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 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. |
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Vaso Corporation and managed network technology services;
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon the accompanying unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("(“U.S. GAAP"GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Although these estimates are based on our knowledge of current events, our actual amounts and results could differ from those estimates. The estimates made are based on historical factors, current circumstances, and the experience and judgment of our management, who continually evaluate the judgments, estimates and assumptions and may employ outside experts to assist in the evaluations.
Certain of our accounting policies are deemed "critical"“critical”, as they are both most important to the financial statement presentation and require management'smanagement’s most difficult, subjective or complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a discussion of our critical accounting policies, see "Management'sNote B to the condensed consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations” in our Annual Report on Form 10-K for the year ended December 31, 20162022 as filed with the SEC on March 30, 2017.
Results of Operations – For the Three Months Ended September 30, 20172023 and 2016
Revenues
Total revenue for the three months ended September 30, 20172023 and 20162022 was $18,041,000$19,449,000 and $17,544,000,$19,833,000, respectively, representing an increasea decrease of $497,000,$384,000, or 3%2% year-over-year. On a segment basis, revenue in the IT segment increased $1,148,000,by $31,000, while revenue in the professional sales serviceservices and equipment segments decreased $278,000by $400,000 and $373,000,$15,000, respectively.
Revenue in the IT segment for the three months ended September 30, 20172023 was $10,827,000$9,867,000 compared to $9,679,000$9,836,000 for the three months ended September 30, 2016,2022, an increase of $1,148,000,$31,000, or less than 1%, of which $252,000$62,000 resulted from growth in the operations ofhigher network services revenue by NetWolves, and $896,000offset by $31,000 from the growthlower revenues in the healthcare IT VAR business, due to more healthcarebusiness. Monthly recurring revenue in the IT solutions installationssegment accounted for $9,302,000 or 94% of the segment revenue in the third quarter of 2017. Our monthly recurring2023, and $9,220,000 or 94% of the segment revenue in the managed network services operations continues to grow month over month as we add new customers and expand our services to existing customers; atfor the same time, the backlog of orders in our healthcare IT operations increased to $10.4 million at September 30, 2017 from $7.4 million at December 31, 2016 and $6.3 million at September 30, 2016, due to growth in orders and clients. We anticipate that as our healthcare IT operations become more developed and the service delivery process accelerated, the backlog will convert to revenue in a more timely fashion and, coupled with continued growth in order volume, profitability will improve in this segment.
Commission revenues in the professional sales servicesservice segment were $6,305,000$8,837,000 in the third quarter of 2017,2023, a decrease of $400,000, or 4%, as compared to $6,583,000$9,237,000 in the same quarter of 2016.2022. The decrease in commission revenues was due primarily to a decrease in the volume of underlying equipment delivered by GEHC during the period.period, partially offset by a higher blended commission rate applicable to such deliveries. The Company only recognizes commission revenue when the underlying equipment has been accepted at the customer site in accordance with the specific terms of the sales agreement. Consequently, amounts billable, or billed and received, under the agreement with GE HealthcareGEHC prior to customer acceptance of the equipment are recorded as deferred revenue in the condensed consolidated balance sheet. As of September 30, 2017, $21,132,0002023, $33,232,000 in deferred commission revenue was recorded in the Company'sCompany’s condensed consolidated balance sheet, of which $9,013,000$14,701,000 was long-term. AtAs of September 30, 2016, $17,355,0002022, $26,886,000 in deferred commission revenue was recorded in the Company'sCompany’s condensed consolidated balance sheet, of which $10,115,000$9,366,000 was long-term. The increase in deferred revenue is principally due to an increase in new orders booked and the decrease in deliveries by GEHC.
Revenue in the equipment segment decreased by $373,000,$15,000, or 29%2%, to $909,000$745,000 for the three-month period ended September 30, 20172023 from $1,282,000$760,000 for the same period of the prior year. The decrease was principallyyear, due to lower EECP® deliveries.
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Vaso Corporation and Subsidiaries
Gross Profit
Gross profit for the three months ended September 30, 20172023 and 20162022 was $10,028,000,$12,043,000, or 56%62% of revenue, and $10,150,000,$12,374,000, or 58%62% of revenue, respectively, representing a decrease of $122,000,$331,000, or 1%3% year-over-year. On a segment basis, gross profit in the IT segmentsegments increased $387,000,$179,000, or 4%, while gross profit in the professional sales services segmentservice and equipment segmentsegments decreased $339,000$506,000, or 7%, and $170,000,$4,000, or 1%, respectively.
IT segment gross profit for the three months ended September 30, 20172023 was $4,516,000,$4,274,000, or 42%43% of the segment revenue, compared to $4,129,000,$4,095,000, or 43%42% of the segment revenue for the three months ended September 30, 2016, with2022. The year-over-year increase of $179,000, or 4%, was primarily a result of a higher margin sales mix in the increase primarily resulting from higher sales.
Professional sales servicesservice segment gross profit was $4,919,000,$7,201,000, or 78%81% of segment revenue, for the three months ended September 30, 20172023 as compared to $5,258,000,$7,707,000, or 80%83% of the segment revenue, for the three months ended September 30, 2016,2022, reflecting a decrease of $339,000,$506,000, or 6%7%. The decrease in absolute dollars was primarily due to lower commission revenue as a result of lower volume of GEHC equipment delivered during the third quarter of 2017 than in2023, partially offset by a higher blended commission rate, when compared to the same period last year.
Commission expense associated with short-term deferred revenue is recorded as short-term deferred commission expense, or with long-term deferred revenue as part of other assets, on the balance sheet until the related commission revenue is recognized.
Equipment segment gross profit decreased to $593,000,$568,000, or 65%76% of segment revenues, for the third quarter of 20172023 compared to $763,000,$572,000, or 60%75% of segment revenues, for the same quarter of 2016. Gross2022. The $4,000, or 1%, decrease in gross profit decreased due towas primarily the result of lower sales volume and gross profit margin increased due mainly to a higher proportion of higher margin products induring the sales mix in 2017, compared to the third quarter 2016.
Operating Income (Loss)
Operating (loss) income for the three months ended September 30, 2017 and 20162023 was $(619,000) and $502,000, respectively,$907,000 compared to $2,266,000 for the same quarter in 2022, representing a decrease of $1,121,000,$1,359,000, or 60%, due primarily due to higherboth the decrease in gross profit and increase in operating costs and lower gross profit. On a segment basis, operating loss in the IT segment decreased $230,000, while operating income(below) in the professional sales service segment. On a segment decreased $1,118,000. Operatingbasis, the IT segment recorded an operating loss of $187,000 in the equipment segment was $(273,000) for the third quarter of 20172023 as compared to an operating loss of $474,000 in the same period of 2022; the professional sales service segment recorded operating income of $1,648,000 in the third quarter of 2023 as opposed to operating income of $10,000$2,981,000 in the same period of 2022; and the equipment segment recorded an operating loss of $83,000 in the third quarter of 2016. In addition, corporate expenses decreased $50,000.
Operating loss in the IT segment decreased into $187,000 for the three-month period ended September 30, 2017 as compared to2023 from an operating loss of $474,000 in the same period of 20162022, due to higher gross profit partially offset by higher research and developmentlower SG&A and R&D costs. Operating income in the professional sales service segment decreased by $1,333,000 in the three-month period ended September 30, 20172023 as compared to operating income in the same period of 20162022, due to lower gross profit combined with higher selling, general, and administrative ("SG&A") costs. The change from equipment segment operating income in the third quarter of 2016 to operating loss in the third quarter of 2017 was due toboth lower gross profit and higher SG&A costs.
SG&A costs for the three months ended September 30, 20172023 and 20162022 were $10,412,000$10,927,000 and $9,531,000,$9,978,000, respectively, representing an increase of $881,000,$949,000, or 9%10% year-over-year. On a segment basis, SG&A costs in the IT segment decreased by $102,000 in the third quarter of 2023 from the same quarter of the prior year due primarily to lower third party commission costs; SG&A costs in the professional sales service segment increased $778,000$829,000 due mainly to increased headcount and other personnel-relatedhigher personnel costs associated with provision of expanded services; and SG&A costs in the equipment segment increased $127,000$16,000 due mainlyprimarily to higher travel and exhibitionpersonnel costs. SG&A costs in the IT segment increased by $29,000 to $4,941,000 in the third quarter of 2017 from $4,912,000 in the same quarter of the prior year due to increased personnel costs in the IT VAR business. Corporate costs not allocated to segments decreased by $50,000 from $329,000 for the three months ended September 30, 2016increased $206,000 due mainly to $279,000 for the three months ended September 30, 2017, due primarily to lowerhigher director and accounting fees.
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Vaso Corporation and Subsidiaries
Research and development ("R&D") expenses were $235,000,$209,000, or 1% of revenues, for the third quarter of 2017,2023, an increase of $118,000,$79,000, or 101%61%, from $117,000,$130,000, or 1% of revenues, for the third quarter of 2016.2022. The increase is primarily attributable to higher softwareproduct development expenses in the ITequipment segment.
Adjusted EBITDA
We define Adjusted EBITDA (earnings (loss) before interest, taxes, depreciation and amortization), which is a non-GAAP financial measure, as net income (loss), plus interest expense (income), net; tax expense; depreciation and amortization; and non-cash expenses for share-based compensation. Adjusted EBITDA is a metric that is used by the investment community for comparative and valuation purposes. We disclose this metric in order to support and facilitate the dialogue with research analysts and investors.
Adjusted EBITDA is not a measure of financial performance under U.S. GAAP and should not be considered a substitute for operating income, which we consider to be the most directly comparable U.S. GAAP measure. Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, you should not consider Adjusted EBITDA in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with U.S. GAAP. Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
A reconciliation of net income to Adjusted EBITDA is set forth below:
(in thousands) | ||||||||
Three months ended September 30, | ||||||||
2017 | 2016 | |||||||
(unaudited) | (unaudited) | |||||||
Net (loss) income | $ | (816 | ) | $ | 328 | |||
Interest expense (income), net | 163 | 166 | ||||||
Income tax expense (benefit) | 94 | 103 | ||||||
Depreciation and amortization | 611 | 549 | ||||||
Share-based compensation | 100 | 275 | ||||||
Adjusted EBITDA | $ | 152 | $ | 1,421 | ||||
(in thousands) | ||||||||
Three months ended September 30, | ||||||||
2023 | 2022 | |||||||
(unaudited) | (unaudited) | |||||||
Net income | $ | 1,198 | $ | 2,336 | ||||
Interest expense (income), net | (264 | ) | (34 | ) | ||||
Income tax expense | 16 | 12 | ||||||
Depreciation and amortization | 225 | 318 | ||||||
Share-based compensation | 10 | 9 | ||||||
Adjusted EBITDA | $ | 1,185 | $ | 2,641 |
Adjusted EBITDA decreased by $1,269,000,$1,456,000, to $152,000$1,185,000 in the quarter ended September 30, 20172023 from $1,421,000$2,641,000 in the quarter ended September 30, 2016.2022. The decrease was primarily attributable to the lowerdecrease in net income and share-based compensation, partially offset by higher fixed asset depreciationincrease in the IT segment.
Interest and Other Income (Expense)
Interest and other income (expense) for the three months ended September 30, 20172023 was $(103,000)$307,000 as compared to $(71,000)$82,000 for the corresponding period of 2016.2022. The expense increase in interest and other income (expense) was due primarily to lower otherhigher interest income resulting from higher money market and short-term investment balances.
Income Tax Expense
For the three months ended September 30, 2023, we recorded income tax expense of $16,000 as compared to $12,000 for the corresponding period of 2022. The $4,000 increase is due mainly to higher state tax expense.
Net Income
Net income for the three months ended September 30, 2017.
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Vaso Corporation and Subsidiaries
Results of Operations – For the Nine Months Ended September 30, 20172023 and 2016
Revenues
Total revenue for the nine months ended September 30, 20172023 and 20162022 was $52,268,000$59,107,000 and $53,300,000,$56,071,000, respectively, representing a decreasean increase of $1,032,000,$3,036,000, or 2%5% year-over-year. On a segment basis, revenue in the IT, segment increased $1,908,000, while revenue in the professional sales service, and equipment segments decreased $2,108,000increased $718,000, $1,977,000, and $832,000,$341,000, respectively.
Revenue in the IT segment for the nine months ended September 30, 20172023 was $31,438,000$30,576,000 compared to $29,530,000$29,858,000 for the nine months ended September 30, 2016,2022, an increase of $1,908,000,$718,000, or 2%, of which $1,136,000$127,000 resulted from growthhigher NetWolves revenue and $591,000 resulted from higher healthcare IT revenue. Our monthly recurring revenue in the operationsIT segment accounted for $28,180,000 or 92% of NetWolves, and $772,000 from growth in the healthcare IT business due to an increase in new installationssegment revenue in the first nine months of 2017, partially offset by lower average2023, and $27,530,000 or 92% of the segment revenue per installation. Our monthly recurring revenue in the managed network services operations continues to grow month over month as we add new customers and expand our services to existing customers; atfor the same time, the backlog of orders in our healthcare IT operations increased to $10.4 million at September 30, 2017 from $7.4 million at December 31, 2016 and $6.3 million at September 30, 2016, due to growth in orders and clients. We anticipate that as our healthcare IT operations become more developed and the service delivery process accelerated, the backlog will convert to revenue in a more timely fashion and, coupled with continued growth in order volume, profitability will improve in this segment.
Commission revenues in the professional sales servicesservice segment were $18,181,000$26,401,000 in the first nine months of 2017, a decrease2023, an increase of 10%$1,977,000, or 8%, as compared to $20,289,000$24,424,000 in the same periodfirst nine months of 2016.2022. The decreaseincrease in commission revenues was due primarily to a decreasean increase in the volume of underlying equipment delivered by GEHC during the period. The Company recognizesperiod, as well as by a higher blended commission revenue when the underlying equipment has been accepted at the customer site in accordance with the specific termsrate applicable to of the sales agreement. Consequently, amounts billable, or billed and received, under the agreement with GE HealthcareGEHC prior to customer acceptance of the equipment are recorded as deferred revenue in the condensed consolidated balance sheet. As of September 30, 2017, $21,132,0002023, $33,232,000 in deferred commission revenue was recorded in the Company'sCompany’s condensed consolidated balance sheet, of which $9,013,000$14,701,000 was long-term. AtAs of September 30, 2016, $17,355,0002022, $26,886,000 in deferred commission revenue was recorded in the Company'sCompany’s condensed consolidated balance sheet, of which $10,115,000$9,366,000 was long-term.
Revenue in the equipment segment decreasedincreased by $832,000,$341,000, or 24%19%, to $2,649,000$2,130,000 for the nine-month period ended September 30, 20172023 from $3,481,000$1,789,000 for the same period of the prior year. The decrease wasyear, principally due to a decreasehigher cloud-based software-as-a-service (“SaaS”) sales in EECP® and Biox ambulatory monitor revenues as a result of lower sales volume, as well as lower EECP® service contract and accessory revenues.
Gross Profit
Gross profit for the nine months ended September 30, 20172023 and 20162022 was $28,896,000,$36,540,000, or 55%62% of revenue, and $30,275,000,$33,260,000, or 57%59% of revenue, respectively, representing a decreasean increase of $1,379,000,$3,280,000, or 5%10% year-over-year. On a segment basis, gross profit in the IT segment increased $818,000, while$1,549,000, or 13%, and gross profit in the professional sales services segmentservice and equipment segment decreased $1,736,000segments increased $1,506,000, or 8%, and $461,000,$225,000, or 16%, respectively.
IT segment gross profit for the nine months ended September 30, 20172023 was $12,912,000,$13,455,000, or 41%44% of the segment revenue, compared to $12,094,000,$11,906,000, or 41%40% of the segment revenue for the nine months ended September 30, 2016, with the $411,0002022. The year-over-year increase of the increase attributable to growth$1,549,000, or 13%, was primarily a result of higher revenue and higher margin product sales mix in both revenuethe network service and gross margin in the healthcare IT business and $407,000 of the increase resulting from higher sales at NetWolves.
Professional sales servicesservice segment gross profit was $14,235,000,$21,480,000, or 78%81% of segment revenue, for the nine months ended September 30, 20172023 as compared to $15,971,000,$19,974,000, or 79%82% of the segment revenue, for the nine months ended September 30, 2016,2022, reflecting a decreasean increase of $1,736,000,$1,506,000, or 11%8%. The decrease in absolute dollarsincrease was primarily due to lowerhigher commission revenue as a result of lowera higher volume of GEHC equipment delivered, as well as by a higher blended commission rate during the first three quartersnine months of 20172023 than in the same period last year, partially offset by lower commission expense in the first three quarters of 2017 compared to the same period of 2016.
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Vaso Corporation and Subsidiaries
Commission expense associated with short-term deferred revenue is recorded as short-term deferred commission expense, or with long-term deferred revenue as part of other assets, on the balance sheet until the related commission revenue is recognized.
Equipment segment gross profit decreasedincreased to $1,749,000,$1,605,000, or 66%75% of segment revenues, for the first three quartersnine months of 20172023 compared to $2,210,000,$1,380,000, or 63%77% of segment revenues, for the same period in 2022. The $225,000, or 16%, increase in gross profit was primarily the result of 2016, due tohigher revenue in both our China operations and our U.S. SaaS operations, partially offset by lower sales volume in the first three quarters of 2017, compared to the first three quarters of 2016.
Operating Income (Loss) Income
Operating (loss) income for the nine months ended September 30, 20172023 and 20162022 was $(3,169,000)$3,225,000 and $925,000,$3,254,000, respectively, representing a decrease of $4,094,000, primarily due to higher$29,000 as a combined result of gross profit increasing $3,280,000 and operating costs and lower gross profit.(below) increasing $3,309,000, year-over-year. On a segment basis, operating loss decreased $193,000 in the IT segment andrecorded an operating loss of $133,000 in the first nine months of 2023 as compared to an operating loss of $1,531,000 in the same period of 2022; operating income in the professional sales service segment decreased $4,209,000, while operating lossby $968,000, from $5,752,000 in the first nine months of 2022 to $4,784,000 in the same period of 2023; and the equipment segment increased $105,000. In addition, corporate expenses decreased $27,000.
Operating loss in the IT segment decreased into $133,000 for the nine-month period ended September 30, 20172023 as compared to an operating loss of $1,531,000 in the same period of 20162022, due primarily to higher gross profit, partially offset by higher research and development and SG&A costs. Operating income in the professional sales service segment decreased $968,000 to $4,784,000 in the nine-month period ended September 30, 20172023 as compared to operating income of $5,752,000 in the same period of 20162022, due to lower gross profit combined with higher SG&A costs. Operating loss in the equipment segment increased in the nine-month period ended September 30, 2017 as compared to the same period of 2016 due to lower gross profit,costs partially offset by lowerhigher gross profit. The equipment segment reported an operating loss of $214,000 in the first nine months of 2023, compared to an operating loss of $132,000 in the first nine months of 2022, a decrease of $82,000, due to higher SG&A costs.
SG&A costs for the nine months ended September 30, 20172023 and 20162022 were $31,349,000$32,731,000 and $28,981,000,$29,584,000, respectively, representing an increase of $2,368,000,$3,147,000, or 8%11% year-over-year. On a segment basis, SG&A costs in the equipmentIT segment decreased $317,000increased by $167,000 in the first nine months of 2023 from the same period of the prior year due mainly to a provision for loan loss made in the first three quarters of 2016, whilehigher personnel costs; SG&A costs in the professional sales service segment increased $2,473,000by $2,475,000 due to increased headcounthigher personnel costs associated with the provision of expanded services, and other personnel-related costs.to higher travel costs; and SG&A costs in the ITequipment segment increased by $240,000$129,000 due mainly to $14,713,000 in the first three quarters of 2017 from $14,473,000 in the same period of the prior year due to increasedhigher personnel costs in the healthcare IT business.costs. Corporate costs not allocated to segments decreased by $27,000 from $1,011,000 for the nine months ended September 30, 2016increased $376,000 due mainly to $984,000 for the nine months ended September 30, 2017, due primarily to lower legalhigher director and directoraccounting fees.
Research and development ("(“R&D"&D”) expenses were $716,000,$584,000, or 1% of revenues, for the first three quartersnine months of 2017, an increase2023, a decrease of $347,000,$15,000, or 94%3%, from $369,000,$422,000, or 1% of revenues, for the first three quartersnine months of 2016.2022. The increase is primarily attributable to higher softwareproduct development expenses in the ITequipment segment.
Adjusted EBITDA
We define Adjusted EBITDA (earnings (loss) before interest, taxes, depreciation and amortization), which is a non-GAAP financial measure, as net income (loss), plus interest expense (income), net; tax expense; depreciation and amortization; and non-cash expenses for share-based compensation. Adjusted EBITDA is a metric that is used by the investment community for comparative and valuation purposes. We disclose this metric in order to support and facilitate the dialogue with research analysts and investors.
Adjusted EBITDA is not a measure of financial performance under U.S. GAAP and should not be considered a substitute for operating income, which we consider to be the most directly comparable U.S. GAAP measure. Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, you should not consider Adjusted EBITDA in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with U.S. GAAP. Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
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Vaso Corporation and Subsidiaries
A reconciliation of net income to Adjusted EBITDA is set forth below:
(in thousands) | ||||||||
Nine months ended September 30, | ||||||||
2017 | 2016 | |||||||
(unaudited) | (unaudited) | |||||||
Net (loss) income | $ | (3,934 | ) | $ | 437 | |||
Interest expense (income), net | 494 | 478 | ||||||
Income tax expense | 314 | 154 | ||||||
Depreciation and amortization | 1,781 | 1,608 | ||||||
Share-based compensation | 417 | 342 | ||||||
Adjusted EBITDA | $ | (928 | ) | $ | 3,019 |
|
| (in thousands) |
| |||||
|
| Nine months ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
|
| (unaudited) |
|
| (unaudited) |
| ||
Net income |
| $ | 3,724 |
|
| $ | 3,268 |
|
Interest expense (income), net |
|
| (555 | ) |
|
| (10 | ) |
Income tax expense |
|
| 35 |
|
|
| 42 |
|
Depreciation and amortization |
|
| 762 |
|
|
| 1,576 |
|
Share-based compensation |
|
| 38 |
|
|
| 22 |
|
Adjusted EBITDA |
| $ | 4,004 |
|
| $ | 4,898 |
|
Adjusted EBITDA decreased by $3,947,000,$894,000 to $(928,000)$4,004,000 in the nine months ended September 30, 20172023 from $3,019,000$4,848,000 in the nine months ended September 30, 2016.2022. The decrease was primarily attributable to the change fromhigher interest income generated in the nine month period ended September 30, 2016 to net loss incurred in the nine month period ended September 30, 2017,and lower depreciation and amortization, partially offset by higher fixed asset depreciation in the IT segment and income tax expense.
Interest and Other Income (Expense)
Interest and other income (expense) for the nine months ended September 30, 20172023 was $(451,000)$534,000 as compared to $(334,000)$56,000 for the corresponding period of 2016.2022. The increase in interest and other income was due primarily to higher interest expense due to additional equipment financingmoney market and lower other income in 2017.
Income Tax Expense
For the nine months ended September 30, 2017,2023, we recorded income tax expense of $314,000$35,000 as compared to income tax expense of $154,000$42,000 for the corresponding period of 2016.2022. The increase arosedecrease was due mainly from application of alternative minimumto lower tax creditsexpense in the prior year period.
Net (Loss) Income
Net lossincome for the nine months ended September 30, 20172023 was $3,934,000$3,724,000 as compared to net income of $437,000$3,268,000 for the nine months ended September 30, 2016,2022, representing a decreasean increase of $4,371,000. Our net loss$456,000, or 14%. Income per share of $0.02 was $0.02recorded in both of the nine month periodnine-month periods ended September 30, 2017, as compared to net income of $0.00 per share in the nine month period ended September 30, 2016.2023 and 2022. The principal cause of the decrease in net incomeimprovement is the decrease in revenue and gross profit in the professional sales service segment resulting from lower deliveries, combined with the increase in SG&A costs.
Liquidity and Capital Resources
Cash and Cash Flow
We have financed our operations from working capital. At September 30, 2017,2023, we had cash and cash equivalents of $5,522,000$11,055,000 and negative working capital of $5,956,000$12,908,00 0, compared to cash and cash equivalents of $7,087,000$11,821,000 and negative working capital of $567,000$9,484,000 at December 31, 2016. $9,752,000 in negative working capital at September 30, 2017 is attributable to the net balance of deferred commission expense and deferred revenue. These are non-cash expense and revenue items and have no impact on future cash flows.
Cash provided by operating activities was $866,000,$6,860,000, which consisted of net lossincome after adjustments to reconcile net lossincome to net cash of $1,250,000$4,710,000 and cash provided by operating assets and liabilities of $2,116,000,$2,150,000, during the nine months ended September 30, 2017,2023, compared to cash provided by operating activities of $3,756,000$12,676,000 for the same period in 2016.2022. The changes in the account balances primarily reflect a decrease in accounts and other receivables of $1,671,000 and increase in deferred revenue of $2,674,000,$6,052,000 and $2,437,000, respectively; partially offset by decreases in accrued expenses and other liabilities of $658,000commissions and accrued commissionsexpenses of $763,000.
Cash used in investing activities during the nine-month period ended September 30, 20172023 was $1,981,000$7,536,000 attributed to $536,000 used for the purchase of equipment and software.
Cash used in financing activities during the nine-month period ended September 30, 20172023 was $383,000$107,000 resulting primarily as a result of $288,000 in payments of notes and capital leases issued for equipment purchases and $170,000 in repaymentsfrom the repayment of notes payable to related parties.
Liquidity
The Company expects to maintaingenerate sufficient liquidity through its cash on hand, availability of funds under its lines of credit, and internally generated fundsflow from operations to meetsatisfy its obligations as they come due. The Company's profitability for at least the year will be largely dependent on deliveries of product by GEHC in our professional sales service segment since the Company does not recognize revenue in this segment until the equipment is delivered.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures reporting as promulgated under the Exchange Act is defined as controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer ("CEO"(“CEO”) and Chief Financial Officer ("CFO"(“CFO”), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our CEO and our CFO have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 20172023 and have concluded that the Company'sCompany’s disclosure controls and procedures were effective as of September 30, 2017.
Changes in Internal Control Over Financial Reporting
There waswere no changechanges in the Company'sCompany’s internal control over financial reporting during the Company'sCompany’s fiscal quarter ended September 30, 20172023 that has materially affected, or is reasonably likely to materially affect, the Company'sCompany’s internal control over financial reporting.
Exhibits
Vaso Corporation and Subsidiaries
In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
VASO CORPORATION | |||
By: | /s/ Jun Ma | ||
Jun Ma | |||
President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
/s/ Michael J. | |||
Michael J. Beecher | |||
Chief Financial Officer and Principal Accounting Officer |
Date: November 14, 2017
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