Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Apr. 05, 2019 | Jun. 29, 2018 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | VASO Corp | ||
Entity Central Index Key | 0000839087 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 6,000,000 | ||
Entity Common Stock, Shares Outstanding | 167,109,200 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2018 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 2,668 | $ 5,245 |
Accounts and other receivables, net of an allowance for doubtful accounts and commission adjustments of $3,994 at December 31, 2018 and $4,872 at December 31, 2017 | 11,028 | 13,225 |
Receivables due from related parties | 20 | 20 |
Inventories, net | 1,983 | 2,355 |
Deferred commission expense | 2,585 | 3,649 |
Prepaid expenses and other current assets | 890 | 993 |
Total current assets | 19,174 | 25,487 |
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $6,370 at December 31, 2018 and $4,980 at December 31, 2017 | 5,809 | 4,719 |
GOODWILL | 17,309 | 17,471 |
INTANGIBLES, net | 4,740 | 5,254 |
OTHER ASSETS, net | 3,067 | 3,847 |
DEFERRED TAX ASSETS, net | 375 | 0 |
Total Assets | 50,474 | 56,778 |
CURRENT LIABILITIES | ||
Accounts payable | 6,284 | 5,423 |
Accrued commissions | 2,116 | 2,467 |
Accrued expenses and other liabilities | 5,655 | 5,337 |
Sales tax payable | 1,020 | 787 |
Deferred revenue - current portion | 10,382 | 15,540 |
Notes payable and capital lease obligations - current portion | 9,304 | 3,674 |
Notes payable - related parties - current portion | 582 | 86 |
Due to related party | 10 | 390 |
Total current liabilities | 35,353 | 33,704 |
LONG-TERM LIABILITIES | ||
Notes payable and capital lease obligations | 400 | 4,834 |
Notes payable - related parties, net of current portion | 245 | 259 |
Deferred revenue, net of current portion | 7,704 | 7,526 |
Deferred tax liability | 124 | 220 |
Other long-term liabilities | 1,037 | 1,083 |
Total long-term liabilities | 9,510 | 13,922 |
COMMITMENTS AND CONTINGENCIES (NOTE P) | ||
STOCKHOLDERS' EQUITY | ||
Preferred stock, $.01 par value; 1,000,000 shares authorized; nil shares issued and outstanding at December 31, 2018 and 2017 | 0 | 0 |
Common stock, $.001 par value; 250,000,000 shares authorized; 177,417,287 and 175,741,970 shares issued at December 31, 2018 and 2017, respectively; 167,109,200 and 165,433,883 shares outstanding at December 31, 2018 and 2017, respectively | 178 | 176 |
Additional paid-in capital | 63,672 | 63,363 |
Accumulated deficit | (55,924) | (52,329) |
Accumulated other comprehensive loss | (315) | (58) |
Treasury stock, at cost, 10,308,087 shares at December 31, 2018 and 2017 | (2,000) | (2,000) |
Total stockholders' equity | 5,611 | 9,152 |
Total liabilities and stockholders' equity | $ 50,474 | $ 56,778 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Accounts and other receivables, allowance for doubtful accounts and commission adjustments | $ 3,994 | $ 4,872 |
PROPERTY AND EQUIPMENT, accumulated depreciation | $ 6,370 | $ 4,980 |
STOCKHOLDERS' EQUITY | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common stock, shares issued | 177,417,287 | 175,741,970 |
Common stock, shares outstanding | 167,109,200 | 165,433,883 |
Treasury stock, at cost | 10,308,087 | 10,308,087 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues | ||
Total revenues | $ 73,980 | $ 72,788 |
Cost of revenues | ||
Total cost of revenues | 32,856 | 32,057 |
Gross profit | 41,124 | 40,731 |
Operating expenses | ||
Selling, general and administrative | 43,962 | 43,618 |
Research and development | 886 | 945 |
Total operating expenses | 44,848 | 44,563 |
Operating (loss) income | (3,724) | (3,832) |
Other income (expense) | ||
Interest and financing costs | (750) | (674) |
Interest and other income, net | 143 | 101 |
Gain on sale of investment in VSK | 212 | 0 |
Total other expense, net | (395) | (573) |
Loss before income taxes | (4,119) | (4,405) |
Income tax benefit (expense) | 385 | (134) |
Net loss | (3,734) | (4,539) |
Other comprehensive loss | ||
Foreign currency translation (loss) gain | (257) | 271 |
Comprehensive loss | $ (3,991) | $ (4,268) |
(Loss) income per common share | ||
- basic and diluted (in dollars per share) | $ (0.02) | $ (0.03) |
Weighted average common shares outstanding | ||
- basic and diluted | 165,420 | 162,213 |
Managed IT systems and services | ||
Revenues | ||
Total revenues | $ 44,228 | $ 42,581 |
Cost of revenues | ||
Total cost of revenues | 25,849 | 24,958 |
Professional sales services | ||
Revenues | ||
Total revenues | 25,511 | 26,443 |
Cost of revenues | ||
Total cost of revenues | 5,346 | 5,813 |
Equipment sales and services | ||
Revenues | ||
Total revenues | 4,241 | 3,764 |
Cost of revenues | ||
Total cost of revenues | $ 1,661 | $ 1,286 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock [Member] | Treasury Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Balance at Dec. 31, 2016 | $ 174 | $ (2,000) | $ 62,856 | $ (47,790) | $ (329) | $ 12,911 |
Balance (in shares) at Dec. 31, 2016 | 173,812 | (10,308) | ||||
Share-based compensation | $ 2 | 512 | 514 | |||
Share-based compensation (in shares) | 1,930 | |||||
Shares not issued for employee tax liability | (5) | (5) | ||||
Foreign currency translation gain (loss) | 271 | 271 | ||||
Net (loss) income | (4,539) | (4,539) | ||||
Balance at Dec. 31, 2017 | $ 176 | $ (2,000) | 63,363 | (52,329) | (58) | 9,152 |
Balance (in shares) at Dec. 31, 2017 | 175,742 | (10,308) | ||||
Share-based compensation | $ 2 | 311 | 313 | |||
Share-based compensation (in shares) | 1,675 | |||||
Adoption of new accounting standard | 139 | 139 | ||||
Shares not issued for employee tax liability | (2) | (2) | ||||
Foreign currency translation gain (loss) | (257) | (257) | ||||
Net (loss) income | (3,734) | (3,734) | ||||
Balance at Dec. 31, 2018 | $ 178 | $ (2,000) | $ 63,672 | $ (55,924) | $ (315) | $ 5,611 |
Balance (in shares) at Dec. 31, 2018 | 177,417 | (10,308) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from operating activities | ||
Net loss | $ (3,734) | $ (4,539) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities | ||
Depreciation and amortization | 2,522 | 2,426 |
Deferred income taxes | (374) | 216 |
Loss from interest in joint venture | 9 | 20 |
Gain on sale of investment in VSK | (212) | 0 |
Loss on disposal of property and equipment | 0 | 3 |
Provision for doubtful accounts and commission adjustments | 460 | 271 |
Amortization of debt issue costs | 32 | 33 |
Share-based compensation | 313 | 514 |
Changes in operating assets and liabilities: | ||
Accounts and other receivables | 1,725 | (737) |
Receivables due from related parties | 0 | (25) |
Inventories, net | 329 | 87 |
Deferred commission expense | 1,174 | (1,732) |
Prepaid expenses and other current assets | 98 | (66) |
Other assets, net | 223 | 1,036 |
Accounts payable | 864 | 197 |
Accrued commissions | (599) | 296 |
Accrued expenses and other liabilities | 602 | 27 |
Sales tax payable | 239 | 67 |
Deferred revenue | (4,981) | 3,663 |
Deferred tax liability | (97) | 108 |
Other long-term liabilities | (46) | (266) |
Net cash (used in) provided by operating activities | (1,453) | 1,599 |
Cash flows from investing activities | ||
Purchases of equipment and software | (2,586) | (2,374) |
Proceeds from sale of investment in VSK | 311 | 0 |
Net cash used in investing activities | (2,275) | (2,374) |
Cash flows from financing activities | ||
Net borrowings (repayments) on revolving line of credit | 778 | (384) |
Payroll taxes paid by withholding shares | (2) | (5) |
Proceeds from notes payable | 21 | 0 |
Repayment of notes payable and capital lease obligations | (156) | (328) |
Proceeds from (payments on) notes payable - related parties | 500 | (335) |
Net cash provided by (used in) financing activities | 1,141 | (1,052) |
Effect of exchange rate differences on cash and cash equivalents | 10 | (15) |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (2,577) | (1,842) |
Cash and cash equivalents - beginning of year | 5,245 | 7,087 |
Cash and cash equivalents - end of year | 2,668 | 5,245 |
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION | ||
Interest paid | 701 | 639 |
Income taxes paid | 79 | 58 |
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Equipment acquired through capital lease | $ 529 | $ 0 |
DESCRIPTION OF BUSINESS AND GOI
DESCRIPTION OF BUSINESS AND GOING CONCERN ASSESSMENT | 12 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS AND GOING CONCERN ASSESSMENT | Vaso Corporation was incorporated in Delaware in July 1987. For most of its history, the Company was a single-product company designing, manufacturing, marketing and servicing its proprietary Enhanced External Counterpulsaion, or EECP®, therapy systems, mainly for the treatment of angina. In 2010 it began to diversify its business operations. The Company changed its name to Vaso Corporation in 2016 to more accurately reflect the diversified nature of its business mixture, and continues to use the original name VasoMedical for its proprietary medical device subsidiary. Unless the context requires otherwise, all references to “we”, “our”, “us”, “Company”, “registrant”, “Vaso” or “management” refer to Vaso Corporation and its subsidiaries. Overview Vaso Corporation principally operates in three distinct business segments in the healthcare equipment 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 General Electric Healthcare (“GEHC”) into the health provider middle market; and ● Equipment segment, primarily focuses on the design, manufacture, sale and service of proprietary medical devices, 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. In June 2014, the Company began its IT segment business by executing the Value Added Reseller Agreement (“VAR Agreement”) with GEHC to become a national value added reseller of GEHC Digital’s software solutions such as Picture Archiving and Communication System (“PACS”), Radiology Information System (“RIS”), and related services, including implementation, training, management and support. This multiyear VAR Agreement focuses primarily on existing customer segments currently served by VasoHealthcare on behalf of GEHC. A new wholly owned subsidiary, VasoHealthcare IT Corp. (“VHC IT”), was formed to conduct the healthcare IT business. In May 2015, the Company further expanded its IT segment business by acquiring NetWolves. NetWolves designs and delivers multi-network and multi-technology solutions as a managed network provider, and provides a complete single-source solution that includes design, network redundancy, application device management, real-time network monitoring, reporting and support systems as a comprehensive solution. VasoHealthcare In May 2010, the Company launched its Professional Sales Service business through a wholly-owned subsidiary Vaso Diagnostics, Inc. d/b/a VasoHealthcare, which was appointed the exclusive representative for the sale of select GEHC diagnostic imaging equipment to specific market segments in the 48 contiguous states of the United States and the District of Columbia. The original agreement (“GEHC Agreement”) has been extended several times and currently expires December 31, 2022, subject to earlier termination under certain circumstances. VasoMedical The proprietary medical equipment business now all under VasoMedical traces back to 1995 when the Company began the external counterpulsation technology in the United States. Vasomedical Global was formed in 2011 to combine and coordinate the various international operations including design, development, manufacturing, and sales of medical devices, while domestic activities are under Vasomedical Solutions. The Company’s Equipment business also has been significantly expanded from the original EECP®-only operations. In September 2011, the Company acquired FGE, a British Virgin Islands company, which owns or controls two Chinese operating companies - Life Enhancement Technology Ltd. (“LET”) based in Foshan, China, and Biox Instruments Co. Ltd. (“Biox”) based in Wuxi, China, respectively - to expand its technical and manufacturing capabilities and to enhance its distribution network, technology, and product portfolio. Biox is a variable interest entity (“VIE”) controlled by FGE through certain contracts and an option to acquire all the shares of Biox. In August 2014, the Company acquired all of the outstanding shares of Genwell Instruments Co. Ltd. (“Genwell”), located in Wuxi, China. Genwell was formed in China in 2010 with the assistance of a government grant to develop the MobiCare™ wireless multi-parameter patient monitoring system and holds intellectual property rights for this system. As a result, the Company has now expanded its equipment products portfolio to include Biox™ series ambulatory patient monitoring systems, ARCS™ series software for ECG and blood pressure analysis, and the MobiCare™ patient monitoring device. In 2017, as an effort to further reduce engineering and production cost of its EECP® products, the Company moved the operations of LET from Foshan, China to Biox in Wuxi, China, and closed LET in 2018. In April 2014, the Company entered into a cooperation agreement with Chongqing PSK-Health Sci-Tech Development Co., Ltd. (“PSK”) of Chongqing, China, the leading manufacturer of external counter pulsation, or ECP, therapy systems in China, to form a joint venture company, VSK Medical Limited (“VSK”), a Cayman Islands company, for the global marketing, sale and advancement of ECP therapy technology. The Company owned 49.9% of VSK, which commenced operations in January 2015. In March 2018, the Company terminated the cooperation agreement with PSK and sold its shares in VSK to PSK (see Note K). Going concern assessment We have incurred net losses from operations for the years ended December 31, 2018 and 2017, and we maintain lines of credit from a lending institution and these lines of credit will require further extensions after their current June 28, 2019 maturity date. These events raise substantial doubt about our ability to continue as a going concern. Our ability to continue operating as a going concern is dependent upon achieving profitability, extending the maturity date of our existing lines of credit, or through additional debt or equity financing. Achieving profitability is largely dependent on our ability to reduce operating costs and to maintain or increase our current revenue. While we believe we will continue to maintain or increase our gross revenue and are in the process of reducing operating costs, and while historically we have received extensions of the maturity dates of our lines of credit, failure to achieve these objectives could cast doubt on our ability to continue as a going concern. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | A summary of the significant accounting policies consistently applied in the preparation of the consolidated financial statements are as follows: Principles of Consolidation The consolidated financial statements include the accounts of Vaso Corporation, its wholly-owned subsidiaries, and the variable interest entity where the Company is the primary beneficiary. Significant intercompany balances and transactions have been eliminated. Variable Interest Entity Basic Information The Company follows the guidance of accounting for variable interest entities, which requires certain variable interest entities to be consolidated by the primary beneficiary of the entities. Biox is a Variable Interest Entity (“VIE”). Laws and regulations of the Peoples Republic of China (“PRC”) prohibit or restrict companies with foreign ownership from certain activities and benefits including eligibility for certain government grants and certain rebates related to commercial activities. To provide the Company the expected residual returns of the VIE, the Company, through its wholly-owned subsidiary Gentone, entered into a series of contractual arrangements with Biox and its registered shareholders to enable the Company, to: ● exercise effective control over the VIE; ● receive substantially all of the economic benefits and residual returns, and absorb substantially all the risks of the VIE as if they were their sole shareholders; and ● have an exclusive option to purchase all of the equity interests in the VIE. The Company’s management evaluated the relationships between the Company and Biox, and the economic benefits flow of the applicable contractual arrangements. The Company concluded that it is the primary beneficiary of Biox. As a result, the results of operations, assets and liabilities of Biox have been included in the Company’s consolidated financial statements. The significant agreements through which the Company exercises effective control over Biox are: ● the Exclusive Technical Consulting Services Agreement between Biox and Gentone; ● the Option Agreement on Purchase of the Equity Interest executed by and among the shareholders of Biox and Gentone; ● the Equity Pledge Agreement executed by and among the shareholders of Biox and Gentone; and ● the Powers of Attorney issued by the shareholders of Biox. Financial Information of VIE Liabilities recognized as a result of consolidating this VIE do not represent additional claims on the Company’s general assets. VIE assets can be used to settle obligations of the primary beneficiary. The financial information of Biox, which was included in the accompanying consolidated financial statements, is presented as follows: (in thousands) As of December 31, 2018 2017 Cash and cash equivalents $ 97 $ 41 Total assets $ 1,641 $ 1,599 Total liabilities $ 1,662 $ 1,745 (in thousands) Year ended December 31, 2018 2017 Total net revenue $ 2,294 $ 1,597 Net income (loss) $ 111 $ (524 ) Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates and assumptions relate to estimates of collectibility of accounts receivable, the realizability of deferred tax assets, stock-based compensation, values and lives assigned to acquired intangible assets, fair value of reporting units in connection with goodwill impairment test, the adequacy of inventory reserves, variable consideration, and allocation of contract transaction price to performance obligations. Actual results could differ from those estimates. Revenue Recognition In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Under the standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. ASU 2014-09 replaced most existing revenue recognition guidance in U.S. GAAP. The new standard introduces a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers, and establishes disclosure requirements which are more extensive than those required under prior U.S. GAAP. Generally, we recognize revenue under Topic 606 for each of our performance obligations either over time (generally, the transfer of a service) or at a point in time (generally, the transfer of a good) as follows: ● VasoTechnology Revenue relating to recurring managed network and voice services provided by NetWolves are recognized as provided on a monthly basis (“over time”). Non-recurring charges related to the provision of such services are recognized in the period provided (“point in time”). In the IT VAR business, software system installations are recognized upon verification of installation and expiration of an acceptance period (“point in time”). Monthly post-implementation customer support provided under such installations as well as software solutions offered under a monthly Software as a Service (“SaaS”) fee basis are recognized monthly over the contract term (“over time”). ● VasoHealthcare Commission revenue is recognized when the underlying equipment has been delivered by GEHC and accepted at the customer site in accordance with the terms of the specific sales agreement (“point in time”). ● VasoMedical In the United States, we recognized revenue from the sale of our medical equipment in the period in which we deliver the product to the customer (“point in time”). Revenue from the sale of our medical equipment to international markets is recognized upon shipment of the product to a common carrier, as are supplies, accessories and spare parts delivered in both domestic and international markets (“point in time”). The Company also recognizes revenue from the maintenance of EECP® systems either on a time and material as-billed basis (“point in time”) or through the sale of a service contract, where revenue is recognized ratably over the contract term (“over time”). Impact of Adoption Effective January 1, 2018, the Company adopted the requirements of Topic 606 using the modified retrospective method, which provided that the cumulative effect from prior periods upon applying the new guidance was recognized in our consolidated balance sheets as of the date of adoption, including an adjustment to retained earnings, and that prior periods are not retrospectively adjusted. The Company elected to apply the modified retrospective method only to contracts that were not completed at January 1, 2018. A summary and discussion of such cumulative effect adjustment and the impact on current period financial statements of adopting Topic 606 is as follows: (in thousands) Year ended December 31, 2018 prior U.S. GAAP Topic 606 impact as reported STATEMENT OF OPERATIONS Revenues Professional sales services $ 25,511 $ - $ 25,511 Total revenues 73,980 - 73,980 Gross Profit 41,124 - 41,124 Operating expenses Selling, general and administrative 44,083 (121 ) 43,962 Operating loss $ (3,845 ) $ 121 $ (3,724 ) (in thousands) As of December 31, 2018 prior U.S. GAAP Topic 606 impact as reported ASSETS Accounts and other receivables, net $ 11,028 $ - $ 11,028 Deferred commission expense $ 2,577 $ 8 $ 2,585 Other assets, net $ 3,252 $ 190 $ 3,442 LIABILITIES AND STOCKHOLDERS' EQUITY Deferred revenue - current portion $ 10,382 $ - $ 10,382 Deferred revenue - long term $ 7,704 $ - $ 7,704 Accumulated deficit $ (56,185 ) $ 261 $ (55,924 ) Disaggregation of Revenue The following tables present revenues disaggregated by our business operations and timing of revenue recognition: Year ended December 31, 2018 Year ended December 31, 2017 Professional sales Equipment Professional sales Equipment IT segment service segment segment Total IT segment service segment segment Total Network services $ 40,254 $ 40,254 $ 38,882 $ 38,882 Software sales and support 3,974 3,974 3,699 3,699 Commissions 25,511 25,511 26,443 26,443 Medical equipment sales 3,151 3,151 2,660 2,660 Medical equipment service 1,090 1,090 1,104 1,104 $ 44,228 $ 25,511 $ 4,241 $ 73,980 $ 42,581 $ 26,443 $ 3,764 $ 72,788 Year ended December 31, 2018 Year ended December 31, 2017 Professional sales Equipment Professional sales Equipment IT segment service segment segment Total IT segment service segment segment Total Revenue recognized over time $ 39,340 $ - $ 658 $ 39,998 $ 37,629 $ - $ 707 $ 38,336 Revenue recognized at a point in time 4,888 25,511 3,583 33,982 4,952 26,443 3,057 34,452 $ 44,228 $ 25,511 $ 4,241 $ 73,980 $ 42,581 $ 26,443 $ 3,764 $ 72,788 Transaction Price Allocated to Remaining Performance Obligations As of December 31, 2018, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $82.2 million, of which we expect to recognize revenue as follows: Fiscal years of revenue recognition 2019 2020 2021 Thereafter Unfulfilled performance obligations $ 41,271 $ 26,087 $ 8,595 $ 6,278 Contract Liabilities Contract liabilities arise in our IT VAR, VasoHealthcare, and VasoMedical businesses. In our IT VAR 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 $344,000 and $371,000 at December 31, 2018 and 2017, respectively, and are included in accrued expenses and other liabilities in our consolidated balance sheets. In our VasoHealthcare business, we bill amounts for booked orders in advance of customer acceptance of the equipment. Such amounts aggregated approximately $17,098,000 and $22,126,000 at December 31, 2018 and 2017, respectively, and are classified in our consolidated balance sheets into current or long-term deferred revenue. In addition, we record a contract liability for amounts expected to be credited back to GEHC due to customer order reductions. Such amounts aggregated approximately $2,315,000 and $1,143,000 at December 31, 2018 and 2017, respectively, and are included in accrued expenses and other liabilities in our consolidated balance sheets. In our VasoMedical business, we bill amounts for post-delivery services and varying duration service contracts in advance of performance. Such amounts aggregated approximately $988,000 and $941,000 at December 31, 2018 and 2017, respectively, and are classified in our consolidated balance sheets as either current or long-term deferred revenue. During the year ended December 31, 2018, we recognized approximately $7.3 million of revenues that were included in our contract liability balance at the beginning of such period. Costs to Obtain or Fulfill a Contract Topic 606 requires that incremental costs of obtaining a contract are recognized as an asset and amortized to expense in a pattern that matches the timing of the revenue recognition of the related contract. We have determined the only significant incremental costs incurred to obtain contracts with customers within the scope of Topic 606 are certain sales commissions paid to associates. In addition, the Company elected the practical expedient to recognize the incremental costs of obtaining a contract when incurred for contracts where the amortization period for the asset the Company would otherwise have recognized is one year or less. Under prior U.S. GAAP, we recognized sales commissions in our equipment segment as incurred. Under Topic 606, sales commissions applicable to service contracts exceeding one year have been capitalized and amortized ratably over the term of the contract. In our IT VAR business, all commissions paid in advance of go-live were, under prior U.S. GAAP, capitalized as deferred commission expense and charged to expense at go-live or customer acceptance, as applicable. Under Topic 606, IT VAR commissions allocable to multi-year subscription contracts or multi-year post-contract support performance obligations are amortized to expense ratably over the terms of the multi-year periods. IT VAR commissions allocable to other elements continue to be charged to expense at go-live or customer acceptance, as was previously done. At the date of adoption of Topic 606, we recorded an asset, and related adjustment to retained earnings, of approximately $139,000 in our consolidated balance sheets for the amount of unamortized sales commissions for prior periods, as calculated under the new guidance. The impact to our financial statements of adopting Topic 606, as it relates to costs to obtain contracts, was a reduction in commission expense of approximately $121,000 for the year ended December 31, 2018, an increase in deferred commission expense of approximately $8,000, and an increase in long term deferred commission expense (recorded in other assets) of approximately $190,000 (inclusive of the beginning balance adjustment of $139,000). In our professional sales services segment, under both prior U.S. GAAP and Topic 606, commissions paid to our sales force are deferred until the underlying equipment is accepted by the customer. At December 31, 2018, our consolidated balance sheet includes approximately $4,562,000 in capitalized sales commissions to be expensed in future periods, of which $2,585,000 is recorded in deferred commission expense and $1,977,000, representing the long-term portion, is included in other assets. Significant Judgments when Applying Topic 606 Contract transaction price is allocated to performance obligations using estimated stand-alone selling price. Judgment is required in estimating stand-alone selling price for each distinct performance obligation. We determine stand-alone selling price maximizing observable inputs such as stand-alone sales when they exist or substantive renewal price charged to clients. In instances where stand-alone selling price is not observable, we utilize an estimate of stand-alone selling price based on historical pricing and industry practices. Certain revenue we record in our professional sales service segment contains an estimate for variable consideration. Due to the tiered structure of our commission rate, which increases as annual targets are achieved, under Topic 606 we record revenue and deferred revenue at the rate we expect to be achieved by year end. Under prior U.S. GAAP, we recognized revenue at the rate achieved at the applicable reporting date. We base our estimate of variable consideration on historical results of previous years’ achievement under the GEHC agreement. Such estimate will be reviewed each quarter and adjusted as necessary. The Company recognized reductions in revenue associated with revisions to variable consideration for previously completed performance obligations of $165,000 for the year ended December 31, 2018. Shipping and Handling Costs All shipping and handling expenses are charged to cost of sales. Amounts billed to customers related to shipping and handling costs are included as a component of sales. Research and Development Research and development costs attributable to development are expensed as incurred. Share-Based Compensation The Company complies with ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”), and ASC Topic 505, “Equity” (“ASC 505”), which requires all companies to recognize the cost of services received in exchange for equity instruments, to be recognized in the financial statements based on their fair values. For employees and non-employee directors, the fair value is measured on the grant date and for non-employees, the fair value is measured on the measurement date and re-measured at each reporting period until performance is complete. The Company applies an estimated forfeiture rate to the grant date fair value to determine the annual compensation cost of share-based payment arrangements with employees. The forfeiture rate is estimated based primarily on job title and prior forfeiture experience. The Company did not grant any awards to non-employees during the years ended December 31, 2018 and 2017. During the year ended December 31, 2018, the Company granted 975,000 restricted shares of common stock valued at $63,000 to non-officer employees, and 725,000 restricted shares of common stock valued at $44,000 to officers. The 975,000 shares granted to non-officer employees vest at various times over three to five years from the grant date and the 725,000 shares granted to officers vested in April 2018. The total fair value of shares vested during the year ended December 31, 2018 was $385,000 for employees. The weighted average grant date fair value of shares granted during the year ended December 31, 2018 was $0.06 per share. During the year ended December 31, 2017, the Company granted 50,000 restricted shares of common stock valued at $6,000 to non-officer employees, and 925,000 restricted shares of common stock valued at $111,000 to officers. The 975,000 shares granted vested on April 1, 2017. The total fair value of shares vested during the year ended December 31, 2017 was $467,000 for employees. The weighted average grant date fair value of shares granted during the year ended December 31, 2017 was $0.12 per share. The Company did not grant any stock options during the years ended December 31, 2018 or 2017, nor were any options exercised during such periods. No options were outstanding at December 31, 2018 or 2017. Share-based compensation expense recognized for the years ended December 31, 2018 and 2017 was $313,000 and $514,000, respectively, and is recorded in selling, general, and administrative expense in the consolidated statements of operations and comprehensive loss. Unrecognized expense related to existing share-based compensation and arrangements is approximately $207,000 at December 31, 2018 and will be recognized over a weighted-average period of approximately 12 months. Cash and Cash Equivalents 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. Accounts Receivable, net The Company’s accounts receivable are due from customers to whom we sell our products and services, distributors engaged in the distribution of our products and from GEHC. Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are generally due 30 to 90 days from shipment and services provided and are stated at amounts due from customers net of allowances for doubtful accounts, returns, term discounts and other allowances. Accounts that are outstanding longer than the contractual payment terms are considered past due. Estimates are used in determining the allowance for doubtful accounts based on the Company’s historical collections experience, current trends, credit policy and a percentage of its accounts receivable by aging category. In determining these percentages, the Company reviews historical write-offs of their receivables. The Company also looks at the credit quality of their customer base as well as changes in their credit policies. The Company continuously monitors collections and payments from our customers, and writes off receivables when all efforts at collection have been exhausted. While credit losses have historically been within expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same credit loss rates that they have in the past. The changes in the Company’s allowance for doubtful accounts and commission adjustments are as follows: (in thousands) Year ended December 31, 2018 2017 Beginning Balance $ 4,872 $ 4,159 Provision for losses on accounts receivable 460 157 Direct write-offs, net of recoveries (268 ) (212 ) Commission adjustments (1,070 ) 768 Ending Balance $ 3,994 $ 4,872 Concentrations of Credit Risk We market our equipment and IT software solutions principally to hospitals, diagnostic imaging centers and physician private practices. We perform credit evaluations of our customers’ financial condition and, as a result, believe that our receivable credit risk exposure is limited. For the years ended December 31, 2018 and 2017, no customer in our equipment or IT segment accounted for 10% or more of revenues or accounts receivable. In our professional sales service segment, 100% of our revenues and accounts receivable are with GEHC; however, we believe this risk is acceptable based on GEHC’s financial position. The Company maintains cash balances in certain U.S. financial institutions, which, at times, may exceed the Federal Depository Insurance Corporation (“FDIC”) coverage of $250,000. The Company has not experienced any losses on these accounts and believes it is not subject to any significant credit risk on these accounts. In addition, the FDIC does not insure the Company’s foreign bank balances, which aggregated approximately $519,000 and $709,000 at December 31, 2018 and 2017, respectively. Inventories, net The Company values inventories in the equipment segment at the lower of cost or net realizable value, with cost being determined on a first-in, first-out basis. The Company occasionally places EECP® systems and other medical device products at various field locations for demonstration, training, evaluation, and other similar purposes at no charge. The cost of these products is transferred to property and equipment and is amortized over two to five years. The Company records the cost of refurbished components of EECP® systems and critical components at cost plus the cost of refurbishment. The Company regularly reviews inventory quantities on hand, particularly raw materials and components, and records a provision for excess and slow moving inventory based primarily on existing and anticipated design and engineering changes to its products as well as forecasts of future product demand. In our IT Segment, we purchase computer hardware and software for specific customer requirements and value such inventories using the specific identification method. Property and Equipment Property and equipment, including assets under capital lease, are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized and minor replacements, maintenance and repairs are charged to expense as incurred. Upon retirement or disposal of assets, the cost and related accumulated depreciation are removed from the consolidated balance sheets. Depreciation is expensed over the estimated useful lives of the assets, which range from two to eight years, on a straight-line basis. Accelerated methods of depreciation are used for tax purposes. We amortize leasehold improvements over the useful life of the related leasehold improvement or the life of the related lease, whichever is less. Goodwill and Intangible Assets Goodwill represents the excess of cost over the fair value of net assets of businesses acquired. The Company accounts for goodwill under the guidance of the ASC Topic 350, “Intangibles: Goodwill and Other”. Goodwill acquired in a purchase business combination is not amortized, but instead tested for impairment, at least annually, in accordance with this guidance. The recoverability of goodwill is subject to an annual impairment test or whenever an event occurs or circumstances change that would more likely than not result in an impairment. The Company tests goodwill for impairment at the reporting unit level on an annual basis as of December 31 and between annual tests when an event occurs or circumstances change that could indicate that the asset might be impaired. In any year, the Company may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If the Company cannot determine qualitatively that the fair value is in excess of the carrying value, or the Company decides to bypass the qualitative assessment, the Company proceeds to the quantitative goodwill impairment test, which compares the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, sn impairment loss is recognized for an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. No impairment loss was recorded as of December 31, 2018 and 2017. Intangible assets consist of the value of customer contracts and relationships, patent and technology costs, and software. The cost of significant customer-related intangibles is amortized in proportion to estimated total related revenue; cost of other intangible assets is generally amortized on a straight-line basis over the asset's estimated economic life, which range from five to ten years. The Company capitalizes internal use software development costs incurred during the application development stage. Costs related to preliminary project activities, training, data conversion, and post implementation activities are expensed as incurred. The Company capitalized $527,000 and $398,000 in software development costs for the years ended December 31, 2018 and 2017, respectively. Impairment of Long-lived Assets The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. If required, the Company compares the estimated fair value determined by either the undiscounted future net cash flows or appraised value to the related asset’s carrying value to determine whether there has been an impairment. If an asset is considered impaired, the asset is written down to fair value, which is based either on discounted cash flows or appraised values in the period the impairment becomes known. No assets were determined to be impaired as of December 31, 2018 and 2017. Deferred Revenue Amounts billable under the agreement with GEHC in advance of customer acceptance of the equipment are recorded initially as deferred revenue, and commission revenue is subsequently recognized as customer acceptance of such equipment is reported to us by GEHC. Similarly, commissions payable to our sales force related to such billings are recorded as deferred commission expense when the associated deferred revenue is recorded. Commission expense is recognized when the corresponding commission revenue is recognized. We record revenue on extended service contracts ratably over the term of the related service contracts. Under the provisions of ASC 606, we defer revenue related to EECP® system sales for the fair value of installation and in-service training to the period when the services are rendered and for service obligations ratably over the service period, which is generally one year. (See Note I) Income Taxes Deferred income taxes are recognized for temporary differences between financial statement and income tax bases of assets and liabilities and loss carry-forwards for which income tax benefits are expected to be realized in future years. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount expected to be realized. In estimating future tax consequences, we generally consider all expected future events other than an enactment of changes in the tax laws or rates. Deferred tax assets are continually evaluated for the expected realization. To the extent our judgment regarding the realization of the deferred tax assets changes, an adjustment to the allowance is recorded, with an offsetting increase or decrease, as appropriate, in income tax expense. Such adjustments are recorded in the period in which our estimate as to the realization of the assets changed that it is “more likely than not” that all of the deferred tax assets will be realized. The “realization” standard is subjective and is based upon our estimate of a greater than 50% probability that the deferred tax asset can be realized. The Company also complies with the provisions of ASC Topic 740, “Income Taxes”, which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by the relevant taxing authority based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. Derecognition of a tax benefit previously recognized results in the Company recording a tax liability that reduces ending retained earnings. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of December 31, 2018 and 2017. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at December 31, 2018 and 2017. Generally, the Company is no longer subject to income tax examinations by major domestic taxing authorities for years before 2015. According to the China tax regulatory framework, there is no statute of limitations on examination of tax filings by tax authorities. However, the general practice is going back five years. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position. Foreign Currency Translation (Loss) Gain and Comprehensive Loss In countries in which the Company operates, and the functional currency is other than the U.S. dollar, assets and liabilities are translated using published exchange rates in effect at the consolidated balance sheet date. Equity accounts are translated at historical rates except for the changes in accumulated deficit during the year as the result of the income statement translation process. Revenues and expenses and cash flows are translated using a weighted average exchange rate for the period. Resulting translation adjustments are recorded as a component of accumulated other comprehensive loss on the accompanying consolidated balance sheets. For the years ended December 31, 2018 and 2017, other comprehensive loss includes (losses) gains of $(257,000) and $271,000, respectively, which were entirely from foreign currency translation. Net Loss Per Common Share Basic loss per common share is based on the weighted average number of common shares outstanding without consideration of potential common stock. Diluted earnings per common share is based on the weighted average number of common and potential dilutive common shares outstanding. The following table represents common stock equivalents that were excluded from the computation of diluted earnings per share for the years ended December 31, 2018 and 2017, because the effect of their inclusion would be anti-dilutive. (in thousands) Year ended December 31, 2018 2017 Restricted common stock grants 2,388 4,204 Reclassifications Certain reclassifications have been made to prior year amounts to conform with the current year presentation. Recently Issued Accounting Pronouncements The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change. New pronouncements assessed by the Company recently are discusse |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | The Company views its business in three segments – the IT segment, the professional sales service segment, and the equipment segment. The IT segment includes the operations of NetWolves and VasoHealthcare IT Corp. The professional sales service segment operates through the Vaso Diagnostics subsidiary and is currently engaged solely in the fulfillment of the Company’s responsibilities under our agreement with GEHC. The equipment segment is engaged in designing, manufacturing, marketing and supporting EECP® enhanced external counterpulsation systems both domestically and internationally, as well as the development, production, marketing and supporting of other medical devices. The chief operating decision maker is the Company’s Chief Executive Officer, who, in conjunction with upper management, evaluates segment performance based on operating income and Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization – defined as net (loss) income, plus net interest expense (income), tax expense, depreciation and amortization, and non-cash expenses for share-based compensation). Administrative functions such as finance and human resources are centralized and related expenses allocated to each segment. Other costs not directly attributable to operating segments, such as audit, legal, director fees, investor relations, and others, as well as certain assets – primarily cash balances – are reported in the Corporate entity below. There are no intersegment revenues. Summary financial information for the segments is set forth below: (in thousands) Year ended December 31, 2018 2017 Revenues from external customers IT $ 44,228 $ 42,581 Professional sales service 25,511 26,443 Equipment 4,241 3,764 Total revenues $ 73,980 $ 72,788 Gross Profit IT $ 18,379 $ 17,623 Professional sales service 20,165 20,630 Equipment 2,580 2,478 Total gross profit $ 41,124 $ 40,731 Operating (loss) income IT $ (3,748 ) $ (3,375 ) Professional sales service 1,958 1,954 Equipment (812 ) (1,066 ) Corporate (1,122 ) (1,345 ) Total operating loss $ (3,724 ) $ (3,832 ) Depreciation and amortization IT $ 1,968 $ 1,822 Professional sales service 187 194 Equipment 367 410 Corporate - - Total depreciation and amortization $ 2,522 $ 2,426 Capital expenditures IT $ 2,496 $ 2,185 Professional sales service 4 127 Equipment 82 43 Corporate 4 19 Total cash capital expenditures $ 2,586 $ 2,374 December 31, 2018 December 31, 2017 Identifiable Assets IT $ 28,785 $ 28,320 Professional sales service 12,193 15,658 Equipment 6,992 7,830 Corporate 2,504 4,970 Total assets $ 50,474 $ 56,778 For the years ended December 31, 2018 and 2017, GEHC accounted for 34% and 36% of revenue, respectively. Also, GEHC accounted for $7.2 million, or 66%, and $8.9 million, or 67%, of accounts and other receivables at December 31, 2018 and 2017, respectively. Our revenues were derived from the following geographic areas: (in thousands) Year ended December 31, 2018 2017 Domestic (United States) $ 71,279 $ 70,719 Non-domestic (foreign) 2,701 2,069 $ 73,980 $ 72,788 |
ACCOUNTS AND OTHER RECEIVABLES
ACCOUNTS AND OTHER RECEIVABLES | 12 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
ACCOUNTS AND OTHER RECEIVABLES | The following table presents information regarding the Company’s accounts and other receivables as of December 31, 2018 and 2017: (in thousands) December 31, 2018 December 31, 2017 Trade receivables $ 15,016 $ 18,056 Due from employees 6 41 Allowance for doubtful accounts and commission adjustments (3,994 ) (4,872 ) Accounts and other receivables, net $ 11,028 $ 13,225 Trade receivables include amounts due for shipped products and services rendered. Amounts currently due 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 estimated future changes in sales order amounts that may reduce the amount the Company will ultimately receive under the GEHC Agreement. Due from employees primarily reflects commission advances made to sales personnel. |
INVENTORIES, NET
INVENTORIES, NET | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORIES, NET | Inventories, net of reserves, consisted of the following: (in thousands) December 31, 2018 December 31, 2017 Raw materials $ 577 $ 530 Work in process 388 449 Finished goods 1,018 1,376 $ 1,983 $ 2,355 At December 31, 2018 and 2017, the Company maintained reserves for slow moving inventories of $636,000 and $746,000, respectively. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | Property and equipment is summarized as follows: (in thousands) December 31, 2018 December 31, 2017 Office, laboratory and other equipment $ 3,885 $ 2,953 Equipment furnished for customer or clinical uses 8,167 6,615 Furniture and fixtures 127 131 12,179 9,699 Less: accumulated depreciation and amortization (6,370 ) (4,980 ) Property and equipment, net $ 5,809 $ 4,719 Assets under capital lease comprised approximately $855,000 and $387,000 of the office, laboratory and other equipment asset class at December 31, 2018 and 2017, respectively, and approximately $60,000 and $0 of the equipment furnished for customer or clinical use asset class at December 31, 2018 and 2017, respectively. Accumulated amortization of assets under capital lease aggregated approximately $250,000 and $103,000 at December 31, 2018 and 2017, respectively. Depreciation expense amounted to approximately $1,489,000 and $1,290,000 for the years ended December 31, 2018 and 2017, respectively. Amortization of assets under capital lease is included in depreciation expense. |
GOODWILL AND OTHER INTANGIBLES
GOODWILL AND OTHER INTANGIBLES | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLES | Goodwill of $14,375,000 is attributable to the NetWolves reporting unit within the IT segment. The remaining $2,934,000 of goodwill is attributable to the FGE reporting unit within the Equipment segment. The NetWolves and FGE reporting units had negative net asset carrying amounts at December 31, 2018 and 2017. The changes in the carrying amount of goodwill are as follows: (in thousands) Year ended December 31, 2018 2017 Beginning of year $ 17,471 $ 17,280 Foreign currency translation adjustment (162 ) 191 End of year $ 17,309 $ 17,471 The Company’s other intangible assets consist of capitalized customer-related intangibles, patent and technology costs, and software costs, as set forth in the following table: (in thousands) December 31, 2018 December 31, 2017 Customer-related Costs $ 5,831 $ 5,831 Accumulated amortization (3,083 ) (2,501 ) 2,748 3,330 Patents and Technology Costs 2,363 2,331 Accumulated amortization (1,532 ) (1,260 ) 831 1,071 Software Costs 2,346 1,819 Accumulated amortization (1,185 ) (966 ) 1,161 853 $ 4,740 $ 5,254 The Company owns four US utility patents that expire at various times through 2023, and, through our Chinese subsidiaries, we own sixteen invention and utility patents that expire at various times through 2028, as well as fourteen software copyright certificates in China related to proprietary technologies in physiological data acquisition, analysis and reporting. The Company also holds one patent for secure and remote monitoring management through its NetWolves subsidiary. Costs incurred for submitting the applications to the United States Patent and Trademark Office and other foreign authorities for these patents have been capitalized. Patent and technology costs are being amortized using the straight-line method over 10-year and 8-year lives, respectively. The Company begins amortizing patent costs once a filing receipt is received stating the patent serial number and filing date from the Patent Office or other foreign authority. 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 approximately $1,033,000 and $1,136,000 for the years ended December 31, 2018 and 2017, respectively. Amortization of intangibles for the next five years is: Years ending December 31, (in thousands) 2019 1,017 2020 934 2021 858 2022 562 2023 328 Total $ 3,699 |
OTHER ASSETS
OTHER ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
Other Assets [Abstract] | |
OTHER ASSETS | Other assets consist of the following: (in thousands) December 31, 2018 December 31, 2017 Deferred commission expense - noncurrent $ 1,978 $ 1,867 Trade receivables - noncurrent 630 968 Other, net of allowance for loss on loan receivable of $412 at December 31, 2018 and 2017 459 1,012 $ 3,067 $ 3,847 |
DEFERRED REVENUE
DEFERRED REVENUE | 12 Months Ended |
Dec. 31, 2018 | |
Deferred Revenue Disclosure [Abstract] | |
DEFERRED REVENUE | The changes in the Company’s deferred revenues are as follows: (in thousands) Year ended December 31, 2018 2017 Deferred revenue at beginning of year $ 23,066 $ 19,404 Net additions: Deferred extended service contracts 687 705 Deferred in-service and training 8 20 Deferred service arrangements 15 43 Deferred commission revenues 4,960 14,779 Recognized as revenue: Deferred extended service contracts (628 ) (661 ) Deferred in-service and training (5 ) (20 ) Deferred service arrangements (31 ) (45 ) Deferred commission revenues (9,986 ) (11,159 ) Deferred revenue at end of year 18,086 23,066 Less: current portion 10,382 15,540 Long-term deferred revenue at end of year $ 7,704 $ 7,526 |
ACCRUED EXPENSES AND OTHER LIAB
ACCRUED EXPENSES AND OTHER LIABILITIES | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
ACCRUED EXPENSES AND OTHER LIABILITIES | Accrued expenses and other liabilities consist of the following: (in thousands) December 31, 2018 December 31, 2017 Accrued compensation $ 648 $ 1,181 Accrued expenses - other 2,092 2,207 Other liabilities 2,915 1,949 $ 5,655 $ 5,337 |
RELATED-PARTY TRANSACTIONS
RELATED-PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
RELATED-PARTY TRANSACTIONS | In March 2018, the Company sold its interest in the VSK joint venture to PSK for a sales price of $676,000 and executed a distributorship agreement, expiring December 31, 2020, with VSK for the sale of the Company’s EECP® products in certain international markets. The sale resulted in a gain of approximately $212,000 and net cash proceeds of approximately $311,000 after satisfaction of deposits and other payables due to VSK aggregating approximately $365,000 at time of sale. Prior to the sale, the Company’s pro-rata share in VSK’s loss from operations approximated $20,000 for the year ended December 31, 2017, and $9,000 for the three months ended March 31, 2018, and is included in interest and other income, net in the accompanying consolidated statements of operations and comprehensive loss. David Lieberman, a practicing attorney in the State of New York, serves as Vice Chairman of the Board of Directors. He is currently a senior partner at the law firm of Beckman, Lieberman & Barandes, LLP, which performs certain legal services for the Company. Fees of approximately $340,000 were billed by the firm for each of the years ended December 31, 2018 and 2017, at which dates $28,000 and $0 were outstanding, respectively. On August 6, 2014 the Company acquired all of the outstanding shares of Genwell Instruments Co. Ltd. (“Genwell”), located in Wuxi, China for cash and notes of Chinese Yuan RMB13,250,000 (approximately $2,151,000 at the acquisition date). The Company issued the RMB6,250,000 note as part of the acquisition payment and, in May 2015, modified the note to change the interest rate from 5% to 9% per annum, effective August 28, 2015, and to extend the maturity date from August 26, 2015 to August 26, 2019. In July 2017 and October 2017, the Company made partial principal payments aggregating RMB2,250,000 (approximately $335,000), plus accrued interest, on notes payable to the president of LET and the president of Biox. Unsecured notes and accrued interest aggregating approximately $335,000, and $354,000 was payable to officers of Biox at December 31, 2018 and 2017, respectively. In November and December 2018, the Company issued unsecured notes aggregating $500,000 to certain directors. The notes bore interest at 10% per annum and matured on March 25, 2019. Principal and interest on these notes were paid off upon maturity. |
NOTES PAYABLE AND CAPITAL LEASE
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS | 12 Months Ended |
Dec. 31, 2018 | |
Debt and Capital Lease Obligations [Abstract] | |
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS | Notes payable and capital lease obligations consist of the following: (in thousands) December 31, 2018 December 31, 2017 Line of credit $ 4,171 $ 3,393 Unsecured term loan 145 153 Note payable 14 - Notes payable - MedTech (net of $14 and $46 in debt issue costs at December 31, 2018 and 2017) 4,786 4,754 Notes payable - related parties 827 345 Capital lease obligations 588 208 Total debt and lease obligations 10,531 8,853 Less: current portion (including related parties) (9,886 ) (3,760 ) $ 645 $ 5,093 Line of Credit In November 2018, NetWolves' lending institution extended its $4.0 million line of credit. Advances under the line, which expires on June 28, 2019, bear interest at a rate of LIBOR plus 3% (aggregating 5.52% at December 31, 2018 and 3.82% at December 31, 2017, based on the rate of LIBOR plus 2.25% in effect at such date) and are secured by substantially all of the assets of NetWolves Network Services, LLC and guaranteed by Vaso Corporation. At December 31, 2018, the Company had drawn approximately $2.9 million against the line. In November 2018, the Company’s lending institution extended its $2.0 million line of credit agreement with the same institution. Advances under the line, which expires on June 28, 2019, bear interest at a rate of LIBOR plus 3% (aggregating 5.52% at December 31, 2018) and are secured by substantially all of the assets of the Company. At December 31, 2018, the Company had drawn approximately $1.25 million against the line. The line of credit agreement includes certain financial covenants. At December 31, 2018 and 2017, the Company was not in compliance with both such covenants, and the lending institution waived the covenants through June 28, 2019. Unsecured Term Loan In December 2018, Biox extended its one-year unsecured term loan of RMB1,000,000 (approximately $145,000) with a Chinese bank for an additional year maturing on December 6, 2019. The loan bears interest at 4.79% per year. Notes Payable The Company financed certain FGE equipment purchases through an interest-free note payable to a Chinese bank. The note, which is secured by the financed equipment, is payable in 18 monthly installments ending in December 2019. On May 29, 2015, the Company entered into a Note Purchase Agreement with MedTechnology Investments, LLC (“MedTech”) pursuant to which it issued MedTech a secured subordinated promissory note (“Note”) for $3,800,000 for the purchase of NetWolves. MedTech was formed to acquire the Note, and $1,950,000 of the aggregate funds used to acquire the Note was provided by six of our directors. In June 2015, a second Note for $750,000 was issued to MedTech for working capital purposes, of which $250,000 was provided by a director and a director’s relative. In July 2015, an additional $250,000 was borrowed under the Note Purchase Agreement. The Notes bear interest at an annual rate of 9%, mature on May 29, 2019, may be prepaid without penalty, and are subordinated to any current or future Senior Debt as defined in the Subordinated Security Agreement. The Subordinated Security Agreement secures payment and performance of the Company’s obligations under the Notes and as a result, MedTech was granted a subordinated security interest in the Company’s assets. Capital lease obligations In July 2016, the Company entered into two three-year lease agreements for network equipment installed at its Florida data center. In September 2018, the Company entered into a capital lease, payable quarterly over a 60-month term, for primarily the acquisition of network components in its Florida data center. The fair market value and capital lease liability of the leased equipment at inception was approximately $399,000, of which approximately $78,000 is recorded in current liabilities. In November 2018, the Company entered into an additional capital lease, payable monthly over a 43-month term, for the acquisition of additional network components in its Florida data center. The fair market value and capital lease liability of the leased equipment at inception was approximately $130,000, of which approximately $29,000 is recorded in current liabilities. Assets under capital leases and related accumulated amortization is recorded under property and equipment in the accompanying consolidated balance sheets. The future minimum lease payments as of December 31, 2018 are set forth in the following table: Years ending December 31, (in thousands) 2019 231 2020 146 2021 146 2022 120 2023 47 690 Portion representing interest (85 ) Portion representing executory costs (17 ) Total capital lease obligations $ 588 Total amounts payable by the Company under its various notes payable and capital lease obligations outstanding as of December 31, 2018 are: (in thousands) Years ending December 31, Notes payable Capital leases Total 2019 9,712 $ 188 $ 9,900 2020 245 116 361 2021 - 126 126 2022 - 112 112 2023 - 46 46 Total $ 9,957 $ 588 $ 10,545 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | Chinese subsidiaries dividends and statutory reserves The payment of dividends by entities organized in China is subject to limitations. In particular, regulations in China currently permit payment of dividends only out of accumulated profits as determined in accordance with PRC accounting standards and regulations. Based on People’s Republic of China (PRC) accounting standards, our Chinese subsidiaries are also required to set aside at least 10% of after-tax profit each year to their general reserves until the accumulative amount of such reserves reaches 50% of the registered capital. As of December 31, 2018 and 2017, statutory reserves aggregating approximately $35,000 were recorded in the Company’s consolidated balance sheets. These reserves are not distributable as cash dividends. In addition, they are required to allocate a portion of their after-tax profit to their staff welfare and bonus fund at the discretion of their respective boards of directors. Moreover, if any of our PRC subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Distribution of dividends from the Chinese operating companies to foreign shareholders is subject to a 10% withholding tax. |
OPTION PLANS
OPTION PLANS | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
OPTION PLANS | 2010 Stock Option and Stock Issuance Plan On June 17, 2010 the Board of Directors approved the 2010 Stock Plan (the “2010 Plan”) for officers, directors, employees and consultants of the Company. The stock issuable under the 2010 Plan shall be shares of the Company’s authorized but unissued or reacquired common stock. The maximum number of shares of common stock which may be issued under the 2010 Plan is 5,000,000 shares. The 2010 Plan is comprised of two separate equity programs, the Options Grant Program, under which eligible persons may be granted options to purchase shares of common stock, and the Stock Issuance Program, under which eligible persons may be issued shares of common stock directly, either through the immediate purchase of such shares or as a bonus for services rendered to the Company. The 2010 Plan provides that the Board of Directors, or a committee of the Board of Directors, will administer it with full authority to determine the identity of the recipients of the options or shares and the number of options or shares. Options granted under the 2010 Plan may be either incentive stock options or non-qualified stock options. The option price shall be 100% of the fair market value of the common stock on the date of the grant ( or in the case of incentive stock options granted to any individual stockholder possessing more than 10% of the total combined voting power of all voting stock of the Company, 110% of such fair market value). The term of any option may be fixed by the Board of Directors, or its authorized committee, but in no event shall it exceed five years from the date of grant. Options are exercisable upon payment in full of the exercise price, either in cash or in common stock valued at fair market value on the date of exercise of the option. No shares or options were granted under the 2010 Plan during the year ended December 31, 2018. 2013 Stock Option and Stock Issuance Plan On October 30, 2013, the Board of Directors approved the 2013 Stock Plan (the “2013 Plan”) for officers, directors, employees and consultants of the Company. The stock issuable under the 2013 Plan shall be shares of the Company’s authorized but unissued or reacquired common stock. The maximum number of shares of common stock which may be issued under the 2013 Plan is 7,500,000 shares. The 2013 Plan is comprised of two separate equity programs, the Options Grant Program, under which eligible persons may be granted options to purchase shares of common stock, and the Stock Issuance Program, under which eligible persons may be issued shares of common stock directly, either through the immediate purchase of such shares or as a bonus for services rendered to the Company. The 2013 Plan provides that the Board of Directors, or a committee of the Board of Directors, will administer it with full authority to determine the identity of the recipients of the options or shares and the number of options or shares. During the year ended December 31, 2018, 475,000 shares of common stock were granted under the 2013 Plan, 320,416 shares were forfeited, and 70,725 shares were withheld for withholding taxes. No options were granted under the 2013 Plan during the year ended December 31, 2018. 2016 Stock Option and Stock Issuance Plan On June 15, 2016, the Board of Directors ("Board") approved the 2016 Stock Plan (the "2016 Plan") for officers, directors, and senior employees of the Corporation or any subsidiary of the Corporation. The stock issuable under the 2016 Plan shall be shares of the Company's authorized but unissued or reacquired common stock. The maximum number of shares of common stock that may be issued under the 2016 Plan is 7,500,000 shares. The 2016 Plan consists of a Stock Issuance Program, under which eligible persons may, at the discretion of the Board, be issued shares of common stock directly, as a bonus for services rendered or to be rendered to the Corporation or any subsidiary of the Corporation. In March 2018, 725,000 restricted shares of common stock under the 2016 Plan were granted to officers. The shares vested in April 2018. In June 2018, the Company granted 500,000 shares of restricted common stock to employees, vesting over a three year period. No options were granted under the 2016 Plan during the year ended December 31, 2018. The following table summarizes non-vested restricted shares for the year ended December 31, 2018: Shares Available for Future Issuance Unvested shares Weighted Average Grant Date Fair Value Balance at December 31, 2016 4,031,946 6,763,125 $ 0.16 Authorized - - $ - Granted (975,000 ) 975,000 $ 0.12 Vested - (3,380,437 ) $ 0.15 Forfeited 153,730 (153,730 ) $ 0.16 Balance at December 31, 2017 3,210,676 4,203,958 $ 0.16 Authorized - - $ - Granted (1,700,000 ) 1,700,000 $ 0.06 Vested - (3,125,317 ) $ 0.14 Forfeited 391,141 (391,141 ) $ 0.16 Balance at December 31, 2018 1,901,817 2,387,500 $ 0.12 There were 68,543,396 remaining authorized shares of common stock after reserves for all stock option plans. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act reduces the maximum U.S. federal corporate tax rate from 35% to 21%, allows net operating losses incurred in 2018 and beyond to be carried forward indefinitely, allows alternative minimum tax carryforwards to be partially refunded, beginning in 2018, and fully refunded by 2021, and creates new taxes on certain foreign sourced earnings. The following is a geographical breakdown of loss before the provision for income taxes: (in thousands) Year ended December 31, 2018 2017 Domestic $ (3,967 ) $ (4,161 ) Foreign (152 ) (244 ) Loss before provision for income taxes $ (4,119 ) $ (4,405 ) The provision for income taxes consisted of the following: (in thousands) Year ended December 31, 2018 2017 Current provision (benefit) Federal $ - $ (154 ) State 63 59 Foreign 35 13 Total current provision (benefit) 98 (82 ) Deferred provision (benefit) Federal (376 ) 168 State (107 ) 48 Foreign - - Total deferred provision (benefit) (483 ) 216 Total income tax provision (benefit) $ (385 ) $ 134 Effective income tax rate 9.35 % -3.04 % Income tax benefit for the year ended December 31, 2018 was $385,000 due primarily to $483,000 in tax benefit related to deferred tax liabilities arising from goodwill generated by the NetWolves acquisition and $63,000 in state income taxes. The following is a reconciliation of the effective income tax rate to the federal statutory rate: For the year ended December 31, 2018 December 31, 2017 % % Federal statutory rate 21.00 34.00 State income taxes (0.87 ) (1.34 ) Change in valuation allowance relating to operations (7.75 ) (42.38 ) Impact of federal statutory rate change - (6.44 ) Impact of federal statutory rate change on valuation allowance - 13.74 Foreign tax rate differential - (2.20 ) R&D credit (0.22 ) - Nondeductible expenses (3.09 ) (1.93 ) Minimum tax credit refundable - 3.51 Other 0.28 - 9.35 (3.04 ) The effective tax rate increased mainly due to the change from tax expense in 2017 to tax benefit in 2018. As of December 31, 2018, the recorded deferred tax assets were $14,983,000, reflecting an increase of $1,868,000 during the year ended December 31, 2018, which was offset by a valuation allowance of $12,077,000, reflecting an increase of $319,000. The components of our deferred tax assets and liabilities are summarized as follows: (in thousands) December 31, 2018 December 31, 2017 Deferred Tax Assets: Net operating loss carryforwards $ 12,402 $ 10,623 Amortization 304 262 Stock-based compensation 16 49 Allowance for doubtful accounts 88 36 Reserve for obsolete inventory 239 235 Tax credits 429 438 Expense accruals 392 579 Excess interest carryforwards 171 - Deferred revenue 942 893 Total gross deferred taxes 14,983 13,115 Valuation allowance (12,077 ) (11,758 ) Net deferred tax assets 2,906 1,357 Deferred Tax Liabilities: Deferred commissions (245 ) (224 ) Goodwill (927 ) (668 ) Differences in timing of revenue recognition (124 ) (112 ) Depreciation (1,360 ) (573 ) Total deferred tax liabilities (2,656 ) (1,577 ) Total deferred tax assets (liabilities) 250 (220 ) Recorded as: Non-current deferred tax assets 374 - Non-current deferred tax liabilities (124 ) (220 ) Total deferred tax assets (liabilities) $ 250 $ (220 ) The activity in the valuation allowance is set forth below: (in thousands) 2018 2017 Valuation allowance, January 1, $ 11,758 $ 15,695 Change in valuation allowance 319 (3,937 ) Valuation allowance, December 31, $ 12,077 $ 11,758 At December 31, 2018, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $39 million expiring at various dates from 2020 through 2037 and approximately $7 million with no expiration date. Under current tax law, the utilization of tax attributes will be restricted if an ownership change, as defined, were to occur. Section 382 of the Internal Revenue Code provides, in general, that if an “ownership change” occurs with respect to a corporation with net operating and other loss carryforwards, such carryforwards will be available to offset taxable income in each taxable year after the ownership change only up to the “Section 382 Limitation” for each year (generally, the product of the fair market value of the corporation’s stock at the time of the ownership change, with certain adjustments, and a specified long-term tax-exempt bond rate at such time). The Company’s ability to use its loss carryforwards will be limited in the event of an ownership change. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Sales representation agreement In December 2017, the Company concluded an amendment of the GEHC Agreement with GEHC, originally signed on May 19, 2010. The amendment extends the term of the original agreement, which began on July 1, 2010 and was previously extended in 2012 and 2015, through December 31, 2022, subject to early termination under certain circumstances, making it the longest extension thus far with a remaining term of five years from December 31, 2017. Under the agreement, VasoHealthcare is the exclusive representative for the sale of select GE Healthcare diagnostic imaging products to specific market segments/accounts in the 48 contiguous states of the United States and the District of Columbia. The circumstances under which early termination of the agreement may occur include: not materially achieving certain sales goals, not maintaining a minimum number of sales representatives, and not meeting various legal and GEHC policy requirements. The Company did not meet the contractual sales goals in 2018. Under the terms of the agreement, the Company is required to lease dedicated computer equipment from GEHC for connectivity to their network and share certain GEHC sales costs. Facility Leases The Company leases a facility in Plainview, New York, under a seven-year agreement expiring in September 2022. The Company also leases offices in New York City under a three-year agreement expiring May 2020. NetWolves houses its operations in leased facilities in Tampa, Florida, under an agreement expiring in May 2020. VHC-IT leases a facility in Nashville, Tennessee pursuant to a one-year lease expiring April 2019. The Company is evaluating possible renewal options and believes sufficient space is available at similar cost in Nashville. FGE leases facilities in Wuxi, China, pursuant to leases expiring in September 2019, August 2020, September 2020, and December 2020. Such leases are renewable upon expiration. Vehicle Lease Agreement The Company provides leased vehicles to the sales team of its professional sales service segment under a closed-end master lease agreement. Vehicles obtained under the terms of the agreement are leased generally for a 36-month term, and payments are fixed for each year of the agreement, subject to readjustment at the beginning of the second and third year. Future rental payments under these operating leases aggregate approximately as follows: For the years ending December 31, (in thousands) Vehicles Facilities Total 2019 $ 289 $ 380 $ 669 2020 195 230 425 2021 53 76 129 2022 - 55 55 Total $ 537 $ 741 $ 1,278 Rental expense for all operating leases totaled approximately $816,000 and $770,000 for the years ended December 31, 2018 and 2017, respectively. Employment Agreements On March 21, 2011, the Company entered into an Employment Agreement with its President and Chief Executive Officer, Dr. Jun Ma, for a three-year term ended on March 14, 2014. The agreement was amended in 2013 and again in 2015 to provide for a continuing three-year term, unless earlier terminated by the Company, but in no event can extend beyond March 14, 2021. The Employment Agreement currently provides for annual compensation of $375,000. Dr. Ma shall be eligible to receive a bonus for each fiscal year thereafter 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 June 1, 2015, the Company entered into an Employment Agreement with Mr. Peter Castle to be its Chief Operating Officer. The agreement provides for a three-year term ending on June 1, 2018 and shall extend for additional one-year periods annually commencing June 1, 2018, unless earlier terminated by the Company, but in no event can extend beyond June 1, 2021. The Employment Agreement currently provides for annual compensation of $350,000. Mr. Castle shall be eligible to receive a bonus for each fiscal year thereafter 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. Mr. Castle 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. Licensing and Support Service Agreement In 2010, NetWolves executed a licensing and support service agreement for the upgrade of its billing system. The agreement initially was set to expire in December 2014; however, it was extended for a period of two years in June 2013 with an automatic one-year renewal thereafter. In December 2017, the agreement was renewed for an additional three years, expiring December 2020. The agreement provides for monthly recurring charges based on a percentage of billed revenues using these services, which charges aggregated approximately $331,000 and $400,000 for the years ended December 31, 2018 and 2017, respectively. Letters of Credit At December 31, 2018 we are contingently liable under two standby letters of credit approximating $270,500 in total. The letters of credit are being maintained as security for payments to two vendors. Litigation The Company is currently, and has been in the past, a party to various routine legal proceedings, primarily employee related matters, incident to the ordinary course of business. The Company believes that the outcome of all such pending legal proceedings in the aggregate is unlikely to have a material adverse effect on the business or consolidated financial condition of the Company. Foreign operations During the years ended December 31, 2018 and 2017, the Company had and continues to have operations in China. Operating transactions in China are denominated in the Chinese currency called RMB, which is not freely convertible into foreign currencies. Operating internationally involves additional risks relating to such things as currency exchange rates, different legal and regulatory environments, political, economic risks relating to the stability or predictability of foreign governments, differences in the manner in which different cultures do business, difficulties in staffing and managing foreign operations, differences in financial reporting, operating difficulties, and other factors. Commercial law is still developing in China and there are limited legal precedents to follow in commercial transactions. There are many tax jurisdictions each of which may have changing tax laws. Applicable taxes include value added taxes (“VAT”), Enterprise Income Tax, and social (payroll) taxes. Regulations are often unclear. Tax declarations (reports) are subject to review and taxing authorities may impose fines, penalties and interest. These facts create risks in China. |
401(k) PLANS
401(k) PLANS | 12 Months Ended |
Dec. 31, 2018 | |
Retirement Benefits [Abstract] | |
401(k) PLANS | The Company maintains a defined contribution plan to provide retirement benefits for its employees - the Vaso Corporation 401(k) Plan adopted in April 1997. As allowed under Section 401(k) of the Internal Revenue Code, the plan provides tax-deferred salary deductions for eligible employees. Employees are eligible to participate in the next quarter enrollment period after employment and participants may make voluntary contributions to the plan up to 80% of their compensation. In the years ended December 31, 2018 and 2017 the Company made discretionary contributions of approximately $96,000 and $116,000, respectively, to match a percentage of employee contributions. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | In accordance with the original acquisition agreement of Gentone by FGE, in March 2019 the Company's subsidiary Gentone exercised its option to acquire all of the shares of Biox. Subsequent to December 31, 2018, the Company issued notes aggregating $750,000 to certain directors, employees, and a shareholder. The notes mature at various periods through April 3, 2020 and bear interest at 10% per annum payable quarterly. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | The consolidated financial statements include the accounts of Vaso Corporation, its wholly-owned subsidiaries, and the variable interest entity where the Company is the primary beneficiary. Significant intercompany balances and transactions have been eliminated. |
Variable Interest Entity | Basic Information The Company follows the guidance of accounting for variable interest entities, which requires certain variable interest entities to be consolidated by the primary beneficiary of the entities. Biox is a Variable Interest Entity (“VIE”). Laws and regulations of the Peoples Republic of China (“PRC”) prohibit or restrict companies with foreign ownership from certain activities and benefits including eligibility for certain government grants and certain rebates related to commercial activities. To provide the Company the expected residual returns of the VIE, the Company, through its wholly-owned subsidiary Gentone, entered into a series of contractual arrangements with Biox and its registered shareholders to enable the Company, to: ● exercise effective control over the VIE; ● receive substantially all of the economic benefits and residual returns, and absorb substantially all the risks of the VIE as if they were their sole shareholders; and ● have an exclusive option to purchase all of the equity interests in the VIE. The Company’s management evaluated the relationships between the Company and Biox, and the economic benefits flow of the applicable contractual arrangements. The Company concluded that it is the primary beneficiary of Biox. As a result, the results of operations, assets and liabilities of Biox have been included in the Company’s consolidated financial statements. The significant agreements through which the Company exercises effective control over Biox are: ● the Exclusive Technical Consulting Services Agreement between Biox and Gentone; ● the Option Agreement on Purchase of the Equity Interest executed by and among the shareholders of Biox and Gentone; ● the Equity Pledge Agreement executed by and among the shareholders of Biox and Gentone; and ● the Powers of Attorney issued by the shareholders of Biox. Financial Information of VIE Liabilities recognized as a result of consolidating this VIE do not represent additional claims on the Company’s general assets. VIE assets can be used to settle obligations of the primary beneficiary. The financial information of Biox, which was included in the accompanying consolidated financial statements, is presented as follows: (in thousands) As of December 31, 2018 2017 Cash and cash equivalents $ 97 $ 41 Total assets $ 1,641 $ 1,599 Total liabilities $ 1,662 $ 1,745 (in thousands) Year ended December 31, 2018 2017 Total net revenue $ 2,294 $ 1,597 Net income (loss) $ 111 $ (524 ) |
Use of Estimates | The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates and assumptions relate to estimates of collectibility of accounts receivable, the realizability of deferred tax assets, stock-based compensation, values and lives assigned to acquired intangible assets, fair value of reporting units in connection with goodwill impairment test, the adequacy of inventory reserves, variable consideration, and allocation of contract transaction price to performance obligations. Actual results could differ from those estimates. |
Revenue Recognition | In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). Under the standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. ASU 2014-09 replaced most existing revenue recognition guidance in U.S. GAAP. The new standard introduces a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers, and establishes disclosure requirements which are more extensive than those required under prior U.S. GAAP. Generally, we recognize revenue under Topic 606 for each of our performance obligations either over time (generally, the transfer of a service) or at a point in time (generally, the transfer of a good) as follows: ● VasoTechnology Revenue relating to recurring managed network and voice services provided by NetWolves are recognized as provided on a monthly basis (“over time”). Non-recurring charges related to the provision of such services are recognized in the period provided (“point in time”). In the IT VAR business, software system installations are recognized upon verification of installation and expiration of an acceptance period (“point in time”). Monthly post-implementation customer support provided under such installations as well as software solutions offered under a monthly Software as a Service (“SaaS”) fee basis are recognized monthly over the contract term (“over time”). ● VasoHealthcare Commission revenue is recognized when the underlying equipment has been delivered by GEHC and accepted at the customer site in accordance with the terms of the specific sales agreement (“point in time”). ● VasoMedical In the United States, we recognized revenue from the sale of our medical equipment in the period in which we deliver the product to the customer (“point in time”). Revenue from the sale of our medical equipment to international markets is recognized upon shipment of the product to a common carrier, as are supplies, accessories and spare parts delivered in both domestic and international markets (“point in time”). The Company also recognizes revenue from the maintenance of EECP® systems either on a time and material as-billed basis (“point in time”) or through the sale of a service contract, where revenue is recognized ratably over the contract term (“over time”). Impact of Adoption Effective January 1, 2018, the Company adopted the requirements of Topic 606 using the modified retrospective method, which provided that the cumulative effect from prior periods upon applying the new guidance was recognized in our consolidated balance sheets as of the date of adoption, including an adjustment to retained earnings, and that prior periods are not retrospectively adjusted. The Company elected to apply the modified retrospective method only to contracts that were not completed at January 1, 2018. A summary and discussion of such cumulative effect adjustment and the impact on current period financial statements of adopting Topic 606 is as follows: (in thousands) Year ended December 31, 2018 prior U.S. GAAP Topic 606 impact as reported STATEMENT OF OPERATIONS Revenues Professional sales services $ 25,511 $ - $ 25,511 Total revenues 73,980 - 73,980 Gross Profit 41,124 - 41,124 Operating expenses Selling, general and administrative 44,083 (121 ) 43,962 Operating loss $ (3,845 ) $ 121 $ (3,724 ) (in thousands) As of December 31, 2018 prior U.S. GAAP Topic 606 impact as reported ASSETS Accounts and other receivables, net $ 11,028 $ - $ 11,028 Deferred commission expense $ 2,577 $ 8 $ 2,585 Other assets, net $ 3,252 $ 190 $ 3,442 LIABILITIES AND STOCKHOLDERS' EQUITY Deferred revenue - current portion $ 10,382 $ - $ 10,382 Deferred revenue - long term $ 7,704 $ - $ 7,704 Accumulated deficit $ (56,185 ) $ 261 $ (55,924 ) Disaggregation of Revenue The following tables present revenues disaggregated by our business operations and timing of revenue recognition: Year ended December 31, 2018 Year ended December 31, 2017 Professional sales Equipment Professional sales Equipment IT segment service segment segment Total IT segment service segment segment Total Network services $ 40,254 $ 40,254 $ 38,882 $ 38,882 Software sales and support 3,974 3,974 3,699 3,699 Commissions 25,511 25,511 26,443 26,443 Medical equipment sales 3,151 3,151 2,660 2,660 Medical equipment service 1,090 1,090 1,104 1,104 $ 44,228 $ 25,511 $ 4,241 $ 73,980 $ 42,581 $ 26,443 $ 3,764 $ 72,788 Year ended December 31, 2018 Year ended December 31, 2017 Professional sales Equipment Professional sales Equipment IT segment service segment segment Total IT segment service segment segment Total Revenue recognized over time $ 39,340 $ - $ 658 $ 39,998 $ 37,629 $ - $ 707 $ 38,336 Revenue recognized at a point in time 4,888 25,511 3,583 33,982 4,952 26,443 3,057 34,452 $ 44,228 $ 25,511 $ 4,241 $ 73,980 $ 42,581 $ 26,443 $ 3,764 $ 72,788 Transaction Price Allocated to Remaining Performance Obligations As of December 31, 2018, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $82.2 million, of which we expect to recognize revenue as follows: Fiscal years of revenue recognition 2019 2020 2021 Thereafter Unfulfilled performance obligations $ 41,271 $ 26,087 $ 8,595 $ 6,278 Contract Liabilities Contract liabilities arise in our IT VAR, VasoHealthcare, and VasoMedical businesses. In our IT VAR 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 $344,000 and $371,000 at December 31, 2018 and 2017, respectively, and are included in accrued expenses and other liabilities in our consolidated balance sheets. In our VasoHealthcare business, we bill amounts for booked orders in advance of customer acceptance of the equipment. Such amounts aggregated approximately $17,098,000 and $22,126,000 at December 31, 2018 and 2017, respectively, and are classified in our consolidated balance sheets into current or long-term deferred revenue. In addition, we record a contract liability for amounts expected to be credited back to GEHC due to customer order reductions. Such amounts aggregated approximately $2,315,000 and $1,143,000 at December 31, 2018 and 2017, respectively, and are included in accrued expenses and other liabilities in our consolidated balance sheets. In our VasoMedical business, we bill amounts for post-delivery services and varying duration service contracts in advance of performance. Such amounts aggregated approximately $988,000 and $941,000 at December 31, 2018 and 2017, respectively, and are classified in our consolidated balance sheets as either current or long-term deferred revenue. During the year ended December 31, 2018, we recognized approximately $7.3 million of revenues that were included in our contract liability balance at the beginning of such period. Costs to Obtain or Fulfill a Contract Topic 606 requires that incremental costs of obtaining a contract are recognized as an asset and amortized to expense in a pattern that matches the timing of the revenue recognition of the related contract. We have determined the only significant incremental costs incurred to obtain contracts with customers within the scope of Topic 606 are certain sales commissions paid to associates. In addition, the Company elected the practical expedient to recognize the incremental costs of obtaining a contract when incurred for contracts where the amortization period for the asset the Company would otherwise have recognized is one year or less. Under prior U.S. GAAP, we recognized sales commissions in our equipment segment as incurred. Under Topic 606, sales commissions applicable to service contracts exceeding one year have been capitalized and amortized ratably over the term of the contract. In our IT VAR business, all commissions paid in advance of go-live were, under prior U.S. GAAP, capitalized as deferred commission expense and charged to expense at go-live or customer acceptance, as applicable. Under Topic 606, IT VAR commissions allocable to multi-year subscription contracts or multi-year post-contract support performance obligations are amortized to expense ratably over the terms of the multi-year periods. IT VAR commissions allocable to other elements continue to be charged to expense at go-live or customer acceptance, as was previously done. At the date of adoption of Topic 606, we recorded an asset, and related adjustment to retained earnings, of approximately $139,000 in our consolidated balance sheets for the amount of unamortized sales commissions for prior periods, as calculated under the new guidance. The impact to our financial statements of adopting Topic 606, as it relates to costs to obtain contracts, was a reduction in commission expense of approximately $121,000 for the year ended December 31, 2018, an increase in deferred commission expense of approximately $8,000, and an increase in long term deferred commission expense (recorded in other assets) of approximately $190,000 (inclusive of the beginning balance adjustment of $139,000). In our professional sales services segment, under both prior U.S. GAAP and Topic 606, commissions paid to our sales force are deferred until the underlying equipment is accepted by the customer. At December 31, 2018, our consolidated balance sheet includes approximately $4,562,000 in capitalized sales commissions to be expensed in future periods, of which $2,585,000 is recorded in deferred commission expense and $1,977,000, representing the long-term portion, is included in other assets. Significant Judgments when Applying Topic 606 Contract transaction price is allocated to performance obligations using estimated stand-alone selling price. Judgment is required in estimating stand-alone selling price for each distinct performance obligation. We determine stand-alone selling price maximizing observable inputs such as stand-alone sales when they exist or substantive renewal price charged to clients. In instances where stand-alone selling price is not observable, we utilize an estimate of stand-alone selling price based on historical pricing and industry practices. Certain revenue we record in our professional sales service segment contains an estimate for variable consideration. Due to the tiered structure of our commission rate, which increases as annual targets are achieved, under Topic 606 we record revenue and deferred revenue at the rate we expect to be achieved by year end. Under prior U.S. GAAP, we recognized revenue at the rate achieved at the applicable reporting date. We base our estimate of variable consideration on historical results of previous years’ achievement under the GEHC agreement. Such estimate will be reviewed each quarter and adjusted as necessary. The Company recognized reductions in revenue associated with revisions to variable consideration for previously completed performance obligations of $165,000 for the year ended December 31, 2018. |
Shipping and Handling Costs | All shipping and handling expenses are charged to cost of sales. Amounts billed to customers related to shipping and handling costs are included as a component of sales. |
Research and Development | Research and development costs attributable to development are expensed as incurred. |
Share-Based Compensation | The Company complies with ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”), and ASC Topic 505, “Equity” (“ASC 505”), which requires all companies to recognize the cost of services received in exchange for equity instruments, to be recognized in the financial statements based on their fair values. For employees and non-employee directors, the fair value is measured on the grant date and for non-employees, the fair value is measured on the measurement date and re-measured at each reporting period until performance is complete. The Company applies an estimated forfeiture rate to the grant date fair value to determine the annual compensation cost of share-based payment arrangements with employees. The forfeiture rate is estimated based primarily on job title and prior forfeiture experience. The Company did not grant any awards to non-employees during the years ended December 31, 2018 and 2017. During the year ended December 31, 2018, the Company granted 975,000 restricted shares of common stock valued at $63,000 to non-officer employees, and 725,000 restricted shares of common stock valued at $44,000 to officers. The 975,000 shares granted to non-officer employees vest at various times over three to five years from the grant date and the 725,000 shares granted to officers vested in April 2018. The total fair value of shares vested during the year ended December 31, 2018 was $385,000 for employees. The weighted average grant date fair value of shares granted during the year ended December 31, 2018 was $0.06 per share. During the year ended December 31, 2017, the Company granted 50,000 restricted shares of common stock valued at $6,000 to non-officer employees, and 925,000 restricted shares of common stock valued at $111,000 to officers. The 975,000 shares granted vested on April 1, 2017. The total fair value of shares vested during the year ended December 31, 2017 was $467,000 for employees. The weighted average grant date fair value of shares granted during the year ended December 31, 2017 was $0.12 per share. The Company did not grant any stock options during the years ended December 31, 2018 or 2017, nor were any options exercised during such periods. No options were outstanding at December 31, 2018 or 2017. Share-based compensation expense recognized for the years ended December 31, 2018 and 2017 was $313,000 and $514,000, respectively, and is recorded in selling, general, and administrative expense in the consolidated statements of operations and comprehensive loss. Unrecognized expense related to existing share-based compensation and arrangements is approximately $207,000 at December 31, 2018 and will be recognized over a weighted-average period of approximately 12 months. |
Cash and Cash Equivalents | 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. |
Accounts Receivable, net | The Company’s accounts receivable are due from customers to whom we sell our products and services, distributors engaged in the distribution of our products and from GEHC. Credit is extended based on evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are generally due 30 to 90 days from shipment and services provided and are stated at amounts due from customers net of allowances for doubtful accounts, returns, term discounts and other allowances. Accounts that are outstanding longer than the contractual payment terms are considered past due. Estimates are used in determining the allowance for doubtful accounts based on the Company’s historical collections experience, current trends, credit policy and a percentage of its accounts receivable by aging category. In determining these percentages, the Company reviews historical write-offs of their receivables. The Company also looks at the credit quality of their customer base as well as changes in their credit policies. The Company continuously monitors collections and payments from our customers, and writes off receivables when all efforts at collection have been exhausted. While credit losses have historically been within expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same credit loss rates that they have in the past. The changes in the Company’s allowance for doubtful accounts and commission adjustments are as follows: (in thousands) Year ended December 31, 2018 2017 Beginning Balance $ 4,872 $ 4,159 Provision for losses on accounts receivable 460 157 Direct write-offs, net of recoveries (268 ) (212 ) Commission adjustments (1,070 ) 768 Ending Balance $ 3,994 $ 4,872 |
Concentrations of Credit Risk | We market our equipment and IT software solutions principally to hospitals, diagnostic imaging centers and physician private practices. We perform credit evaluations of our customers’ financial condition and, as a result, believe that our receivable credit risk exposure is limited. For the years ended December 31, 2018 and 2017, no customer in our equipment or IT segment accounted for 10% or more of revenues or accounts receivable. In our professional sales service segment, 100% of our revenues and accounts receivable are with GEHC; however, we believe this risk is acceptable based on GEHC’s financial position. The Company maintains cash balances in certain U.S. financial institutions, which, at times, may exceed the Federal Depository Insurance Corporation (“FDIC”) coverage of $250,000. The Company has not experienced any losses on these accounts and believes it is not subject to any significant credit risk on these accounts. In addition, the FDIC does not insure the Company’s foreign bank balances, which aggregated approximately $519,000 and $709,000 at December 31, 2018 and 2017, respectively. |
Inventories, net | The Company values inventories in the equipment segment at the lower of cost or net realizable value, with cost being determined on a first-in, first-out basis. The Company occasionally places EECP® systems and other medical device products at various field locations for demonstration, training, evaluation, and other similar purposes at no charge. The cost of these products is transferred to property and equipment and is amortized over two to five years. The Company records the cost of refurbished components of EECP® systems and critical components at cost plus the cost of refurbishment. The Company regularly reviews inventory quantities on hand, particularly raw materials and components, and records a provision for excess and slow moving inventory based primarily on existing and anticipated design and engineering changes to its products as well as forecasts of future product demand. In our IT Segment, we purchase computer hardware and software for specific customer requirements and value such inventories using the specific identification method. |
Property and Equipment | Property and equipment, including assets under capital lease, are stated at cost less accumulated depreciation and amortization. Major improvements are capitalized and minor replacements, maintenance and repairs are charged to expense as incurred. Upon retirement or disposal of assets, the cost and related accumulated depreciation are removed from the consolidated balance sheets. Depreciation is expensed over the estimated useful lives of the assets, which range from two to eight years, on a straight-line basis. Accelerated methods of depreciation are used for tax purposes. We amortize leasehold improvements over the useful life of the related leasehold improvement or the life of the related lease, whichever is less. |
Goodwill and Intangible Assets | Goodwill represents the excess of cost over the fair value of net assets of businesses acquired. The Company accounts for goodwill under the guidance of the ASC Topic 350, “Intangibles: Goodwill and Other”. Goodwill acquired in a purchase business combination is not amortized, but instead tested for impairment, at least annually, in accordance with this guidance. The recoverability of goodwill is subject to an annual impairment test or whenever an event occurs or circumstances change that would more likely than not result in an impairment. The Company tests goodwill for impairment at the reporting unit level on an annual basis as of December 31 and between annual tests when an event occurs or circumstances change that could indicate that the asset might be impaired. In any year, the Company may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is in excess of its carrying value. If the Company cannot determine qualitatively that the fair value is in excess of the carrying value, or the Company decides to bypass the qualitative assessment, the Company proceeds to the quantitative goodwill impairment test, which compares the fair value of each reporting unit to its carrying amount, including goodwill. If the fair value of each reporting unit exceeds its carrying amount, goodwill is not considered to be impaired. If the carrying amount of a reporting unit exceeds its fair value, sn impairment loss is recognized for an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. No impairment loss was recorded as of December 31, 2018 and 2017. Intangible assets consist of the value of customer contracts and relationships, patent and technology costs, and software. The cost of significant customer-related intangibles is amortized in proportion to estimated total related revenue; cost of other intangible assets is generally amortized on a straight-line basis over the asset's estimated economic life, which range from five to ten years. The Company capitalizes internal use software development costs incurred during the application development stage. Costs related to preliminary project activities, training, data conversion, and post implementation activities are expensed as incurred. The Company capitalized $527,000 and $398,000 in software development costs for the years ended December 31, 2018 and 2017, respectively. |
Impairment of Long-Lived Assets | The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. If required, the Company compares the estimated fair value determined by either the undiscounted future net cash flows or appraised value to the related asset’s carrying value to determine whether there has been an impairment. If an asset is considered impaired, the asset is written down to fair value, which is based either on discounted cash flows or appraised values in the period the impairment becomes known. No assets were determined to be impaired as of December 31, 2018 and 2017. |
Deferred Revenue | Amounts billable under the agreement with GEHC in advance of customer acceptance of the equipment are recorded initially as deferred revenue, and commission revenue is subsequently recognized as customer acceptance of such equipment is reported to us by GEHC. Similarly, commissions payable to our sales force related to such billings are recorded as deferred commission expense when the associated deferred revenue is recorded. Commission expense is recognized when the corresponding commission revenue is recognized. We record revenue on extended service contracts ratably over the term of the related service contracts. Under the provisions of ASC 606, we defer revenue related to EECP® system sales for the fair value of installation and in-service training to the period when the services are rendered and for service obligations ratably over the service period, which is generally one year. (See Note I) |
Income Taxes | Deferred income taxes are recognized for temporary differences between financial statement and income tax bases of assets and liabilities and loss carry-forwards for which income tax benefits are expected to be realized in future years. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount expected to be realized. In estimating future tax consequences, we generally consider all expected future events other than an enactment of changes in the tax laws or rates. Deferred tax assets are continually evaluated for the expected realization. To the extent our judgment regarding the realization of the deferred tax assets changes, an adjustment to the allowance is recorded, with an offsetting increase or decrease, as appropriate, in income tax expense. Such adjustments are recorded in the period in which our estimate as to the realization of the assets changed that it is “more likely than not” that all of the deferred tax assets will be realized. The “realization” standard is subjective and is based upon our estimate of a greater than 50% probability that the deferred tax asset can be realized. The Company also complies with the provisions of ASC Topic 740, “Income Taxes”, which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by the relevant taxing authority based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. Derecognition of a tax benefit previously recognized results in the Company recording a tax liability that reduces ending retained earnings. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of December 31, 2018 and 2017. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the payment of interest and penalties at December 31, 2018 and 2017. Generally, the Company is no longer subject to income tax examinations by major domestic taxing authorities for years before 2015. According to the China tax regulatory framework, there is no statute of limitations on examination of tax filings by tax authorities. However, the general practice is going back five years. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position. |
Foreign Currency Translation (Gain) Loss and Comprehensive (Loss) Income | In countries in which the Company operates, and the functional currency is other than the U.S. dollar, assets and liabilities are translated using published exchange rates in effect at the consolidated balance sheet date. Equity accounts are translated at historical rates except for the changes in accumulated deficit during the year as the result of the income statement translation process. Revenues and expenses and cash flows are translated using a weighted average exchange rate for the period. Resulting translation adjustments are recorded as a component of accumulated other comprehensive loss on the accompanying consolidated balance sheets. For the years ended December 31, 2018 and 2017, other comprehensive loss includes (losses) gains of $(257,000) and $271,000, respectively, which were entirely from foreign currency translation. |
Net Loss Per Common Share | Basic loss per common share is based on the weighted average number of common shares outstanding without consideration of potential common stock. Diluted earnings per common share is based on the weighted average number of common and potential dilutive common shares outstanding. The following table represents common stock equivalents that were excluded from the computation of diluted earnings per share for the years ended December 31, 2018 and 2017, because the effect of their inclusion would be anti-dilutive. (in thousands) Year ended December 31, 2018 2017 Restricted common stock grants 2,388 4,204 |
Reclassifications | Certain reclassifications have been made to prior year amounts to conform with the current year presentation. |
Recently Issued Accounting Pronouncements | The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change. New pronouncements assessed by the Company recently are discussed below: Leases In February 2016, The FASB issued ASU 2016-02 (Topic 842), “Leases”. ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at either the effective date (the “effective date method”) or the beginning of the earliest period presented (the “comparative method”) using a modified retrospective approach. Under the effective date method, the Company’s comparative period reporting is unchanged. In contrast, under the comparative method, the Company’s date of initial application is the beginning of the earliest comparative period presented, and the Topic 842 transition guidance is then applied to all comparative periods presented. Further, under either transition method, the standard includes certain practical expedients intended to ease the burden of adoption. The Company adopted this new standard January 1, 2019 using the effective date method and elected certain practical expedients allowing the Company not to reassess: ● whether expired or existing contracts contain leases under the new definition of a lease; ● lease classification for expired or existing leases; and ● whether previously capitalized initial direct costs would qualify for capitalization under Topic 842. The Company also made the accounting policy decision not to recognize lease assets and liabilities for leases with a term of 12 months or less. The Company estimates the adoption of this standard on January 1, 2019 will result in the addition to our consolidated balance sheet of approximately $1.1 million in right-of-use assets and lease liabilities. The standard is not expected to have a material effect on the Company’s consolidated statements of cash flows or operations. Goodwill In January 2017, the FASB issued ASU 2017-04, which eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The standard is effective for fiscal periods beginning after December 15, 2019. Early adoption is permitted for interim and annual goodwill impairment testing dates after January 1, 2017. The Company early adopted this standard in December 2018. The adoption did not have a material effect on the Company’s Consolidated Financial Statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of Variable Interest Entities | (in thousands) As of December 31, 2018 2017 Cash and cash equivalents $ 97 $ 41 Total assets $ 1,641 $ 1,599 Total liabilities $ 1,662 $ 1,745 (in thousands) Year ended December 31, 2018 2017 Total net revenue $ 2,294 $ 1,597 Net income (loss) $ 111 $ (524 ) |
Impact of Adopting Topic 606 | (in thousands) Year ended December 31, 2018 prior U.S. GAAP Topic 606 impact as reported STATEMENT OF OPERATIONS Revenues Professional sales services $ 25,511 $ - $ 25,511 Total revenues 73,980 - 73,980 Gross Profit 41,124 - 41,124 Operating expenses Selling, general and administrative 44,083 (121 ) 43,962 Operating loss $ (3,845 ) $ 121 $ (3,724 ) (in thousands) As of December 31, 2018 prior U.S. GAAP Topic 606 impact as reported ASSETS Accounts and other receivables, net $ 11,028 $ - $ 11,028 Deferred commission expense $ 2,577 $ 8 $ 2,585 Other assets, net $ 3,252 $ 190 $ 3,442 LIABILITIES AND STOCKHOLDERS' EQUITY Deferred revenue - current portion $ 10,382 $ - $ 10,382 Deferred revenue - long term $ 7,704 $ - $ 7,704 Accumulated deficit $ (56,185 ) $ 261 $ (55,924 ) |
Disaggregation of Revenue | Year ended December 31, 2018 Year ended December 31, 2017 Professional sales Equipment Professional sales Equipment IT segment service segment segment Total IT segment service segment segment Total Network services $ 40,254 $ 40,254 $ 38,882 $ 38,882 Software sales and support 3,974 3,974 3,699 3,699 Commissions 25,511 25,511 26,443 26,443 Medical equipment sales 3,151 3,151 2,660 2,660 Medical equipment service 1,090 1,090 1,104 1,104 $ 44,228 $ 25,511 $ 4,241 $ 73,980 $ 42,581 $ 26,443 $ 3,764 $ 72,788 Year ended December 31, 2018 Year ended December 31, 2017 Professional sales Equipment Professional sales Equipment IT segment service segment segment Total IT segment service segment segment Total Revenue recognized over time $ 39,340 $ - $ 658 $ 39,998 $ 37,629 $ - $ 707 $ 38,336 Revenue recognized at a point in time 4,888 25,511 3,583 33,982 4,952 26,443 3,057 34,452 $ 44,228 $ 25,511 $ 4,241 $ 73,980 $ 42,581 $ 26,443 $ 3,764 $ 72,788 |
Transaction Price Allocated to Remaining Performance Obligations | Fiscal years of revenue recognition 2019 2020 2021 Thereafter Unfulfilled performance obligations $ 41,271 $ 26,087 $ 8,595 $ 6,278 |
Changes in Allowance for Doubtful Accounts and Commission Adjustments | (in thousands) Year ended December 31, 2018 2017 Beginning Balance $ 4,872 $ 4,159 Provision for losses on accounts receivable 460 157 Direct write-offs, net of recoveries (268 ) (212 ) Commission adjustments (1,070 ) 768 Ending Balance $ 3,994 $ 4,872 |
Common Stock Equivalents Excluded from Computation of Diluted Earnings Per Share | (in thousands) Year ended December 31, 2018 2017 Restricted common stock grants 2,388 4,204 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Segment Reporting [Abstract] | |
Summary Financial Information for Segments | (in thousands) Year ended December 31, 2018 2017 Revenues from external customers IT $ 44,228 $ 42,581 Professional sales service 25,511 26,443 Equipment 4,241 3,764 Total revenues $ 73,980 $ 72,788 Gross Profit IT $ 18,379 $ 17,623 Professional sales service 20,165 20,630 Equipment 2,580 2,478 Total gross profit $ 41,124 $ 40,731 Operating (loss) income IT $ (3,748 ) $ (3,375 ) Professional sales service 1,958 1,954 Equipment (812 ) (1,066 ) Corporate (1,122 ) (1,345 ) Total operating loss $ (3,724 ) $ (3,832 ) Depreciation and amortization IT $ 1,968 $ 1,822 Professional sales service 187 194 Equipment 367 410 Corporate - - Total depreciation and amortization $ 2,522 $ 2,426 Capital expenditures IT $ 2,496 $ 2,185 Professional sales service 4 127 Equipment 82 43 Corporate 4 19 Total cash capital expenditures $ 2,586 $ 2,374 December 31, 2018 December 31, 2017 Identifiable Assets IT $ 28,785 $ 28,320 Professional sales service 12,193 15,658 Equipment 6,992 7,830 Corporate 2,504 4,970 Total assets $ 50,474 $ 56,778 |
Revenues by Geographic Areas | (in thousands) Year ended December 31, 2018 2017 Domestic (United States) $ 71,279 $ 70,719 Non-domestic (foreign) 2,701 2,069 $ 73,980 $ 72,788 |
ACCOUNTS AND OTHER RECEIVABLES
ACCOUNTS AND OTHER RECEIVABLES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
Accounts and Other Receivables | (in thousands) December 31, 2018 December 31, 2017 Trade receivables $ 15,016 $ 18,056 Due from employees 6 41 Allowance for doubtful accounts and commission adjustments (3,994 ) (4,872 ) Accounts and other receivables, net $ 11,028 $ 13,225 |
INVENTORIES, NET (Tables)
INVENTORIES, NET (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories, Net of Reserves | (in thousands) December 31, 2018 December 31, 2017 Raw materials $ 577 $ 530 Work in process 388 449 Finished goods 1,018 1,376 $ 1,983 $ 2,355 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | (in thousands) December 31, 2018 December 31, 2017 Office, laboratory and other equipment $ 3,885 $ 2,953 Equipment furnished for customer or clinical uses 8,167 6,615 Furniture and fixtures 127 131 12,179 9,699 Less: accumulated depreciation and amortization (6,370 ) (4,980 ) Property and equipment, net $ 5,809 $ 4,719 |
GOODWILL AND OTHER INTANGIBLES
GOODWILL AND OTHER INTANGIBLES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Changes in Carrying Amount of Goodwill | Year ended December 31, 2018 2017 Beginning of year $ 17,471 $ 17,280 Foreign currency translation adjustment (162 ) 191 End of year $ 17,309 $ 17,471 |
Schedule of Other Intangible Assets | (in thousands) December 31, 2018 December 31, 2017 Customer-related Costs $ 5,831 $ 5,831 Accumulated amortization (3,083 ) (2,501 ) 2,748 3,330 Patents and Technology Costs 2,363 2,331 Accumulated amortization (1,532 ) (1,260 ) 831 1,071 Software Costs 2,346 1,819 Accumulated amortization (1,185 ) (966 ) 1,161 853 $ 4,740 $ 5,254 |
Amortization of Intangibles | Years ending December 31, (in thousands) 2019 1,017 2020 934 2021 858 2022 562 2023 328 Total $ 3,699 |
OTHER ASSETS (Tables)
OTHER ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Other Assets [Abstract] | |
Schedule of Other Assets | (in thousands) December 31, 2018 December 31, 2017 Deferred commission expense - noncurrent $ 1,978 $ 1,867 Trade receivables - noncurrent 630 968 Other, net of allowance for loss on loan receivable of $412 at December 31, 2018 and 2017 459 1,012 $ 3,067 $ 3,847 |
DEFERRED REVENUE (Tables)
DEFERRED REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Deferred Revenue Disclosure [Abstract] | |
Changes in Deferred Revenues | (in thousands) Year ended December 31, 2018 2017 Deferred revenue at beginning of year $ 23,066 $ 19,404 Net additions: Deferred extended service contracts 687 705 Deferred in-service and training 8 20 Deferred service arrangements 15 43 Deferred commission revenues 4,960 14,779 Recognized as revenue: Deferred extended service contracts (628 ) (661 ) Deferred in-service and training (5 ) (20 ) Deferred service arrangements (31 ) (45 ) Deferred commission revenues (9,986 ) (11,159 ) Deferred revenue at end of year 18,086 23,066 Less: current portion 10,382 15,540 Long-term deferred revenue at end of year $ 7,704 $ 7,526 |
ACCRUED EXPENSES AND OTHER LI_2
ACCRUED EXPENSES AND OTHER LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
Accrued Expenses and Other Liabilities | (in thousands) December 31, 2018 December 31, 2017 Accrued compensation $ 648 $ 1,181 Accrued expenses - other 2,092 2,207 Other liabilities 2,915 1,949 $ 5,655 $ 5,337 |
NOTES PAYABLE AND CAPITAL LEA_2
NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt and Capital Lease Obligations [Abstract] | |
Schedule of Debt and Lease Obligations | (in thousands) December 31, 2018 December 31, 2017 Line of credit $ 4,171 $ 3,393 Unsecured term loan 145 153 Note payable 14 - Notes payable - MedTech (net of $14 and $46 in debt issue costs at December 31, 2018 and 2017) 4,786 4,754 Notes payable - related parties 827 345 Capital lease obligations 588 208 Total debt and lease obligations 10,531 8,853 Less: current portion (including related parties) (9,886 ) (3,760 ) $ 645 $ 5,093 |
Schedule of Future Minimum Lease Payments | Years ending December 31, (in thousands) 2019 231 2020 146 2021 146 2022 120 2023 47 690 Portion representing interest (85 ) Portion representing executory costs (17 ) Total capital lease obligations $ 588 |
Schedule of Amounts Payable by the Company Under Various Debt and Capital Lease Obligations | (in thousands) Years ending December 31, Notes payable Capital leases Total 2019 9,712 $ 188 $ 9,900 2020 245 116 361 2021 - 126 126 2022 - 112 112 2023 - 46 46 Total $ 9,957 $ 588 $ 10,545 |
OPTION PLANS (Tables)
OPTION PLANS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Non-vested Restricted Shares | Shares Available for Future Issuance Unvested shares Weighted Average Grant Date Fair Value Balance at December 31, 2016 4,031,946 6,763,125 $ 0.16 Authorized - - $ - Granted (975,000 ) 975,000 $ 0.12 Vested - (3,380,437 ) $ 0.15 Forfeited 153,730 (153,730 ) $ 0.16 Balance at December 31, 2017 3,210,676 4,203,958 $ 0.16 Authorized - - $ - Granted (1,700,000 ) 1,700,000 $ 0.06 Vested - (3,125,317 ) $ 0.14 Forfeited 391,141 (391,141 ) $ 0.16 Balance at December 31, 2018 1,901,817 2,387,500 $ 0.12 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Geographical Breakdown of Income before Provision for Income Taxes | (in thousands) Year ended December 31, 2018 2017 Domestic $ (3,967 ) $ (4,161 ) Foreign (152 ) (244 ) Loss before provision for income taxes $ (4,119 ) $ (4,405 ) |
Provision for Income Taxes | (in thousands) Year ended December 31, 2018 2017 Current provision (benefit) Federal $ - $ (154 ) State 63 59 Foreign 35 13 Total current provision (benefit) 98 (82 ) Deferred provision (benefit) Federal (376 ) 168 State (107 ) 48 Foreign - - Total deferred provision (benefit) (483 ) 216 Total income tax provision (benefit) $ (385 ) $ 134 Effective income tax rate 9.35 % -3.04 % |
Reconciliation of Effective Income Tax Rate to Federal Statutory Rate | For the year ended December 31, 2018 December 31, 2017 % % Federal statutory rate 21.00 34.00 State income taxes (0.87 ) (1.34 ) Change in valuation allowance relating to operations (7.75 ) (42.38 ) Impact of federal statutory rate change - (6.44 ) Impact of federal statutory rate change on valuation allowance - 13.74 Foreign tax rate differential - (2.20 ) R&D credit (0.22 ) - Nondeductible expenses (3.09 ) (1.93 ) Minimum tax credit refundable - 3.51 Other 0.28 - 9.35 (3.04 ) |
Deferred Tax Assets and Liabilities | (in thousands) December 31, 2018 December 31, 2017 Deferred Tax Assets: Net operating loss carryforwards $ 12,402 $ 10,623 Amortization 304 262 Stock-based compensation 16 49 Allowance for doubtful accounts 88 36 Reserve for obsolete inventory 239 235 Tax credits 429 438 Expense accruals 392 579 Excess interest carryforwards 171 - Deferred revenue 942 893 Total gross deferred taxes 14,983 13,115 Valuation allowance (12,077 ) (11,758 ) Net deferred tax assets 2,906 1,357 Deferred Tax Liabilities: Deferred commissions (245 ) (224 ) Goodwill (927 ) (668 ) Differences in timing of revenue recognition (124 ) (112 ) Depreciation (1,360 ) (573 ) Total deferred tax liabilities (2,656 ) (1,577 ) Total deferred tax assets (liabilities) 250 (220 ) Recorded as: Non-current deferred tax assets 374 - Non-current deferred tax liabilities (124 ) (220 ) Total deferred tax assets (liabilities) $ 250 $ (220 ) |
Valuation Allowance Activity | (in thousands) 2018 2017 Valuation allowance, January 1, $ 11,758 $ 15,695 Change in valuation allowance 319 (3,937 ) Valuation allowance, December 31, $ 12,077 $ 11,758 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future Rental Payments under Operating Leases | For the years ending December 31, (in thousands) Vehicles Facilities Total 2019 $ 289 $ 380 $ 669 2020 195 230 425 2021 53 76 129 2022 - 55 55 Total $ 537 $ 741 $ 1,278 |
DESCRIPTION OF BUSINESS AND G_2
DESCRIPTION OF BUSINESS AND GOING CONCERN ASSESSMENT (Details Narrative) | 12 Months Ended |
Dec. 31, 2018Segment | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of business segments | 3 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash and cash equivalents | $ 2,668 | $ 5,245 | $ 7,087 |
Total net revenue | 73,980 | 72,788 | |
Net (loss) income | (3,734) | (4,539) | |
Biox [Member] | |||
Cash and cash equivalents | 97 | 41 | |
Total assets | 1,641 | 1,599 | |
Total liabilities | 1,662 | 1,745 | |
Total net revenue | 2,294 | 1,597 | |
Net (loss) income | $ 111 | $ (524) |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues | ||
Total revenues | $ 73,980 | $ 72,788 |
Gross Profit | 41,124 | 40,731 |
Operating expenses | ||
Selling, general and administrative | 43,962 | 43,618 |
Operating loss | (3,724) | (3,832) |
ASSETS | ||
Accounts and other receivables, net | 11,028 | 13,225 |
Deferred commission expense | 2,585 | 3,649 |
Other assets, net | 3,067 | 3,847 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Deferred revenue - current portion | 10,382 | |
Deferred revenue - long term | 7,704 | |
Accumulated deficit | (55,924) | (52,329) |
Prior U.S. GAAP [Member] | ||
Revenues | ||
Total revenues | 73,980 | |
Gross Profit | 41,124 | |
Operating expenses | ||
Selling, general and administrative | 44,083 | |
Operating loss | (3,845) | |
ASSETS | ||
Accounts and other receivables, net | 11,028 | |
Deferred commission expense | 2,577 | |
Other assets, net | 3,252 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Deferred revenue - current portion | 10,382 | |
Deferred revenue - long term | 7,704 | |
Accumulated deficit | (56,185) | |
Topic 606 Impact [Member] | ||
Revenues | ||
Total revenues | 0 | |
Gross Profit | 0 | |
Operating expenses | ||
Selling, general and administrative | (121) | |
Operating loss | 121 | |
ASSETS | ||
Accounts and other receivables, net | 0 | |
Deferred commission expense | 8 | |
Other assets, net | 190 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Deferred revenue - current portion | 0 | |
Deferred revenue - long term | 0 | |
Accumulated deficit | 261 | |
Professional sales services | ||
Revenues | ||
Total revenues | 25,511 | 26,443 |
Professional sales services | Prior U.S. GAAP [Member] | ||
Revenues | ||
Total revenues | 25,511 | |
Professional sales services | Topic 606 Impact [Member] | ||
Revenues | ||
Total revenues | 0 | |
Professional Sales Service Segment [Member] | ||
Revenues | ||
Total revenues | 25,511 | |
Gross Profit | 20,165 | 20,630 |
Operating expenses | ||
Operating loss | $ 1,958 | $ 1,954 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue | $ 73,980 | $ 72,788 |
Network Services [Member] | ||
Revenue | 40,254 | 38,882 |
Software Sales and Support [Member] | ||
Revenue | 3,974 | 3,699 |
Commissions [Member] | ||
Revenue | 25,511 | 26,443 |
Medical Equipment Sales [Member] | ||
Revenue | 3,151 | 2,660 |
Medical Equipment Service [Member] | ||
Revenue | 1,090 | 1,104 |
Managed IT systems and services | ||
Revenue | 44,228 | 42,581 |
Managed IT systems and services | Network Services [Member] | ||
Revenue | 40,254 | 38,882 |
Managed IT systems and services | Software Sales and Support [Member] | ||
Revenue | 3,974 | 3,699 |
Managed IT systems and services | Commissions [Member] | ||
Revenue | 0 | 0 |
Managed IT systems and services | Medical Equipment Sales [Member] | ||
Revenue | 0 | 0 |
Managed IT systems and services | Medical Equipment Service [Member] | ||
Revenue | 0 | 0 |
Professional sales services | ||
Revenue | 25,511 | 26,443 |
Professional sales services | Network Services [Member] | ||
Revenue | 0 | 0 |
Professional sales services | Software Sales and Support [Member] | ||
Revenue | 0 | 0 |
Professional sales services | Commissions [Member] | ||
Revenue | 25,511 | 26,443 |
Professional sales services | Medical Equipment Sales [Member] | ||
Revenue | 0 | 0 |
Professional sales services | Medical Equipment Service [Member] | ||
Revenue | 0 | 0 |
Equipment sales and services | ||
Revenue | 4,241 | 3,764 |
Equipment sales and services | Network Services [Member] | ||
Revenue | 0 | 0 |
Equipment sales and services | Software Sales and Support [Member] | ||
Revenue | 0 | 0 |
Equipment sales and services | Commissions [Member] | ||
Revenue | 0 | 0 |
Equipment sales and services | Medical Equipment Sales [Member] | ||
Revenue | 3,151 | 2,660 |
Equipment sales and services | Medical Equipment Service [Member] | ||
Revenue | $ 1,090 | $ 1,104 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue | $ 73,980 | $ 72,788 |
Revenue Recognized over Time [Member] | ||
Revenue | 39,998 | 38,336 |
Revenue Recognized at a Point in Time [Member] | ||
Revenue | 33,982 | 34,452 |
Managed IT systems and services | ||
Revenue | 44,228 | 42,581 |
Managed IT systems and services | Revenue Recognized over Time [Member] | ||
Revenue | 39,340 | 37,629 |
Managed IT systems and services | Revenue Recognized at a Point in Time [Member] | ||
Revenue | 4,888 | 4,952 |
Professional sales services | ||
Revenue | 25,511 | 26,443 |
Professional sales services | Revenue Recognized over Time [Member] | ||
Revenue | 0 | 0 |
Professional sales services | Revenue Recognized at a Point in Time [Member] | ||
Revenue | 25,511 | 26,443 |
Equipment sales and services | ||
Revenue | 4,241 | 3,764 |
Equipment sales and services | Revenue Recognized over Time [Member] | ||
Revenue | 658 | 707 |
Equipment sales and services | Revenue Recognized at a Point in Time [Member] | ||
Revenue | $ 3,583 | $ 3,057 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) $ in Thousands | Dec. 31, 2018USD ($) |
2019 | |
Unfulfilled performance obligations | $ 41,271 |
2020 | |
Unfulfilled performance obligations | 26,087 |
2021 | |
Unfulfilled performance obligations | 8,595 |
Thereafter | |
Unfulfilled performance obligations | $ 6,278 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Beginning Balance | $ 4,872 | $ 4,159 |
Provision for losses on accounts receivable | 460 | 157 |
Direct write-offs, net of recoveries | (268) | (212) |
Commission adjustments | (1,070) | 768 |
Ending Balance | $ 3,994 | $ 4,872 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 6) - shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Restricted Stock [Member] | ||
Common stock equivalents excluded from computation of diluted earnings per share | 2,388 | 4,204 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Restricted shares of common stock granted | 1,700,000 | 975,000 |
Fair value of shares vested | $ 385 | $ 467 |
Weighted average grant date fair value | $ 0.06 | $ 0.12 |
Share-based compensation expense | $ 313 | $ 514 |
Unrecognized expense related to existing share-based arrangements | 207 | |
FDIC uninsured amount | 519 | 709 |
Capitalized software development costs | 527 | 398 |
Foreign currency translation gain (loss) | $ (257) | $ 271 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Total revenues | $ 73,980 | $ 72,788 |
Total gross profit | 41,124 | 40,731 |
Total operating (loss) income | (3,724) | (3,832) |
Depreciation and amortization | 2,522 | 2,426 |
Total cash capital expenditures | 2,586 | 2,374 |
Identifiable Assets | 50,474 | 56,778 |
Information Technology Segment [Member] | ||
Total revenues | 44,228 | 42,581 |
Total gross profit | 18,379 | 17,623 |
Total operating (loss) income | (3,748) | (3,375) |
Depreciation and amortization | 1,968 | 1,822 |
Total cash capital expenditures | 2,496 | 2,185 |
Identifiable Assets | 28,785 | 28,320 |
Professional Sales Service Segment [Member] | ||
Total revenues | 25,511 | 26,443 |
Total gross profit | 20,165 | 20,630 |
Total operating (loss) income | 1,958 | 1,954 |
Depreciation and amortization | 187 | 194 |
Total cash capital expenditures | 4 | 127 |
Identifiable Assets | 12,193 | 15,658 |
Equipment Segment [Member] | ||
Total revenues | 4,241 | 3,764 |
Total gross profit | 2,580 | 2,478 |
Total operating (loss) income | (812) | (1,066) |
Depreciation and amortization | 367 | 410 |
Total cash capital expenditures | 82 | 43 |
Identifiable Assets | 6,992 | 7,830 |
Corporate [Member] | ||
Total operating (loss) income | (1,122) | (1,345) |
Depreciation and amortization | 0 | 0 |
Total cash capital expenditures | 4 | 19 |
Identifiable Assets | $ 2,504 | $ 4,970 |
SEGMENT REPORTING (Details 1)
SEGMENT REPORTING (Details 1) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Total revenues | $ 73,980 | $ 72,788 |
UNITED STATES | ||
Total revenues | 71,279 | 70,719 |
Non-US [Member] | ||
Total revenues | $ 2,701 | $ 2,069 |
SEGMENT REPORTING (Details Narr
SEGMENT REPORTING (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounts and other receivables | $ 11,028 | $ 13,225 |
GE Healthcare [Member] | Sales Revenue, Net [Member] | ||
Concentration risk percentage | 34.00% | 36.00% |
GE Healthcare [Member] | Accounts and Other Receivables [Member] | ||
Concentration risk percentage | 66.00% | 67.00% |
Accounts and other receivables | $ 7,200 | $ 8,900 |
ACCOUNTS AND OTHER RECEIVABLE_2
ACCOUNTS AND OTHER RECEIVABLES (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Receivables [Abstract] | ||
Trade receivables | $ 15,016 | $ 18,056 |
Due from employees | 6 | 41 |
Allowance for doubtful accounts and commission adjustments | (3,994) | (4,872) |
Accounts and other receivables, net | $ 11,028 | $ 13,225 |
INVENTORIES, NET (Details)
INVENTORIES, NET (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 577 | $ 530 |
Work in process | 388 | 449 |
Finished goods | 1,018 | 1,376 |
Inventories, net | $ 1,983 | $ 2,355 |
INVENTORIES, NET (Details Narra
INVENTORIES, NET (Details Narrative) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Reserves for slow moving inventories | $ 636 | $ 746 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Property and equipment, gross | $ 12,179 | $ 9,699 |
Less: accumulated depreciation | (6,370) | (4,980) |
Property and equipment, net | 5,809 | 4,719 |
Assets under capital lease | 915 | 387 |
Accumulated amortization of assets under capital lease | (250) | (103) |
Office, Laboratory and Other Equipment [Member] | ||
Property and equipment, gross | 3,885 | 2,953 |
Assets under capital lease | 855 | 387 |
Equipment furnished for customer or clinical uses [Member] | ||
Property and equipment, gross | 8,167 | 6,615 |
Assets under capital lease | 60 | 0 |
Furniture and Fixtures [Member] | ||
Property and equipment, gross | $ 127 | $ 131 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 1,489 | $ 1,290 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill, Beginning of year | $ 17,471 | $ 17,280 |
Foreign currency translation adjustment | (162) | 191 |
Goodwill, End of year | $ 17,309 | $ 17,471 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLES (Details 1) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Intangible assets, net | $ 4,740 | $ 5,254 |
Customer-Related [Member] | ||
Costs | 5,831 | 5,831 |
Accumulated amortization | (3,083) | (2,501) |
Intangible assets, net | 2,748 | 3,330 |
Patents and Technology [Member] | ||
Costs | 2,363 | 2,331 |
Accumulated amortization | (1,532) | (1,260) |
Intangible assets, net | 831 | 1,071 |
Software [Member] | ||
Costs | 2,346 | 1,819 |
Accumulated amortization | (1,185) | (966) |
Intangible assets, net | $ 1,161 | $ 853 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLES (Details 2) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2019 | $ 1,017 | |
2020 | 934 | |
2021 | 858 | |
2022 | 562 | |
2023 | 328 | |
Total | $ 4,740 | $ 5,254 |
GOODWILL AND OTHER INTANGIBLE_5
GOODWILL AND OTHER INTANGIBLES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 1,033 | $ 1,136 |
OTHER ASSETS (Details)
OTHER ASSETS (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Other Assets [Abstract] | ||
Deferred commission expense - noncurrent | $ 1,978 | $ 1,867 |
Trade receivables - noncurrent | 630 | 968 |
Other, net of allowance for loss on loan receivable of $412 at December 31, 2018 and 2017 | 459 | 1,012 |
Total | $ 3,067 | $ 3,847 |
DEFERRED REVENUE (Details)
DEFERRED REVENUE (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Deferred revenue at beginning of year | $ 23,066 | $ 19,404 |
Additions | ||
Recognized as revenue | ||
Deferred revenue at end of year | 18,086 | 23,066 |
Less: current portion | 10,382 | 15,540 |
Long-term deferred revenue at end of year | 7,704 | 7,526 |
Extended Service Contracts [Member] | ||
Additions | 687 | 705 |
Recognized as revenue | (628) | (661) |
In Service and Training [Member] | ||
Additions | 8 | 20 |
Recognized as revenue | (5) | (20) |
Service Arrangements [Member] | ||
Additions | 15 | 43 |
Recognized as revenue | (31) | (45) |
Commission Revenues [Member] | ||
Additions | 4,960 | 14,779 |
Recognized as revenue | $ (9,986) | $ (11,159) |
ACCRUED EXPENSES AND OTHER LI_3
ACCRUED EXPENSES AND OTHER LIABILITIES (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Accrued compensation | $ 648 | $ 1,181 |
Accrued expenses - other | 2,092 | 2,207 |
Other liabilities | 2,915 | 1,949 |
Accrued expenses and other liabilities | $ 5,655 | $ 5,337 |
DEBT AND LEASE OBLIGATIONS (Det
DEBT AND LEASE OBLIGATIONS (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Debt and lease obligations | $ 10,531 | $ 8,853 |
Less: current portion (including related parties) | (9,886) | (3,760) |
Total | 645 | 5,093 |
Note Payable [Member] | ||
Debt and lease obligations | 14 | 0 |
Notes Payable-MedTechnology Investments LLC [Member] | ||
Debt and lease obligations | 4,786 | 4,754 |
Notes Payable-Related Parties [Member] | ||
Debt and lease obligations | 827 | 345 |
Line of Credit [Member] | ||
Debt and lease obligations | 4,171 | 3,393 |
Unsecured Debt [Member] | ||
Debt and lease obligations | 145 | 153 |
Capital Lease Obligations [Member] | ||
Debt and lease obligations | $ 588 | $ 208 |
DEBT AND LEASE OBLIGATIONS (D_2
DEBT AND LEASE OBLIGATIONS (Details 1) $ in Thousands | Dec. 31, 2018USD ($) |
Debt and Capital Lease Obligations [Abstract] | |
2019 | $ 231 |
2020 | 146 |
2021 | 146 |
2022 | 120 |
2023 | 47 |
Total | 690 |
Portion representing interest | (85) |
Portion representing executory costs | (17) |
Total capital lease obligations | $ 588 |
DEBT AND LEASE OBLIGATIONS (D_3
DEBT AND LEASE OBLIGATIONS (Details 2) $ in Thousands | Dec. 31, 2018USD ($) |
2019 | $ 9,900 |
2020 | 361 |
2021 | 126 |
2022 | 112 |
2023 | 46 |
Total | 10,545 |
Loans Payable [Member] | |
2019 | 9,712 |
2020 | 245 |
2021 | 0 |
2022 | 0 |
2023 | 0 |
Total | 9,957 |
Capital Lease Obligations [Member] | |
2019 | 188 |
2020 | 116 |
2021 | 126 |
2022 | 112 |
2023 | 46 |
Total | $ 588 |
OPTION PLANS (Details)
OPTION PLANS (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Weighted average grant date fair value | ||
Granted | $ 0.06 | $ 0.12 |
Restricted Stock [Member] | ||
Shares available for future issuance | ||
Balance, beginning of period | 3,210,676 | 4,031,946 |
Authorized | 0 | 0 |
Granted | (1,700,000) | (975,000) |
Forfeited | 391,141 | 153,730 |
Balance, end of period | 1,901,817 | 3,210,676 |
Unvested shares | ||
Balance, beginning of period | 4,203,958 | 6,763,125 |
Granted | 1,700,000 | 975,000 |
Vested | (3,125,317) | (3,380,437) |
Forfeited | (391,141) | (153,730) |
Balance, end of period | 2,387,500 | 4,203,958 |
Weighted average grant date fair value | ||
Balance, beginning of period | $ 0.16 | $ 0.16 |
Granted | 0.06 | 0.12 |
Vested | 0.14 | 0.15 |
Forfeited | 0.16 | 0.16 |
Balance, end of period | $ 0.12 | $ 0.16 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Domestic | $ (3,967) | $ (4,161) |
Foreign | (152) | (244) |
Loss before income taxes | $ (4,119) | $ (4,405) |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Current (benefit) provision | ||
Federal | $ 0 | $ (154) |
State | 63 | 59 |
Foreign | 35 | 13 |
Total current (benefit) provision | 98 | (82) |
Deferred provision | ||
Federal | (376) | 168 |
State | (107) | 48 |
Foreign | 0 | 0 |
Total deferred provision | (483) | 216 |
Total provision for income taxes | $ (385) | $ 134 |
Effective income tax rate | 9.35% | (3.04%) |
INCOME TAXES (Details 2)
INCOME TAXES (Details 2) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Federal statutory rate | 21.00% | 34.00% |
State income taxes | (0.87%) | (1.34%) |
Change in valuation allowance relating to operations | (7.75%) | (42.38%) |
Impact of federal tax rate decrease | 0.00% | (6.44%) |
Impact of federal statutory rate change on valuation allowance | 0.00% | 13.74% |
Foreign tax rate differential | 0.00% | (2.20%) |
R&D credit | (0.22%) | 0.00% |
Nondeductible expenses | (3.09%) | (1.93%) |
Minimum tax credit refundable | 0.00% | 3.51% |
Other | 0.28% | 0.00% |
Total | 9.35% | (3.04%) |
INCOME TAXES (Details 3)
INCOME TAXES (Details 3) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred Tax Assets | |||
Net operating loss carryforwards | $ 12,402 | $ 10,623 | |
Amortization | 304 | 262 | |
Stock-based compensation | 16 | 49 | |
Allowance for doubtful accounts | 88 | 36 | |
Reserve for obsolete inventory | 239 | 235 | |
Tax credits | 429 | 438 | |
Expense accruals | 392 | 579 | |
Excess interest carryforwards | 171 | 0 | |
Deferred revenue | 942 | 893 | |
Total gross deferred taxes | 14,983 | 13,115 | |
Valuation allowance | (12,077) | (11,758) | $ (15,695) |
Net deferred tax assets | 2,906 | 1,357 | |
Deferred Tax Liabilities | |||
Deferred commissions | (245) | (224) | |
Goodwill | (927) | (668) | |
Differences in timing of revenue recognition | (124) | (112) | |
Depreciation | (1,360) | (573) | |
Total deferred tax liabilities | (2,656) | (1,577) | |
Total deferred tax assets (liabilities) | 250 | (220) | |
Recorded as | |||
Non-current deferred tax assets | 374 | 0 | |
Non-current deferred tax liabilities | (124) | (220) | |
Total deferred tax assets (liabilities) | $ 250 | $ (220) |
INCOME TAXES (Details 4)
INCOME TAXES (Details 4) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Valuation allowance, beginning of period | $ 11,758 | $ 15,695 |
Change in valuation allowance | 319 | (3,937) |
Valuation allowance, end of period | $ 12,077 | $ 11,758 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income tax expense | $ (385) | $ 134 | |
Deferred tax assets | 14,983 | 13,115 | |
Increase (decrease) in deferred tax assets | (319) | 3,937 | |
Valuation allowance | 12,077 | $ 11,758 | $ 15,695 |
Net operating loss carryforwards | $ 46,000 | ||
Minimum [Member] | |||
Net operating loss carryforwards expiration date | Dec. 31, 2020 | ||
Maximum [Member] | |||
Net operating loss carryforwards expiration date | Dec. 31, 2037 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands | Dec. 31, 2018USD ($) |
2019 | $ 669 |
2020 | 425 |
2021 | 129 |
2022 | 55 |
Total | 1,278 |
Vehicles [Member] | |
2019 | 289 |
2020 | 195 |
2021 | 53 |
2022 | |
Total | 537 |
Facilities [Member] | |
2019 | 380 |
2020 | 230 |
2021 | 76 |
2022 | 55 |
Total | $ 741 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rental expense | $ 816 | $ 770 |
401(k) PLANS (Details)
401(k) PLANS (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Retirement Benefits [Abstract] | ||
Company's discretionary annual contributions | $ 96 | $ 116 |