10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

[X] 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

[ ] 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-18105

 

VASO CORPORATION

(Exact name of registrant as specified in Its Charter)

Delaware	11-2871434
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

137 Commercial Street, Plainview, New York	11803
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (516) 997-4600

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

Title of each class Trading Symbol Name of each exchange on which registered

Securities registered under Section 12(g) of the Act:

Common Stock, $.001 par value

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ]                        No [ X ]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes [ ]                        No [ X ]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ]                        No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)

Yes [ X] No [ ]

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

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Smaller reporting company [X]

Emerging growth company [ ]

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

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

The aggregate market value of common stock held by non-affiliates was approximately $1.9 million based on the closing sales price of the common stock as quoted on the OTC PK on June 28, 2020.

At April 23, 2021, the number of shares outstanding of the issuer's common stock was 174,936,212.

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VASO CORPORATION

INDEX TO FORM 10-K

PART I	1
ITEM 1 – BUSINESS	1
ITEM 1A - RISK FACTORS	6
ITEM 2 – PROPERTIES	9
PART II	10
ITEM 5 –MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	10
ITEM 7 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	10
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	17
ITEM 9A - CONTROLS AND PROCEDURES	17
PART III	18
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	18
ITEM 11 - EXECUTIVE COMPENSATION	20
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	23
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	24
ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES	26
PART IV	27
ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	27
SIGNATURES	28

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	F-2
CONSOLIDATED BALANCE SHEETS	F-4
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS	F-5
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY	F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS	F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	F-8

EXHIBITS

Exhibit 31  Certifications Pursuant to Securities Exchange Act Rule 13A-14(A)/15D-14(A)

Exhibit 32  Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

PART I

ITEM 1 – BUSINESS

Except for historical information contained in this report, the matters discussed are forward-looking statements that involve risks and uncertainties. When used in this report, words such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “may”, “plans”, “potential” and “intends” and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Among the factors that could cause actual results to differ materially are the following: the effect of business and economic conditions, including the current COVID-19 pandemic; the effect of the dramatic changes taking place in IT and healthcare; continuation of the GEHC agreement; the impact of competitive technology and products and their pricing; medical insurance reimbursement policies; unexpected manufacturing or supplier problems; unforeseen difficulties and delays in product development programs; the actions of regulatory authorities and third-party payers in the United States and overseas; and the risk factors reported from time to time in the Company’s SEC reports. The Company undertakes no obligation to update forward-looking statements as a result of future events or developments.

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

General 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.

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

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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

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

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Managed diagnostic imaging applications (channel partner of select vendors of healthcare IT products).

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Managed network infrastructure (routers, switches and other core equipment).

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Managed network transport (FCC licensed carrier reselling 175+ facility partners).

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Managed security services.

VasoTechnology uses a combination of proprietary technology, methodology and best-in-class third-party applications to deliver its value proposition.

VasoHealthcare

VasoHealthcare commenced operations in 2010, in conjunction with the Company’s execution of its exclusive sales representation agreement with GEHC, which is the healthcare business division of the General Electric Company (“GE”), to further the sale of certain medical capital equipment in certain domestic market segments.

1

VasoHealthcare’s current offering consists of:

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GEHC diagnostic imaging capital equipment.

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GEHC service agreements for the above equipment.

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GEHC training services for use of the above equipment.

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GEHC and third-party financial services for the above equipment.

VasoHealthcare has built a team of over 80 highly experienced sales professionals who utilize proprietary sales management and analytic tools to manage the complete sales process and to increase market penetration.

VasoMedical

The proprietary medical equipment business now all under VasoMedical dates back to 1995 when the Company began the proprietary Enhanced External Counterpulsation (EECP®) technology in the United States and has since diversified to include other medical hardware and software. 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. These devices primarily consist of cardiovascular diagnostic and therapeutic systems, including:

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Biox™ series Holter monitors and ambulatory blood pressure recorders.

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ARCS™ series analysis, reporting and communication software for ECG and blood pressure signals.

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MobiCare™ multi-parameter wireless vital-sign monitoring system.

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EECP® therapy systems for non-invasive, outpatient treatment of ischemic heart disease.

This segment uses its extensive cardiovascular device knowledge coupled with its engineering resources to cost effectively create and market its proprietary technology. It sells and services its products to domestic customers directly and sells and/or services its products in the international market mainly through independent distributors.

Historical Background

Vaso Corporation was incorporated in Delaware in July 1987. For most of its history, the Company primarily was a single-product company designing, manufacturing, marketing and servicing its proprietary Enhanced External Counterpulsation, 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, and continues to use the original name VasoMedical for its proprietary medical device subsidiary.

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 GE 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”) was for three years ending June 30, 2013; it has been extended several times with the current extension through December 31, 2022, subject to earlier termination under certain conditions.

In June 2014, the Company began its IT segment business by concluding 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 business focuses primarily on customer segments currently served by VasoHealthcare. 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 business segment by acquiring all of the assets of NetWolves, LLC and its affiliates, including the membership interests in NetWolves Network Services, LLC (collectively, “NetWolves”), pursuant to an asset purchase agreement. NetWolves designs and delivers efficient and cost-effective multi-network and multi-technology solutions as a managed network provider, as well as 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.

2

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 owned or controlled 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 was a variable interest entity (“VIE”) controlled by FGE through certain contracts and an option to acquire all the shares of Biox by FGE’s wholly owned subsidiary Gentone, and in March 2019 Gentone exercised its option to acquire all of the shares of Biox. In August 2014, the Company through Gentone 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 local 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 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. On May 20, 2020, the Company closed on the sale of 51% of the capital stock of its wholly-owned subsidiary EECP Global Corporation (“EECP Global”) to PSK for $1,150,000. EECP Global was formed in September 2019 to hold all the assets and liabilities of its EECP business. Concurrently with the closing of the transaction, the Company signed a three-year Management Service Agreement with EECP Global to provide management service for the business and operation of EECP Global in the United States. Pursuant to the agreement, EECP Global reimburses the Company all direct expenses and pays a management fee starting April 1, 2020, the effective date of the sale.

Management

The Company currently bases its headquarters in Plainview, Long Island, NY pursuant to a lease which expires in September 2022. Reporting to the Board of Directors, corporate officers of the Company include the President and Chief Executive Officer (“CEO”), Co-Chief Financial Officer and Secretary, Chief Operating Officer (“COO”), and Co-Chief Financial Officer and Treasurer.

The management of the Company’s IT segment is led by the COO of the Company, who is also the President of VasoTechnology and NetWolves, which is based in Tampa, FL. Our VasoHealthcare IT VAR business is organized as a part of VasoTechnology and is also led by the COO, supported by several software solution sales and implementation specialists, based in Nashville, TN. The business unit works with our VasoHealthcare diagnostic imaging equipment sales team to generate leads and potential clients for the software solutions products and works with NetWolves sales and technical teams for comprehensive IT product and service offerings.

In the professional sales services segment, we sell GEHC diagnostic imaging products to our assigned market through a nationwide team of approximately 65 sales employees led by several regional managers and an executive team who report to the President of VasoHealthcare. The operation is also supported by in-house administrative, analytic and other support staff, as well as applicable GEHC employees.

The equipment segment is under the direct supervision of the CEO of the Company. Sales and marketing efforts in the domestic market are led by a Vice President of national sales and service at Vasomedical Solutions, and the managers of our China subsidiaries are in charge of the development and production of all our proprietary products and marketing and sales in the international markets. We sell our Biox™ series and other products in China by a group of sales managers as well as through distributors covering various regions of China and other international geographies.

Competition

In the U.S. diagnostic imaging market where we sell GEHC products, our main competitors include Siemens, Philips, Canon, and Hologic. Key competitive factors in the market include price, quality, finance availability, delivery speed, service and support, innovation, distribution network, breadth of product and service offerings and brand name recognition. GEHC is a leading competitor in this market.

In the IT segment, our primary competitors in the healthcare IT VAR business are Agfa Healthcare, McKesson, Philips, Carestream Health and other independent software providers. Key competitive factors are brand recognition, quality, radiology workflow solutions, scalability and service and support capability. In the managed network services business our primary competition includes, but is not limited to, organizations who have a presence in most of the major markets for the following products and services: network services, managed services, security services and healthcare applications. Several of those competitors, many of which are our vendors, are: Verizon, AT&T, CenturyLink, IBM and Cisco Resellers, Siemens, Epic, small regional IT integrators and large company internal IT departments.

3

In the ambulatory monitoring system business, there are numerous competitors of various size and strength. The Biox™ series is among the few from China with CE Mark certification for Europe, CFDA approval for China, US FDA clearances as well as Brazilian Agencia Nacional de Vigilancia Sanitaria (ANVISA) approval, which are among the most important qualifications to market and sell the products around the world.

Regulations on Medical Devices

As a medical device manufacturer and marketer, we are subject to extensive regulation by numerous government regulatory agencies, including the US FDA and similar foreign agencies. We are required to comply with applicable laws, regulations and standards governing the development, preclinical and clinical testing, manufacturing, quality testing, labeling, promotion, import, export, and distribution of our medical devices.

Compliance with Regulations in the United States

The Company has received appropriate US FDA premarket notification (510(k)) clearance for all its products marketed and sold in the United States, including EECP® therapy systems and Biox™ ambulatory monitoring systems and analysis and report software. We continue to seek US FDA clearance or approval for new products prior to their introduction to the US market.

We are subject to other US FDA regulations that apply prior to and after a product is commercially released. We also are subject to periodic and random inspections by the US FDA for compliance with the current Good Manufacturing Practice, or cGMP, requirements and Quality System Regulation. The US FDA also enforces post-marketing controls that include the requirement to submit medical device reports to the agency when a manufacturer becomes aware of information suggesting that any adverse events are related to its marketed products. The FDA relies on medical device reports to identify product problems and utilizes these reports to determine, among other things, whether it should exercise its enforcement powers. The FDA also may require post-market surveillance studies for specified devices.

We are subject to the Federal Food, Drug, and Cosmetic Act’s, or FDCA’s, general controls, including establishment registration, device listing, and labeling requirements.

The sales and advertising of our products is subject to regulation by the Federal Trade Commission, or FTC. The FTC Act prohibits unfair or deceptive acts or practices in or affecting commerce. Violations of the FTC Act, such as failure to have substantiation for product claims, would subject us to a variety of enforcement actions, including compulsory process, cease and desist orders and injunctions, which can require, among other things, limits on advertising, corrective advertising, consumer redress and restitution, as well as substantial fines or other penalties.

As a medical device sales channel partner and product reseller to healthcare facilities, we are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry, including anti-kickback and false claims laws.

Foreign Regulation

In most countries where we seek to export our medical devices, a local regulatory clearance must be obtained. The regulatory review process varies from country to country and can be complex, costly, uncertain, and time-consuming. Our medical devices are all manufactured in accordance with ISO 13485 (Medical device – Quality management systems – Requirement for regulatory purpose), an internationally agreed standard that sets out the requirements for a quality management system specific to the medical devices industry. All our current medical devices have obtained necessary clearances or approvals prior to their release in the appropriate jurisdictions, including CE marking certification for European Union countries, China FDA (CFDA) approval for mainland China, Korean FDA (KFDA) approval for South Korea, Agência Nacional de Vigilância Sanitária (ANVISA) approval for Brazil, Taiwan FDA (TFDA) for Taiwan, and the Saudi SFDA (MDMA) for the Kingdom of Saudi Arabia.

We are also subject to audits by organizations authorized by foreign countries to determine compliance with laws, regulations and standards that apply to the commercialization of our products in those markets. Examples include auditing by a European Union Notified Body organization (authorized by a member state’s Competent Authority) to determine conformity with the Medical Device Directives (MDD) and by an organization authorized by the Brazilian government to determine conformity with the ANVISA requirement.

Patient Privacy

Federal and state laws protect the confidentiality of certain patient health information, including patient records, and restrict the use and disclosure of that protected information. The U.S. Department of Health and Human Services (HHS) published patient privacy rules under the Health Insurance Portability and Accountability Act of 1996 (HIPAA privacy rule) and the regulation was finalized in October 2002. Currently, the HIPAA privacy rule affects us only indirectly in that patient data that we access, collect and analyze may include protected health information. Additionally, we have signed some Business Associate Agreements with Covered Entities that contractually bind us to protect private health information, consistent with the HIPAA privacy rule’s requirements. We do not expect the costs and impact of the HIPAA privacy rule to be material to our business.

4

Regulations in the IT Business

As a reseller of telecommunication services and network solutions provider, our products and services are subject to federal, state and local regulations. These regulations govern, in part, our rates and the way we conduct our business, including the requirement to offer telecommunications services pursuant to nondiscriminatory rates, terms, and conditions, the obligation to safeguard the confidentiality of customer proprietary network information, as well as the obligation to maintain specialized records and file reports with the Federal Communications Commission  and state regulatory authorities. While we believe we are in compliance with laws and regulations in jurisdictions where we do business, we continue to monitor and assess our compliance.

The Federal Communications Commission (“FCC”) exercises jurisdiction over services and regulates interstate and international communications in all 50 states, the District of Columbia and U.S territories. As an independent U.S. government agency overseen by Congress, the commission is the United States' primary authority for communications laws, regulation and technological innovation.

We maintain Certificates of Public Convenience and Necessity in all 50 states, which enable us to provide services within each state. We are therefore subject to regulation from the Public Utility Commissions in each state.

Intellectual Properties

In addition to other methods of protecting our proprietary technology, know-how and show-how as well as trade secrets, we pursue a policy of seeking patent protection, both in the US and abroad, for our proprietary technologies including those in Biox™ and MobiCare™ products. Moreover, trademarks have been registered for the names “Vaso”, “Vasomedical”, “VasoGlobal”, “VasoSolutions”, “VasoHealthcare”.

Through our China-based subsidiaries, we own thirty invention and utility patents in China that expire at various times through 2032, as well as fourteen software copyright certificates in China related to proprietary technologies in physiological data acquisition, analysis and reporting.  We also maintain five registered trademarks in China for our products.

Through our NetWolves subsidiary we hold a patent for Secure and Remote Monitoring Management (“SRM”) and we hold trademarks “NetWolves”, “SRM”, and “Wolfpac”.

There can be no assurance that our patents will not be violated or that any issued patents will provide protection that has commercial significance. As with any patented technology, litigation could be necessary to protect our patent position. Such litigation can be costly and time-consuming, and there can be no assurance that we will be successful.

Employees

As of December 31, 2020, we employed 268 full-time persons, of which 15 are employed through our facility in Plainview, New York; 81 through VasoHealthcare; 8 through VasoHealthcare IT; 109 through our NetWolves operations; and 55 in our China operations. None of our employees are represented by a labor union. We believe that our employee relations are good.

The Company also uses several part-time employees and consultants from time to time for various purposes.

Manufacturing

The Company conducts manufacturing activities primarily through its Biox facilities in China, while maintaining certain manufacturing capability in the Plainview, NY location to satisfy certain domestic and international needs for the EECP® systems. The Biox facilities manufacture ambulatory monitoring devices and other medical devices.

All manufacturing operations are conducted under the cGMP requirements, as set forth in the FDA Quality System Regulation, as well as ISO 13485 (Medical device – Quality management systems – Requirement for regulatory purpose), an internationally agreed standard that sets out the requirements for a quality management system specific to the medical devices industry. We are also certified to conform to full quality assurance system requirements of the EU Medical Device Directive (MDD 93/42/EEC Annex II) and can apply CE marking to all of our current product models. Lastly, we are certified to comply with the requirements of the Brazilian Agência Nacional de Vigilância Sanitária (ANVISA). All these regulations and standards subject us to inspections to verify compliance and require us to maintain documentation and controls for the manufacturing and quality activities.

5

We believe our manufacturing capacity and warehouse facility are adequate to meet the current and immediately foreseeable future demand for the production of our medical devices. We believe our suppliers of the other medical devices we distribute or represent are capable of meeting our demand for the foreseeable future.

Subsequent Event

In March 2021, the Company made principal payments aggregating $1.5 million on its lines of credit and $1.2 million on its MedTech Notes, and extended the maturity dates of its remaining line of credit and its MedTech Notes to June 30, 2022. The extensions require subsequent principal payments of $50,000 per quarter beginning June 30, 2021 through March 31, 2022 under both the line of credit and the MedTech Notes. No change was made to the interest rates in effect at the time of extensions.

ITEM 1A - RISK FACTORS

You should carefully consider the risks and uncertainties described below, together with the information included elsewhere in this Report on Form 10K. The risks and uncertainties described below are those we have identified as material, but are not the only risks and uncertainties facing us. Our business is also subject to general risks and uncertainties that affect many other companies, such as market conditions, geopolitical events, changes in laws or accounting rules, fluctuation in interest rates, terrorism, wars or conflicts, major health concerns, natural disasters or other disruptions of economic or business conditions, including the current COVID-19 pandemic. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may impair our business, including our results of operations, liquidity and financial position.

Risks Related to the COVID-19 Pandemic

The impact of the COVID-19 pandemic on our markets and financial condition is difficult to predict and manage.

The pandemic has adversely affected, and is expected to continue to adversely affect, certain elements of our business, primarily customer orders in our IT and professional sales service segments and accounts receivable collections in our IT segment. The COVID-19 pandemic has caused us to modify our business practices, and we may take further actions as required by government authorities, our customers or as determined to be in the best interests of our associates, customers and business partners. There is no certainty that these measures will be sufficient to mitigate the risks posed by the virus and our ability to execute our business plans could be impacted. The magnitude and duration of the disruption and resulting decline in business activity is uncertain.

Financial Risks

Achieving profitable operations is dependent on several factors

We achieved profitability in the years ended December 31, 2020 after having incurred net losses from operations for the years ended December 31, 2019 and 2018. However, we still maintain a line of credit from a lending institutionand debts from another party, all of which mature June 30, 2022. Our ability to sustain profitability is dependent on many factors, primarily being the sufficient and timely generation of cash, as well as attaining and maintaining profitability in our IT and equipment segments, as well as the success of our other strategic initiatives.

In March 2021, a payment of principal was made to the lending institution; as a result, one line of credit was paid off in full and closed and the other line of credit was paid down and extended to June 30, 2022. A separate payment of principal was made to MedTech and the remaining balance on the MedTech note was extended to mature on June 30, 2022.

Risks Related to Our Business

We currently derive a significant amount of our revenue and operating income from our agreement with GEHC.

On May 19, 2010, we signed a sales representation agreement with GEHC. Under the GEHC Agreement, we have been appointed the exclusive representative for these products to specific market segments in the 48 contiguous states of the United States and the District of Columbia. The GEHC Agreement had an initial term of three years commencing July 1, 2010 and in 2012 was extended for two additional years to June 30, 2015. In December 2014, the agreement was extended again through December 31, 2018. In December 2017, the agreement was further extended through December 31, 2022, including GEHC’s right to terminate without cause with certain conditions.

A significant amount of our revenue and operating income arise from activities under this agreement. Moreover, our performance and growth in the professional sales service segment depends partially on the territories, customer accounts and product modalities assigned to us by GEHC, and thus relies on our ability to demonstrate our added value as a channel partner, and on maintaining a positive relationship with GEHC. There is no assurance that the agreement will not be terminated prior to its expiration pursuant to its termination provisions or will be extended beyond the current expiration date. Should GEHC terminate the agreement, it would have a material adverse effect on our financial condition and results of operations.

6

We face competition from other companies and technologies.

In all segments of our business we compete with other companies that market technologies, products and services in the global marketplace. We do not know whether these companies, or other potential competitors who may succeed in developing technologies, products or services that are more efficient or effective than those offered by us, and that would render our technology and existing products obsolete or non-competitive. Potential new competitors may also have substantially greater financial, manufacturing and marketing resources than those possessed by us. In addition, other technologies or products may be developed that have an entirely different approach or means of accomplishing the intended purpose of our products. Accordingly, the life cycles of our products are difficult to estimate. To compete successfully, we must keep pace with technological advancements, respond to evolving consumer requirements and achieve market acceptance.

We depend on management and other key personnel.

We are dependent on a limited number of key management and technical personnel. The loss of one or more of our key employees may harm our business if we are unable to identify other individuals to provide us with similar services. We do not maintain “key person” insurance on any of our employees. In addition, our success depends upon our ability to attract and retain additional highly qualified management, sales, IT, manufacturing and research and development personnel in our various operations. The competition for IT personnel is intense.

We may not continue to receive necessary FDA clearances or approvals, which could hinder our ability to market and sell certain products.

If we modify our medical devices and the modifications significantly affect safety or effectiveness, or if we make a change to the intended use, we will be required to submit a new premarket notification (510(k)) or premarket approval (PMA) application to the FDA. We would not be able to market the modified device in the U.S. until the FDA issues a clearance for the 510(k).

If we offer new products that require 510(k) clearance or a PMA, we will not be able to commercially distribute those products until we receive such clearance or approval. Regulatory agency approval or clearance for a product may not be received or may entail limitations on the device’s indications for use that could limit the potential market for the product. Delays in receipt of, or failure to obtain or maintain, regulatory clearances and approvals, could delay or prevent our ability to market or distribute our products. Such delays could have a material adverse effect on our equipment business.

If we are unable to comply with applicable governmental regulations, we may not be able to continue certain of our operations.

As a reseller of telecommunication services and network solutions provider, our products and services are subject to federal, state and local regulations. These regulations govern, in part, our rates and the way we conduct our business, including the requirement to offer telecommunications services pursuant to nondiscriminatory rates, terms, and conditions, the obligation to safeguard the confidentiality of customer proprietary network information, as well as the obligation to maintain specialized records and file reports with the Federal Communications Commission and state regulatory authorities. While we believe we are in compliance with laws and regulations in jurisdictions where we do business, we must continue to monitor and assess our compliance.

We also must comply with current Good Manufacturing Practice requirements as set forth in the Quality System Regulation to receive US FDA approval to market new products and to continue to market current products. Most states also have similar regulatory and enforcement authority for medical devices.

Our operations in China are also subject to the laws of the People’s Republic of China with which we must be in compliance in order to conduct these operations.

We are subject to various federal, state and local laws targeting fraud and abuse in the healthcare industry, including anti-kickback and false claims laws.

We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we predict what effect additional governmental regulations or administrative orders, either domestically or internationally, when and if promulgated, would have on our business in the future. We may be slow to adapt, or we may never adapt to changes in existing requirements or adoption of new requirements or policies. We may incur significant costs to comply with laws and regulations in the future or compliance with laws or regulations may create an unsustainable burden on our business.

7

We have foreign operations and are subject to the associated risks of doing business in foreign countries.

The Company continues to have operations in China. 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. The occurrence of any of these risks, if severe enough, could have an adverse effect on the consolidated financial position, results of operations and cash flows of the Company.

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 (“EIT”), 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 for our operations in China.

We depend on several suppliers for the supply of certain products.

As a GEHC channel partner, we could be negatively impacted by interruptions or delays to equipment installations, production and quality issues, and any customer concerns related to GEHC. With respect to our proprietary medical products we now manufacture our ownproducts primarily through our China based facilities, and we depend on certain independent suppliers for parts, components and certain finished goods.

We may not have adequate intellectual property protection.

Our patents and proprietary technology may not be able to prevent competition by others. The validity and breadth of claims in technology patents involve complex legal and factual questions. Future patent applications may not be issued, the scope of any patent protection may not exclude competitors, and our patents may not provide competitive advantages to us. Our patents may be found to be invalid and other companies may claim rights in or ownership of the patents and other proprietary rights held or licensed by us. Also, our existing patents may not cover products that we develop in the future. Moreover, when our patents expire, the inventions will enter the public domain. There can be no assurance that our patents will not be violated or that any issued patents will provide protection that has commercial significance. Litigation may be necessary to protect our patent position. Such litigation may be costly and time-consuming, and there can be no assurance that we will be successful in such litigation.

The loss or violation of certain of our patents and trademarks could have a material adverse effect upon our business.

Since patent applications in the United States are maintained in secrecy until such patent applications are issued, our current product development may infringe patents that may be issued to others. If our products were found to infringe patents held by competitors, we may have to modify our products to avoid infringement, and it is possible that our modified products would not be commercially successful.

Risks Related to Our Industries

Our growth could suffer if the markets into which we sell products decline, do not grow as anticipated or experience cyclicality.

Our growth depends in part on the growth of the IT and healthcare markets which we serve. In our professional sales services segment, our quarterly sales and profits depend significantly on the volume and timing of delivery of the underlying equipment of the orders we booked during the quarter, and the delivery of such products is difficult to forecast since it is largely dependent on GEHC. Product demand is dependent upon the customer’s capital spending budget as well as government funding policies, and matters of public policy as well as product cycles and economic downturns that can affect the spending decisions of these entities. These factors could adversely affect our growth, financial position, and results of operations.

Technological change is difficult to predict and to manage.

We face the challenges that are typically faced by companies in the IT and medical device fields. Our products and services may require substantial development efforts and compliance with governmental clearance or approval requirements. We may encounter unforeseen technological or scientific problems that force abandonment or substantial change in the development of a specific product or process.

We are subject to product liability claims and product recalls that may not be covered by insurance.

The nature of our manufacturing operations exposes us to risks of product liability claims and product recalls. Medical devices as complex as ours frequently experience errors or failures, especially when first introduced or when new versions are released.

We currently maintain product liability insurance at $6,000,000 per occurrence and $6,000,000 in the aggregate. Our product liability insurance may not be adequate. In the future, insurance coverage may not be available on commercially reasonable terms, or at all. In addition, product liability claims or product recalls could damage our reputation even if we have adequate insurance coverage.

8

We do not know the effects of healthcare reform proposals.

The healthcare industry is undergoing fundamental changes resulting from political, economic and regulatory influences. In the United States, the Affordable Care Act (“ACA”) is designed to provide increased access to healthcare for the uninsured, control the escalation of healthcare expenditures within the economy and use healthcare reimbursement policies to balance the federal budget.

The United States Congress already has changed the ACA. We expect that there could be more changes or even a repeal of the ACA. In any event, we anticipate that there will continue to be a number of federal and state proposals to constrain expenditures for medical products and services, which may affect payments for products such as ours. We cannot predict which, if any of such proposals will be adopted and when they might be effective, or the effect these proposals may have on our business. Other countries also are considering health reform. Significant changes in healthcare systems could have a substantial impact on the manner in which we conduct our business and could require us to revise our strategies.

Risks Related to our Securities

The application of the "penny stock" rules could adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

As long as the trading price of our common shares is below $5 per share, the open-market trading of our common shares will be subject to the "penny stock" rules. The "penny stock" rules impose additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of securities and have received the purchaser's written consent to the transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers restrict the ability and decrease the willingness of broker-dealers to sell our common shares, which we believe results in decreased liquidity for our common shares as well as increased transaction costs for sales and purchases of our common shares as compared to other securities.

Our common stock is subject to price volatility.

The market price of our common stock historically has been and may continue to be highly volatile. Our stock price could be subject to wide fluctuations in response to various factors beyond our control, including, but not limited to:

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actual or anticipated fluctuations in our operating results;

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overall market fluctuations and domestic and worldwide economic conditions;

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medical reimbursement;

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announcements of technological innovations, new products or pricing by our competitors;

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the timing of patent and regulatory approvals;

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the timing and extent of technological advancements;

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the sales of our common stock by affiliates or other shareholders with large holdings; and

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other factors described in the “Risk Factors” and elsewhere in this Report.

Our future operating results may fall below the expectations of securities industry analysts or investors. Any such shortfall could result in a significant decline in the market price of our common stock. In addition, the stock market has experienced significant price and volume fluctuations that have affected the market price of our stock and that often have been unrelated to the operating performance of such companies. These broad market fluctuations may directly influence the market price of our common stock.

We do not intend to pay dividends in the foreseeable future.

We do not intend to pay any cash dividends on our common stock in the foreseeable future.

Additional Information

We are subject to the reporting requirements under the Securities Exchange Act of 1934 and are required to file reports and information with the Securities and Exchange Commission (SEC), including reports on the following forms: annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports files or furnished pursuant to Section 13(a) or 15(d) of the Securities Act of 1934.

ITEM 2 – PROPERTIES

The Company leases its headquarters at an 8,700 square foot facility at 137 Commercial Street, Plainview, New York 11803, under a lease with a term that expires on September 15, 2022 and with a base annual rental of approximately $74,000. The Company’s NetWolves unit leases a 16,200 square foot facility in Tampa, Florida, under a lease expiring in June 2022 with an annual rental of approximately $180,000. VHC-IT leases a 3,500 square foot facility in Nashville, Tennessee on a month-to-month basis with an annual cost of $49,000. The Company is evaluating possible renewal options and believes sufficient space is available at similar cost in Nashville. We believe that our current facilities are adequate for foreseeable current and future needs.

We lease our engineering and production facilities in China. Specifically, we lease approximately 14,700 square feet of space in Wuxi, China under leases expiring in August 2023, September 2023, and December 2023 at an aggregate annual cost of approximately $76,000. Such leases are renewable upon expiration.

9

PART II

ITEM 5 – 

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock currently trades on the OTC Market under the symbol VASO. The number of record holders of common stock as of April 23, 2021, was approximately 900, which does not include approximately 8,500 beneficial owners of shares held in the name of brokers or other nominees. The table below sets forth the range of high and low trade prices of the common stock for the fiscal periods specified.

	Year ended December 31, 2020		Year ended December 31, 2019
	High	Low	High	Low
First quarter	$0.04	$0.02	$0.04	$0.03
Second quarter	$0.04	$0.02	$0.03	$0.02
Third quarter	$0.03	$0.02	$0.02	$0.02
Fourth quarter	$0.09	$0.02	$0.03	$0.01

The last bid price of the Company's common stock on April 23, 2021, was $0.09 per share.

Dividend Policy

We have never paid any cash dividends on our common stock and do not intend to pay cash dividends in the foreseeable future.

ITEM 7 – 

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains descriptions of our expectations regarding future trends affecting our business. These forward looking statements and other forward-looking statements made elsewhere in this document are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please read the section titled “Risk Factors” in “Item One – Business” to review certain conditions, among others, which we believe could cause results to differ materially from those contemplated by the forward-looking statements.

Except for historical information contained in this report, the matters discussed are forward-looking statements that involve risks and uncertainties. When used in this report, words such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “may”, “plans”, “potential” and “intends” and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the Company’s management, as well as assumptions made by and information currently available to the Company’s management. Among the factors that could cause actual results to differ materially are the following: the effect of business and economic conditions, including the current COVID-19 pandemic; the effect of the dramatic changes taking place in IT and healthcare; continuation of the GEHC agreement; the impact of competitive technology and products and their pricing; medical insurance reimbursement policies; unexpected manufacturing or supplier problems; unforeseen difficulties and delays in the conduct of product development programs; the actions of regulatory authorities and third-party payers in the United States and overseas; and the risk factors reported from time to time in the Company’s SEC reports. The Company undertakes no obligation to update forward-looking statements as a result of future events or developments.

The following discussion should be read in conjunction with the financial statements and notes thereto included in this Annual Report on Form 10-K.

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General Overview

COVID-19 pandemic

The COVID-19 pandemic has had and will continue to have a significant impact on the United States economy and it is anticipated that its negative impact to the Company’s financial condition and results of operations will continue. At this time, we cannot reasonably estimate what the total impact may be. The pandemic has resulted in workforce and travel restrictions and created business disruptions in supply chain, production and demand across many business sectors. Equipment orders in our professional sales service segment have been negatively impacted, and we do anticipate continued negative impact in all our business at least through the next few quarters, in particular in our professional sales service segment for the diagnostic imaging equipment. Moreover, we have also experienced the negative impact in the recurring revenue business in our IT segment as some of our customers have been adversely affected by the shutdown, and new business in this segment appears to be slower as well. The pandemic also may have a negative impact on our cash receipts as some customers request forbearance or a delay in their payments to us.

The pandemic may impact our operations in 2021, depending on the duration of the pandemic and the timing and success of the reopening of the economy.

We have taken significant steps in our efforts to protect our workforce and our clients. Most of our employees have been working at least partially remotely and we are implementing plans to reopen our work sites consistent with the guidelines promulgated by the CDC and respective state governments. In addition, the Company received a $3.6 million loan under the Paycheck Protection Program of the CARES Act (the “PPP loan”). This loan, substantially all of which should qualify for forgiveness, has been used to principally cover our payroll costs for a period of time as specified by the rules, thereby allowing us to maintain our workforce and continue to provide services and solutions to our clients. We have applied for forgiveness of the PPP loan.

Our Business Segments

Vaso Corporation (formerly Vasomedical, Inc.) (“Vaso”) was incorporated in Delaware in July 1987. We principally operate 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.

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

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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

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

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Managed diagnostic imaging applications (channel partner of select vendors of healthcare IT products).

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Managed network infrastructure (routers, switches and other core equipment).

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Managed network transport (FCC licensed carrier reselling 175+ facility partners).

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Managed security services.

VasoTechnology uses a combination of proprietary technology, methodology and best-in-class third-party applications to deliver its value proposition.

11

VasoHealthcare

VasoHealthcare commenced operations in 2010, in conjunction with the Company’s execution of its exclusive sales representation agreement with GEHC, which is the healthcare business division of the General Electric Company (“GE”), to further the sale of certain medical capital equipment in certain domestic market segments.

VasoHealthcare’s current offering consists of:

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GEHC diagnostic imaging capital equipment.

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GEHC service agreements for the above equipment.

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GEHC training services for use of the above equipment.

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GEHC and third-party financial services for the above equipment.

VasoHealthcare has built a team of over 80 highly experienced sales professionals who utilize highly focused sales management and analytic tools to manage the complete sales process and to increase market penetration.

VasoMedical

The proprietary medical equipment business under VasoMedical traces back to 1995 when the Company began the proprietary Enhanced External Counterpulsation (EECP®) technology in the United States and has since diversified to include other medical hardware and software. 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. These devices primarily consist of cardiovascular diagnostic and therapeutic systems, including:

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Biox™ series Holter monitors and ambulatory blood pressure recorders.

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ARCS™ series analysis, reporting and communication software for ECG and blood pressure signals.

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MobiCare™ multi-parameter wireless vital-sign monitoring system.

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EECP® therapy systems for non-invasive, outpatient treatment of ischemic heart disease.

This segment uses its extensive cardiovascular device knowledge coupled with its engineering resources to cost effectively create and market its proprietary technology. It sells and services its products to domestic customers directly and sells and/or services its products in the international market mainly through independent distributors.

Strategic Plan and Objectives

Our short- and long-term plans for the growth of the Company and to increase stockholder value are:

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Continue to effectively reduce operating costs.

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Continue to expand our product and service offerings as well as market penetration in the business of our IT segment.

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Maintain and improve business performance in our professional sales service segment by increasing market penetration of the GE Healthcare product modalities we represent, and possibly building new teams to represent other vendors.

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Maintain and grow our equipment business by increasing efficiency and exploring new revenue models.

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Continue to seek accretive partnership opportunities.

Revision of prior year financial statements

The income statement, balance sheet and changes in stockholders’ equity for the year ended December 31, 2019 have been corrected for immaterial errors as a result of what we believe to be the misappropriation of funds by a mid-level management employee, who was not an officer or director of the Company. The correction includes $190 thousand in additional SG&A expense in the year ended December 31, 2019 and a beginning balance addition of total $907 thousand to accumulated deficit at January 1, 2019, of which $333 thousand represents a charge as of the May 2015 acquisition date of the subsidiary affected. The effect on net income (loss) for each of the years ended December 31, 2015 through December 31, 2018 is not material. The individual was suspended on March 29, 2021 and was terminated effective April 1, 2021. Upon additional examination and comprehensive review, the Company believes that this was an isolated incident and non-recurring. The Company has taken immediate steps to implement additional internal control procedures. See also Item 9A – Controls and Procedures.

In addition, the Company noted accounting errors in our IT segment where certain regulatory fees billed to our customers during the years 2016 through 2019 were partially recorded as revenue. Correction of such errors resulted in a $147 thousand addition to accumulated deficit at January 1, 2019 and the reversal of $231 thousand in revenue in the year ended December 31, 2019.

See Note B for tabular presentation of selected line items from the Company's Consolidated Financial Statements illustrating the effect of these corrections.

12

Results of Operations – For the Years Ended December 31, 2020 and 2019

Total revenues decreased by $5,665,000, or 7.5%, to $69,850,000 in the year ended December 31, 2020, from $75,515,000 in the year ended December 31, 2019. We reported net income (loss) of $358,000 and $(382,000) for the years ended December 31, 2020 and 2019, respectively, an improvement of $740,000. The change to net income from net loss was primarily due to lower operating expenses partially offset by lower gross profit. Our net income (loss) was $0.00 and $(0.00) per basic and diluted common share for the years ended December 31, 2020 and 2019, respectively.

Revenues

Revenue in the IT segment was $43,894,000 for the year ended December 31, 2020 as compared to $45,505,000 for the prior year, a decrease of $1,611,000, or 3.5%, of which $1,557,000 was attributable to a decline in VHC-IT revenues and $54,000 to a decrease in NetWolves revenues.

Commission revenues in the professional sales service segment decreased by $3,343,000, or 12.8%, to $22,865,000 in the year ended December 31, 2020, as compared to $26,208,000 in the year ended December 31, 2019. The decrease was primarily due to lower volume of GEHC equipment delivered in 2020 coupled with a lower blended commission rate for equipment delivered in 2020. As discussed in Note C to the financial statements, the Company defers recognition of commission revenue until the underlying equipment is delivered. As of December 31, 2020, the Company recorded on its consolidated balance sheet deferred commission revenue of $17,689,000 for this segment (of which $6,178,000 is long-term), a decrease of $876,000, or 4.7%, compared to $18,565,000 of deferred commission revenue at December 31, 2019 (of which $6,645,000 was long-term). The decrease in deferred revenue is due principally to lower total orders booked during the year, partially offset by the decrease in equipment deliveries over the same period.

Revenue in our equipment segment decreased 18.7% to $3,091,000 for the year ended December 31, 2020 from $3,802,000 for the year ended December 31, 2019, as a result of including EECP operations only for the first quarter of 2020 in the consolidated financials but for the full year of 2019, partially offset by a revenue increase in our China operations. In April 2020, the Company sold 51% of the equity in its EECP business and does not consolidate these operations after such date. With EECP revenues all excluded in 2020 and 2019, equipment segment revenue would be respectively $2,726,000 and $2,532,000, an increase of $194,000, or 7.7%, mainly a result of higher revenue in our China operations. As of December 31, 2020, the Company recorded on its consolidated balance sheet for this segment $15,000 of deferred revenue, of which $10,000 is long-term, compared to $778,000 of deferred revenue at December 31, 2019, of which $354,000 was long-term, a decrease of $763,000 or 98.1%. The decrease in deferred revenue is due principally to the sale of a majority equity stake in the EECP business.

Gross Profit

The Company recorded gross profit of $38,571,000, or 55% of revenue, for the year ended December 31, 2020, compared to $42,432,000, or 56% of revenue, for the year ended December 31, 2019. The decrease of $3,861,000, or 9.1%, was due primarily to a $2,679,000 decrease in the professional sales service segment and a $1,108,000 decrease in the IT segment, both as a result of lower revenues.

IT segment gross profit decreased to $17,682,000, or 40% of segment revenues, for the year ended December 31, 2020 as compared to $18,790,000, or 41% of segment revenues, in the prior year, a decrease of $1,108,000, of which $909,000 was attributable to VHC-IT and $199,000 was attributable to NetWolves, resulting mainly from lower VHC-IT revenues and higher Netwolves costs.

Professional sales service segment gross profit was $18,608,000, or 81% of the segment revenues, for the year ended December 31, 2020, a decrease of $2,679,000, or 12.6%, from segment gross profit of $21,287,000, or 81% of the segment revenue, for the year ended December 31, 2019. The decrease in gross profit was due primarily to the decrease in equipment delivery volume. Cost of commissions decreased by $664,000, or 13.5%, to $4,257,000 for the year ended December 31, 2020, as compared to cost of commissions of $4,921,000 in 2019. The decrease is due primarily to the decrease in delivery volume. Cost of commissions reflects commission expense associated with certain recognized commission revenues. Commission expense associated with deferred revenue is recorded as deferred commission expense until the related commission revenue is earned.

Equipment segment gross profit decreased to $2,281,000, or 74% of equipment segment revenues, for the year ended December 31, 2020 compared to $2,355,000, or 62% of equipment segment revenues, for the year ended December 31, 2019, due primarily to the inclusion of EECP operations only for the first quarter of 2020 in the consolidated financials but for the full year of 2019, partially offset but an increase in gross profit of our China operations. Excluding EECP operations from both 2020 and 2019 numbers, gross profit in the equipment segment would be $2,040,000 (74.8% of segment revenue) and $1,887,000 (74.5% of segment revenue), respectively, representing an increase of $153,000 or 8.1%, year over year. Equipment segment gross profits are dependent on a number of factors including the mix of products sold, their respective models and average selling prices, the ongoing costs of training, maintenance and servicing, as well as certain fixed period costs, including facilities, payroll and insurance.

13

Operating Income

Operating income was $772,000 for the year ended December 31, 2020 compared to operating income of $591,000 for the year ended December 31, 2019, an increase of $181,000, or 30.6%. The improvement was primarily attributable to the decrease in operating loss in the equipment segment to $155,000 for the year ended December 31, 2020 from a loss of $855,000 for the prior year, an improvement of $700,000, due to lower operating expenses, partially offset by a decrease in operating income in the professional sales service segment to $2,977,000 for the year ended December 31, 2020 from $3,626,000 for the year ended December 31, 2019, due to lower gross profit partially offset by reduced operating expenses.

Selling, general and administrative (SG&A) expenses for the years ended December 31, 2020 and 2019 were $37,054,000, or 53% of revenues, and $41,028,000, or 54% of revenues, respectively, reflecting a decrease of $3,974,000 or 10%.The decrease in SG&A expenditures in the year ended December 31, 2020 resulted primarily from a $2,030,000 decrease in the professional sales service segment attributable mainly to lower sales personnel-related and travel costs; a $1,090,000 decrease in the IT segment due to lower personnel, marketing and travel costs; a $646,000 decrease in the equipment segment due mainly to the deconsolidation of the EECP business, and by a $208,000 decrease in corporate expenses reflecting lower legal and accounting fees.

Research and development (R&D) expenses of $745,000, or 1% of revenues, for the year ended December 31, 2020 decreased by $68,000, or 8%, from $813,000, or 1% of revenues, for the year ended December 31, 2019. The decrease is primarily attributable to lower new product development costs in our China operations.

Adjusted EBITDA

We define Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), which is a non-GAAP financial measure, as net (loss) income, plus net interest expense (income), tax expense, depreciation and amortization, and non-cash expenses for share-based compensation.  Adjusted EBITDA is a metric that is used by the investment community for comparative and valuation purposes. We disclose this metric in order to support and facilitate the dialogue with research analysts and investors.

Adjusted EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States (“GAAP”) and should not be considered a substitute for operating income, which we consider to be the most directly comparable GAAP measure. Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, you should not consider Adjusted EBITDA in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with GAAP. Other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

A reconciliation of net income (loss) to Adjusted EBITDA is set forth below:

(in thousands)

	Year ended December 31,
	2020	2019
Net income (loss)	$358	$(382)
Interest expense (income), net	675	962
Income tax (benefit) expense	(1)	111
Depreciation and amortization	2,462	2,681
Share-based compensation	88	141
Adjusted EBITDA	$3,582	$3,513

Adjusted EBITDA increased by $69,000, to $3,582,000 in the year ended December 31, 2020 from $3,513,000 in the year ended December 31, 2019. The increase was primarily attributable to the higher net income, partially offset by lower interest expense, income tax expense, depreciation and amortization, and share-based compensation costs, as compared to the prior year.

14

Other Income (Expense), Net

Other income (expense), net for the years ended December 31, 2020 and 2019, was $(415,000) and $(862,000), respectively, a decrease in net expense of $447,000. The decrease was due primarily to lower interest expense on our lines of credit and other debt instruments, and by the $110,000 gain on sale of equity in the EECP business.

Income Tax (Benefit) Expense

During the year ended December 31, 2020, we recorded income tax benefit of $1,000, as compared to income tax expense of $111,000 in the year ended December 31, 2019. The Company utilized $797,000 and $0 in net operating loss carryforwards for the years ended December 31, 2020 and 2019, respectively. The change to income tax benefit in 2020 arose primarily from lower foreign tax expense due to write-off of deferred tax liability. The Company has net operating loss carryforwards of approximately $45 million at December 31, 2020.

Liquidity and Capital Resources

Cash and Cash Flow – For the year ended December 31, 2020

We have financed our operations and investment activities primarily from working capital and borrowings. At December 31, 2020, we had cash and cash equivalents of $6,819,000 and negative working capital of $9,431,000. $9,162,000 in negative working capital at December 31, 2020 is attributable to the net balance of deferred commission expense and deferred revenue. These are non-cash expense and revenue items and have no impact on future cash flows. At April 23, 2021 the Company’s cash and cash equivalents were approximately $9.5 million.

Cash provided by operating activities was $5,934,000 during the year ended December 31, 2020, which consisted of net income after non-cash adjustments of $3,377,000 and changes in operating assets and liabilities of $2,557,000. The changes in the account balances primarily reflect decreases in accounts and other receivables and deferred commission expenses of $5,050,000 and $407,000, respectively, partially offset by decreases in accounts payable, deferred revenue, and accrued commissions of $1,369,000, $870,000, and $791,000, respectively.

Cash used in investing activities during the year ended December 31, 2020 was $575,000 consisting of $1,000,000 in purchases of equipment and software and $725,000 in purchase of short-term investment, offset by $1,150,000 in proceeds from sale of equity in EECP Global.

Cash used in financing activities during the year ended December 31, 2020 was $553,000, primarily attributable to repayment of $1,375,000 on our lines of credit, and $2,930,000 in payments of notes and finance leases, partially offset by proceeds of $3,756,000 from notes payable, including $3,610,900 from a PPP loan.

Liquidity

The Company expects to generate sufficient cash flow from operations to satisfy its obligations for the next twelve months. It is anticipated that the COVID-19 pandemic may continue to adversely impact our operations depending on the duration of the pandemic and the timing and success of the reopening of the economy.

Off-Balance Sheet Arrangements

We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (SPES), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of December 31, 2020, we are not involved in any unconsolidated SPES or other off-balance sheet arrangements.

Effects of Inflation

We believe that inflation and changing prices over the past two years have not had a significant impact on our revenue or on our results of operations.

15

Critical Accounting Policies and Estimates

Note C of the Notes to Consolidated Financial Statements includes a summary of our significant accounting policies and methods used in the preparation of our financial statements. In preparing these financial statements, we have made our best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. The application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Our critical accounting policies and estimates are as follows:

Revenue Recognition

We account for revenues in accordance with ASC 606, “Revenue from Contracts with Customers”, which was adopted as of January 1, 2018 on a modified retrospective basis.

ASC 606 requires certain judgments and estimates in implementing its five-step process to be followed in determining the amount and timing of revenue recognition and related disclosures. Refer to Note C of the notes to consolidated financial statements for further discussion regarding significant judgments involved in our application of ASC 606.

Inventories, net

We value 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 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 at the lower of cost or estimated market, with cost being determined on the specific identification method.

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 and determined to have an indefinite useful life 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 impairment test is based on the estimated fair value of the underlying businesses and performed in the fourth quarter of each year. 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 costs incurred during the application development stage. Costs related to preliminary project activities and post implementation activities are expensed as incurred.

Deferred Revenues

For the professional sales service segment, amounts billable under the agreement with GE Healthcare 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.

For the equipment segment, we record revenue on extended service contracts ratably over the term of the related contract period.

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 realizability. 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 realizability of the assets changed that it is “more likely than not” that all of the deferred tax assets will be realized. The “more likely than not” standard is subjective and is based upon our estimate of a greater than 50% probability that the deferred tax asset will be realized.

We also comply with the provisions of the 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 taxing authorities. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of December 31, 2020 and December 31, 2019. 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, 2020 and December 31, 2019. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

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Recently Issued Accounting Pronouncements

Note C of the Notes to Consolidated Financial Statements includes a description of the Company’s evaluation of recently issued accounting pronouncements.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements are filed as part of this report.

ITEM 9A - CONTROLS AND PROCEDURES

Report on Disclosure Controls and Procedures

Disclosure controls and procedures reporting as promulgated under the Exchange Act is defined as controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures include without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our CEO and our CFO have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020 and have concluded that the Company’s disclosure controls and procedures were not effective as a result of a material weakness in internal controls as of December 31, 2020.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control involves maintaining records that accurately represent our business transactions, providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization, and providing reasonable assurance that unauthorized acquisition, use or disposition of company assets that could have a material effect on our financial statements would be detected or prevented on a timely basis.

Because of its innate limitations, internal control over our financial statements is not intended to provide absolute guarantee that a misstatement can be detected or prevented on the statements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in condition, or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 COSO framework). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Based on this evaluation and those criteria, the Company’s CEO and CFO concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2020, due to a lack of segregation of duties at one of the Company’s subsidiaries.

This report does not include an attestation report of the Company’s Independent Registered Public Accounting Firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s Independent Registered Public Accounting Firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this Annual Report.

Changes in Internal Control over Financial Reporting

For the quarter ended December 31, 2020 there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART III

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors of the Registrant

As of April 23, 2021, the members of our Board of Directors are:

Name of Director	Age	Principal Occupation	Director Since
Joshua Markowitz (2)	65	Chairman of the Board and Director	June, 2015
David Lieberman	76	Vice Chairman of the Board and Director	February, 2011
Jun Ma	57	President, Chief Executive Officer and Director	June, 2007
Jane Moen	41	Director	March, 2020
Behnam Movaseghi (1) (2)	67	Director	July, 2007
Edgar Rios (1)	68	Director	February, 2011

(1)

Member of the Audit Committee

(2)

Member of the Compensation Committee

The following is a brief account of the business experience for at least the past five years of our directors:

Joshua Markowitz has been a director since June 2015, and was appointed Chairman of the Board of the Company in August 2016. Mr. Markowitz has been a practicing attorney in the State of New Jersey for in excess of 30 years. He is currently a senior partner in the New Jersey law firm of Markowitz O'Donnell, LLP. Mr. Markowitz was the brother-in-law of Mr. Simon Srybnik (deceased), the former Chairman and director of the Company.

David Lieberman has been a director of the Company and the Vice Chairman of the Board, since February 2011. Mr. Lieberman has been a practicing attorney in the State of New York for more than 45 years, specializing in corporation and securities law. He is currently a senior partner at the law firm of Beckman Lieberman and Associates, LLP, which performs certain legal services for the Company and its subsidiaries. Mr. Lieberman is a former Chairman of the Board of Herley Industries, Inc., which was sold in March, 2011.

Jun Ma, PhD, has been a director since June 2007 and was appointed President and Chief Executive Officer of the Company on October 16, 2008.   Dr. Ma has held various positions in academia and business, and prior to becoming President and CEO of the Company, had provided technology and business consulting services to several domestic and international companies in aerospace, automotive, biomedical, medical device, and other industries, including Kerns Manufacturing Corp. and Living Data Technology Corp., both of which are stockholders of our Company. Dr. Ma received his PhD degree in mechanical engineering from Columbia University, MS degree in biomedical engineering from Shanghai University, and BS degree in precision machinery and instrumentation from University of Science and Technology of China.

Jane Moen has been a director since March 2020. Ms. Moen has been President of the Company’s wholly-owned subsidiary Vaso Diagnostics, Inc. d/b/a VasoHealthcare since June 2018 following a remarkable career track record at VasoHealthcare, starting as an Account Manager at the inception of VasoHealthcare in April 2010 and being promoted to Regional Manager in January 2012, Director of Product Business Lines in July 2012 and Vice President of Sales in April 2016. Jane Moen has been in the medical sales industry for over 17 years, having had prior experience with Ledford Medical Sales, Vital Signs, Inc., Pfizer Inc. and Ecolab, Inc.

Behnam Movaseghi, CPA, has been a director since July 2007. Mr. Movaseghi has been treasurer of Kerns Manufacturing Corporation since 2000, and controller from 1990 to 2000. For approximately ten years prior thereto Mr. Movaseghi was a tax and financial consultant. Mr. Movaseghi is a Certified Public Accountant.

Edgar G. Rios has been a director of the Company since February 2011. Mr. Rios currently is President of Edgary Consultants, LLC. and was appointed a director in conjunction with the Company’s prior consulting agreement with Edgary Consultants, LLC. Most recently from 2008 thru the end of 2016, Mr. Rios was the Co-founder, CEO and Managing Member of SHD Oil & Gas LLC, an oil and gas exploration and development firm operating on the reservation of the Three Affiliate Tribes in North Dakota. Previously, Mr. Rios was a co-founder, Executive Vice President, General Counsel and Director of AmeriChoice Corporation from its inception in 1989 through its acquisition by UnitedHealthcare in 2002 and continued as a senior executive with United Healthcare through 2007. Prior to co-founding AmeriChoice, Mr. Rios was a senior executive with a number of businesses that provided technology services and non-technology products to government purchasers. Over the years, Mr. Rios also has been an investor, providing seed capital to various technology and nontechnology start-ups. Mr. Rios serves on the Board of Advisors of Columbia Law School. Mr. Rios also serves as a member of the Board of Trustees of Meharry Medical School and the Brookings Institution in Washington; and as a director of the An-Bryce Foundation and Los Padres Foundation in Virginia. Mr. Rios holds a J.D. from Columbia University Law School and an A.B. from Princeton University.

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Committees of the Board of Directors

Audit Committee and Audit Committee Financial Expert

The Board has a standing Audit Committee. The Board has affirmatively determined that each director who serves on the Audit Committee is independent, as the term is defined by applicable Securities and Exchange Commission ("SEC") rules. During the year ended December 31, 2020, the Audit Committee consisted of Edgar Rios, committee chair, and Behnam Movaseghi. The members of the Audit Committee have substantial experience in assessing the performance of companies, gained as members of the Company’s Board of Directors and Audit Committee, as well as by serving in various capacities in other companies or governmental agencies. As a result, they each have an understanding of financial statements. The Board believes that Behnam Movaseghi fulfills the role of the financial expert on this committee.

The Audit Committee regularly meets with our independent registered public accounting firm without the presence of management.

The Audit Committee operates under a charter approved by the Board of Directors. The Audit Committee charter is available on our website.

Compensation Committee

Our Compensation Committee annually establishes, subject to the approval of the Board of Directors and any applicable employment agreements, the compensation that will be paid to our executive officers during the coming year, as well as administers our stock-based benefit plans. During the year ended December 31, 2020, the Compensation Committee consisted of Joshua Markowitz, committee chair, and Behnam Movaseghi. Neither of these persons has been officers or employees of the Company at the time of his position on the committee, or, except as otherwise disclosed, had any relationship requiring disclosure herein.

The Compensation Committee operates under a charter approved by the Board of Directors. The Compensation Committee charter is available on our website.

MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES

During the year ended December 31, 2020 there were:

●

4 meetings of the Board of Directors

●

4 meetings of the Audit Committee

●

1 meeting of the Compensation Committee

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires directors, executive officers and persons who beneficially own more than 10% of our common stock (collectively, “Reporting Persons”) to file initial reports of ownership and reports of changes in ownership of our common stock with the SEC. Reporting Persons are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. To our knowledge, based solely on our review of the copies of such reports received or written representations from certain Reporting Persons that no other reports were required, we believe that during the year ended December 31, 2020 all Reporting Persons timely complied with all applicable filing requirements.

Corporate Governance - Code of Ethics

We have adopted a Corporate Code of Business Ethics (the "Code") that applies to all employees, including our principal executive officer, principal financial officer, and directors of the Company. A copy of the Code can be found on our website, www.vasocorporation.com. The Code is broad in scope and is intended to foster honest and ethical conduct, including accurate financial reporting, compliance with laws and the like. If any substantive amendments are made to the Code or if there is any grant of waiver, including any implicit waiver, from a provision of the Code to our Chief Executive Officer or Chief Financial Officer, we will disclose the nature of such amendment or waiver in a Current Report on Form 8-K.

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Executive Officers of the Registrant

As of April 23, 2021 our executive officers are:

Name of Officer	Age	Position held with the Company
Jun Ma, PhD	57	President, Chief Executive Officer
Peter C. Castle	52	Chief Operating Officer
Michael J. Beecher	76	Co-Chief Financial Officer and Secretary
Jonathan P. Newton	60	Co-Chief Financial Officer and Treasurer

Peter Castle was a director from August 2010 to December 2019 and was appointed the Chief Operating Officer of the Company after the NetWolves acquisition in June 2015. Prior to the acquisition, Mr. Castle was the President and Chief Executive Officer of NetWolves Network Services, LLC, where he has been employed since 1998. At NetWolves, Mr. Castle also held the position of Chief Financial Officer from 2001 until October 2009, Vice President of Finance since January 2000, Controller from August 1998 until December 1999 and Treasurer and Secretary from August 1999.

Michael J. Beecher, CPA,was Chief Financial Officer of the Company from September 2011 and Co-Chief Financial Officer since December 10, 2019. Prior to joining Vasomedical in 2011, Mr. Beecher was Chief Financial Officer of Direct Insite Corp., a publicly held company, from December 2003 to September 2011.  Prior to his position at Direct Insite, Mr. Beecher was Chief Financial Officer and Treasurer of FiberCore, Inc., a publicly held company in the fiber-optics industry. From 1989 to 1995 he was Vice-President Administration and Finance at the University of Bridgeport. Mr. Beecher began his career in public accounting with Haskins & Sells, an international public accounting firm. He is a graduate of the University of Connecticut, a Certified Public Accountant and a member of the American Institute of Certified Public Accountants.

Jonathan P. Newton served as Chief Financial Officer of the Company from September 1, 2010 to September 8, 2011, Vice President of Finance and Treasurer until December 10, 2019, and is currently Co-Chief Financial Officer and Treasurer.  From June 2006 to August 2010, Mr. Newton was Director of Budgets and Financial Analysis for Curtiss-Wright Flow Control.   Prior to his position at Curtiss-Wright Flow Control, Mr. Newton was Vasomedical’s Director of Budgets and Analysis from August 2001 to June 2006. Prior positions included Controller of North American Telecommunications Corp., Accounting Manager for Luitpold Pharmaceuticals, positions of increasing responsibility within the internal audit function of the Northrop Grumman Corporation and approximately three and one half years as an accountant for Deloitte Haskins & Sells, during which time Mr. Newton became a Certified Public Accountant.  Mr. Newton holds a B.S. in Accounting from SUNY at Albany, and a B.S. in Mechanical Engineering from Hofstra University.

ITEM 11 - EXECUTIVE COMPENSATION

The following table sets forth the annual and long-term compensation of our Chief Executive Officer and each of our most highly compensated officers and employees who were serving as executive officers or employees at the end of the last completed fiscal year for services rendered for the years ended December 31, 2020 and 2019.

20

Summary Compensation Table

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($) (1)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($) (2)	Total ($)
Jun Ma, PhD	2020	500,000	75,000					59,548	634,548
Chief Executive Officer	2019	447,917		100,000				33,767	581,684
Peter C. Castle	2020	343,437	52,500					13,950	409,887
Chief Operating Officer	2019	350,000						15,308	365,308
Jane Moen	2020	275,000	74,250	20,000				11,450	380,700
President of VasoHealthcare	2019	275,000	165,000					7,114	447,114
Michael J. Beecher	2020	120,000	12,600					3,360	135,960
Co-Chief Financial Officer and Secretary	2019	167,500						5,218	172,718
Jonathan P. Newton	2020	190,000	30,000					8,722	228,722
Co-Chief Financal Officer and Treasurer	2019	175,000		15,000				7,084	197,084

(1)

Represents fair value on the date of grant. See Note C to the Consolidated Financial Statements included in our Form 10–K for the year ended December 31, 2020 for a discussion of the relevant assumptions used in calculating grant date fair value.

(2)

Represents tax gross-ups, lodging and vehicle allowances, Company-paid life insurance, and amounts matched in the Company’s 401(k) Plan.

Outstanding Equity Awards at Last Fiscal Year End

The following table provides information concerning outstanding options, unvested stock and equity incentive plan awards for our named executive officers at December 31, 2020:

		Option Awards			Stock Awards
NameNumber of Securities Underlying Unexercised Options - Exercisable	Number of Securities Underlying Unexercised Options - Unexercisable	Equity Incentive Plan Awards: Number of Underlying Unexercised Unearned OptionsOption Exercise Price	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested	Market Value of Shares or Units of Stock That Have Not Vested	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
Jun Ma, PhD				3,000,000	270,000	-	-
Jane Moen				800,000	72,000	-	-
Jonathan P. Newton				400,000	36,000	-	-

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The future vesting dates of the above stock awards are:

Name	Number of Shares or Units of Stock That Have Not Vested	Vesting Date
Jun Ma, PhD	1,000,000	6/1/2021
	1,000,000	6/1/2022
	1,000,000	6/1/2023
Jane Moen	200,000	4/1/2021
	200,000	4/1/2022
	200,000	4/1/2023
	200,000	4/1/2024
Jonathan P. Newton	100,000	1/1/2021
	100,000	1/1/2022
	100,000	1/1/2023
	100,000	1/1/2024

Employment Agreements

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

On 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.

401(k) Plan

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 under the Vaso Corporation Plan. Participants may make voluntary contributions to the plan up to 80% of their compensation under the Vaso Corporation Plan. In the years ended December 31, 2020 and 2019 the Company made discretionary contributions of approximately $114,000 and $118,000, respectively, to match a percentage of employee contributions.

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Director's Compensation

Non-employee directors receive a fee of $2,500 for each Board of Directors and Committee meeting attended. Committee chairs receive an annual fee of $5,000. Non-employee directors also receive an annual fee of $30,000. These fees have been paid in cash.

	Fees Earned or Paid in Cash	Stock Awards	Option Awards	Non-equity Incentive Plan Compensation	Nonqualified Deferred Compensation Earnings	All Other Compensation (1)	Total
Name	($)	($)	($)	($)	($)	($)	($)
David Lieberman	40,000	-	-	-	-	22,961	62,961
Joshua Markowitz	50,000	-	-	-	-	-	50,000
Behnam Movaseghi	55,000	-	-	-	-	-	55,000
Edgar Rios	55,000	-	-	-	-	-	55,000

(1) 

Represents health benefit premiums.

Compensation Committee Interlocks and Insider Participation

During the year ended December 31, 2020, the Compensation Committee consisted of Joshua Markowitz, committee chair, and Behnam Movaseghi. Neither of these persons were officers or employees of the Company during the time they held positions on the committee, or, except as otherwise disclosed, had any relationship requiring disclosure herein.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth the beneficial ownership of shares of our common stock as of April 23, 2021 of (i) each person known by us to beneficially own 5% or more of the shares of outstanding common stock, based solely on filings with the SEC, (ii) each of our executive officers and directors, and (iii) all of our executive officers and directors as a group. Except as otherwise indicated, all shares are beneficially owned, and investment and voting power is held by the persons named as owners. To our knowledge, except under community property laws or as otherwise noted, the persons and entities named in the table have sole voting and sole investment power over their shares of our common stock. Unless otherwise indicated, each beneficial owner listed below maintains a mailing address of c/o Vaso Corporation, 137 Commercial Street, Plainview, New York 11803.

Name of Beneficial Owner	Common Stock Beneficially Owned (1)	% of Common Stock (2)
Joshua Markowitz ** (3)  .	56,088,318	32.06%
Jun Ma, PhD **	10,298,146	5.89%
Peter Castle **	3,125,000	1.79%
Edgar Rios **  ..	1,625,000	*
David Lieberman **	1,599,200	*
Jane Moen **…	1,438,421	*
Jonathan Newton **  .	1,275,000	*
Michael J. Beecher **  .	1,240,400	*
Behnam Movaseghi **  .	1,189,404	*
** Directors and executive officers as a group
(9 persons).….…...….…..…...….	77,878,889	44.52%

*Less than 1% of the Company's common stock

(1)

No officer or director owns more than one percent of the issued and outstanding common stock of the Company unless otherwise indicated.

(2)

Applicable percentages are based on 174,936,212 shares of common stock outstanding as of April 23, 2021, adjusted as required by rules promulgated by the SEC.

(3)

Joshua Markowitz is the record holder of 350,000 shares of our common stock. Additionally, he has voting power and dispositive power over 55,738,318 shares of our common stock in his capacity as executor of the estate of Simon Srybnik (the “Estate”), comprised of the following: 25,714,286 shares of common stock owned by Kerns Manufacturing, of which the Estate is the majority shareholder; 17,815,007 shares of common stock owned by Living Data Technology Corp, of which the Estate is the majority shareholder; and 12,209,025 shares of common stock owned by the Estate.

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Equity Compensation Plan Information

We maintain various stock plans under which stock options and stock grants are awarded at the discretion of our Board of Directors or its Compensation Committee. The purchase price of the shares under the plans and the shares subject to each option granted is not less than the fair market value on the date of the grant. The term of each option is generally five years and is determined at the time of the grant by our board of directors or the compensation committee. The participants in these plans are officers, directors, employees, and consultants of the Company and its subsidiaries and affiliates.

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted-average exercise price of outstanding options, warrants and rights	(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity Compensation
plans approved by
security holders	-	$0.00	-
Equity Compensation
plans not approved
by security holders (1)	191,666	$0.00	11,005,580
Total	191,666		11,005,580

(1) 

Includes 25,000 and 166,666 shares of restricted common stock granted, but unissued, under the 2013 Plan and 2016 Plan, respectively. The exercise price for the stock grants is zero. 805,580 shares, 1,700,000 shares, and 8,500,000 shares remain available for future grants under the 2013 Plan, 2016 Plan, and 2019 Plan, respectively.

See Note Q to the Consolidated Financial Statements for description of the material features of our current stock plans not approved by stockholders.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

One of the Company’s officers, Peter Castle, was the Chief Executive Officer and President of NetWolves Network Services, LLC, which we acquired in May 2015. One of the Company’s directors, David Lieberman, was a director of NetWolves Network Services, LLC. Of the $18,000,000 purchase price paid for the acquisition, $14,200,000 was from the Company’s cash on hand and the remaining $3,800,000 was raised from the sale of a Subordinated Secured Note to MedTechnology Investments, LLC (“MedTech”).

On May 29, 2015, the Company entered into a Note Purchase Agreement with MedTech pursuant to which it issued MedTech a secured subordinated promissory note (“Note”) for $3,800,000 for the purchase of NetWolves. In June 2015, a second Note for $750,000 was issued to MedTech for working capital purposes; in July 2015, an additional $250,000 was borrowed under the Note Purchase Agreement. MedTech was formed to acquire the Notes, and of the total $4,800,000 Notes it acquired, $2,200,000 was provided by our directors and officers and a relative of a director.

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The Notes bear interest at an annual rate of 6%, mature on June 30, 2022 (see Note U), 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. As set forth in the following table, three directors and an officer of the Company provided funds in excess of $120,000 through Medtech during 2015. Principal and interest payments for the year ended December 31, 2020 and amounts payable at December 31, 2020 to these four parties are as indicated in the table below:

	Principal Paid	Principal Outstanding	Interest Paid	Interest Payable
Peter C. Castle	$187,500	$562,500	$55,438	$8,625
David Lieberman	$175,000	$525,000	$51,742	$8,050
Jun Ma, PhD	$75,000	$225,000	$22,175	$3,450
Edgar Rios	$62,500	$187,500	$18,479	$2,875

In 2020, the Company extended the maturity date of notes issued in 2019 to a director and an officer in excess of $120,000. Principal and interest payments for the year ended December 31, 2020 and amounts payable at December 31, 2020 to these two parties are as indicated in the table below:

	Principal Paid	Principal Outstanding	Interest Paid	Interest Payable
Edgar Rios	$300,000	$-	$17,496	$-
Peter C. Castle	$250,000	$-	$18,671	$-

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 and Associates, LLP, which performs certain legal services for the Company. Fees of approximately $227,000 were billed by the firm for the year ended December 31, 2020 at which date no amount was outstanding.

Director Independence

We have adopted the NASDAQ Stock Market’s standards for determining the independence of directors. Under these standards, an independent director means a person other than an executive officer or one of our employees or any other individual having a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In addition, the following persons shall not be considered independent:

●

a director who is, or at any time during the past three years was, employed by us;

●

a director who accepted or who has a family member who accepted any compensation from us in excess of $100,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than the following:

o

compensation for service on the Board of Directors or any committee thereof;

o

compensation paid to a family member who is one of our employees (other than an executive officer); or

o

under a tax-qualified retirement plan, or non-discretionary compensation;

●

a director who is a family member of an individual who is, or at any time during the past three years was, employed by us as an executive officer;

●

a director who is, or has a family member who is, a partner in, or a controlling stockholder or an executive officer of, any organization to which we made, or from which we received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient's consolidated gross revenues for that year, or $200,000, whichever is more, other than the following:

o

payments arising solely from investments in our securities; or

o

payments under non-discretionary charitable contribution matching programs;

●

a director who is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of our executive officers served on the compensation committee of such other entity; or

●

a director who is, or has a family member who is, a current partner of our outside auditor, or was a partner or employee of our outside auditor who worked on our audit at any time during any of the past three years.

25

For purposes of the NASDAQ independence standards, the term “family member” means a person's spouse, parents, children and siblings, whether by blood, marriage or adoption, or anyone residing in such person's home.

The Board of Directors has assessed the independence of each non-employee director under the independence standards of the NASDAQ Stock Market set forth above, and has affirmatively determined that three of our non-employee directors (Mr. Rios, Mr. Markowitz and Mr. Movaseghi) are independent.

We expect each director to attend every meeting of the Board and the committees on which he serves as well as the annual meeting. In the year ended December 31, 2020, all directors attended both the annual meeting and at least 75% of the meetings of the Board and the committees on which they served.

ITEM 14 - PRINCIPAL ACCOUNTING FEES AND SERVICES

MaloneBailey, LLP, as our current independent registered public accounting firm, performed the audits of our consolidated financial statements for the years ended December 31, 2020 and 2019, respectively. The following table sets forth all fees for such periods:

	2020	2019
Audit fees	$260,000	$202,472
Tax fees	-	-
All other fees	-	-
Total	$260,000	$202,472

The Audit Committee has adopted a policy that requires advance approval of all audit, audit-related, tax services, and other services performed by the Company’s independent auditor. Accordingly, the Audit Committee must approve the permitted service before the independent auditor is engaged to perform it. In accordance with such policies, the Audit Committee approved 100% of the services relative to the above fees.

26

PART IV

ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements and Financial Statement Schedules

(1)

See Index to Consolidated Financial Statements on page F-1 at beginning of attached financial statements.

(a)

Exhibits

(3)(i) 

(a) 

Restated Certificate of Incorporation (2)

(b) 

Certificate of Designations of Preferences and Rights of Series E Convertible Preferred Stock (3)

(c) 

Certificate of Amendment to Certificate of Incorporation (11)

(3)(ii)            By-Laws (1)

(4) 

(a) 

Specimen Certificate for Common Stock (1)

(b)

Specimen Certificate for Series E Convertible Preferred Stock (5)

(c) 

Secured Subordinated Note, dated as of May 29, 2015, between Vasomedical, Inc. and MedTechnology Investments LLC(9)

(10)

(a)      Form of Stock Purchase Agreement (3)

(b) 

Redacted Sales Representative Agreement between GE Healthcare Division of General Electric Company and Vaso Diagnostics, Inc. d/b/a VasoHealthcare, a subsidiary of Vasomedical, Inc. dated as of May 19, 2010 (4).

(c)     

2010 Stock Plan (5).

(d) 

Employment Agreement entered into as of March 21, 2011 between Vasomedical, Inc. and Jun Ma, as amended. (8)

(e) 

Stock Purchase Agreement dated as of August 19, 2011 among Vasomedical, Inc., Fast Growth Enterprises Limited (FGE) and the FGE Shareholders (6)

(f) 

Amendment to Sales Representative Agreement between GE Healthcare Division of General Electric Company and Vaso Diagnostics, Inc. d/b/a VasoHealthcare, a subsidiary of Vasomedical, Inc. dated as of June 20, 2012 (7)

(g)

2013 Stock Plan (12)

(h) 

Asset Purchase and Sale Agreement, dated as of May 29, 2015, by and among Vasomedical, Inc., VasoTechnology, Inc., NetWolves, LLC and NetWolves Corporation (9)

(i) 

Subordinated Security Agreement dated as of May 29, 2015 by and between Vasomedical, Inc. and MedTechnology Investments LLC (9)

(j) 

Employment Agreement dated as of June 1, 2015 between Vasomedical, Inc. and Peter C. Castle (10)

(k)       

2016 Stock Plan (13)

(l)       

2019 Stock Plan (14)

(21)                           Subsidiaries of the Registrant

Name	State of Incorporation	Percentage Owned by Company
Vaso Diagnostics, Inc.	New York	100%
VasoMedical, Inc.	Delaware	100%
Vasomedical Global Corp.	New York	100%
Vasomedical Solutions, Inc.	New York	100%
VasoHealthcare IT Corp.	Delaware	100%
VasoTechnology, Inc.	Delaware	100%
NetWolves Network Services LLC	Florida	100%
EECP Global Corporation	New York	49%
Fast Growth Enterprises Limited	British Virgin Islands	100%

(31)                  Certification Reports pursuant to Securities Exchange Act Rule 13a - 14

(32)                  Certification Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

__________________________

(1)

Incorporated by reference to Registration Statement on Form S-18, No. 33-24095.

(2)

Incorporated by reference to Registration Statement on Form S-1, No. 33-46377 (effective 7/12/94).

(3)

Incorporated by reference to Report on Form 8-K dated June 21, 2010.

(4)

Incorporated by reference to Report on Form 8-K/A dated May 19, 2010 and filed November 9, 2010.

(5)

Incorporated by reference to Report on Form 10-K for the fiscal year ended May 31, 2010.

(6)

Incorporated by reference to Report on Form 10-K for the fiscal year ended May 31, 2011.

(7)

Incorporated by reference to Report on Form 8-K dated June 20, 2012.

(8)

Incorporated by reference to Report on Form 8-K dated March 21, 2011.

(9)

Incorporated by reference to Report on Form 8-K dated May 29, 2015.

(10)

Incorporated by reference to Report on Form 8-K dated October 8, 2015.

(11)

Incorporated by reference to Report on Form 10-Q for the quarter ended September 30, 2016.

(12)

Incorporated by reference to Report on Form 10-Q for the quarter ended September 30, 2013.

(13)

Incorporated by reference to Report on Form 10-Q for the quarter ended June 30, 2016.

(14)

Incorporated by reference to Report on Form 10-K for the year ended December 31, 2019.

  27

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 4th day of May 2021.

	VASO CORPORATION
Date	By:	/s/ Jun Ma
		Jun Ma
		President, Chief Executive Officer, and Director (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on May 4, 2021, by the following persons in the capacities indicated:

/s/ Jun Ma	President, Chief Executive Officer and Director (Principal Executive Officer)
Jun Ma
/s/ Michael Beecher	Chief Financial Officer (Principal Financial Officer)
Michael Beecher
/s/ Joshua Markowitz	Chairman of the Board
Joshua Markowitz
/s/ David Lieberman	Vice Chairman of the Board
David Lieberman
/s/ Jane Moen	Director
Jane Moen
/s/ Edgar Rios	Director
Edgar Rios
/s/ Behnam Movaseghi	Director
Behnam Movaseghi

  28

Vaso Corporation and Subsidiaries

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2020 and 2019

	Page
Report of Independent Registered Public Accounting Firm	F-2
Financial Statements
Consolidated Balance Sheets as of December 31, 2020 and 2019	F-3
Consolidated Statements of Operations and Comprehensive Income (Loss)	F-4
for the years ended December 31, 2020 and 2019
Consolidated Statements of Changes in Stockholders’ Equity	F-5
for the years ended December 31, 2020 and 2019
Consolidated Statements of Cash Flows	F-6
for the years ended December 31, 2020 and 2019
Notes to Consolidated Financial Statements	F-7-F-33

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Vaso Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vaso Corporation and its subsidiaries (collectively, the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognized from commission sales with General Electric Healthcare (GEHC)

Description of the Matter

As discussed in Notes A and C to the consolidated financial statements, the Company, through its wholly-owned subsidiary VasoHealthcare (VHC), was appointed the exclusive representative for the sale of GEHC diagnostics imaging equipment to specific market segments and recognized commission revenue when the underlying equipment/services have been delivered/completed by GEHC. VHC has a total commission revenue of $22,865 (in thousands) for the year ended December 31, 2020, and 100% of it is with GEHC.

F-2

We identified the testing of commission revenue generated from GEHC as a critical audit matter. Specifically, the commission revenue is calculated through complicated formula including order data from various files obtained from GEHC monthly and is stored in a excel file and based on the one master agreement and various subsequent amendments between GEHC and the Company. The audit of the excel file requires significant efforts from auditors due to the volume of data, the size of the file, and the complexity of the formulas inside of the file.

How We Addressed the Matter in Our Audit

During the audit, we obtained an understanding of the design and implementation of the internal control over the revenue recognition process including certain general computer controls, applications controls and monitor controls and tested access control of the master excel worksheet. For selected orders based on our judgment, we inspected the Company’s master file, traced the data source to the various files that are further directly confirmed with GEHC, tested the formula for its accuracy and reasonableness and agreed the commission rates and incentives to the agreements between GEHC and further confirmed with GEHC on the incentives as to which sales region achieved the incentive target.

/s/ Malone Bailey LLP

www.malonebaily.com

We have served as the Company’s auditor since June 2019.

Houston, Texas

May 4, 2021

F-3

Vaso Corporation and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	December 31, 2020	December 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$6,819	$2,124
Short-term investments	766	-
Accounts and other receivables, net of an allowance for doubtful
accounts and commission adjustments of $4,208 at December 31, 2020
and $4,285 at December 31, 2019	9,776	15,852
Receivables due from related parties	18	18
Inventories	1,384	1,941
Deferred commission expense	2,354	2,785
Prepaid expenses and other current assets	1,151	1,339
Total current assets	22,268	24,059
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$8,833 at December 31, 2020 and $7,560 at December 31, 2019	3,885	4,954
OPERATING LEASE RIGHT OF USE ASSETS	1,009	870
GOODWILL	15,688	17,271
INTANGIBLES, net	3,949	4,301
OTHER ASSETS, net	2,190	2,586
INVESTMENT IN EECP GLOBAL	1,116	-
DEFERRED TAX ASSETS, net	271	323
Total assets	$50,376	$54,364
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$6,285	$7,654
Accrued commissions	1,474	2,102
Accrued expenses and other liabilities	4,867	5,344
Finance lease liabilities - current	190	170
Operating lease liabilities - current	540	549
Sales tax payable	621	887
Deferred revenue - current portion	11,516	12,345
Notes payable - current portion	5,970	2,700
Notes payable - related parties - current portion	-	1,233
Due to related party	236	19
Total current liabilities	31,699	33,003
LONG-TERM LIABILITIES
Notes payable, net of current portion	5,779	8,121
Notes payable - related parties, net of current portion	-	20
Finance lease liabilities, net of current portion	246	437
Operating lease liabilities, net of current portion	469	321
Deferred revenue, net of current portion	6,188	6,998
Deferred tax liability	-	124
Other long-term liabilities	910	1,026
Total long-term liabilities	13,592	17,047
COMMITMENTS AND CONTINGENCIES (NOTE S)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 1,000,000 shares authorized; nil shares
issued and outstanding at December 31, 2020 and December 31, 2019	-	-
Common stock, $.001 par value; 250,000,000 shares authorized;
185,244,299 and 183,744,376 shares issued at December 31, 2020 and December 31, 2019;
174,936,212 and 173,436,289 shares outstanding at December 31, 2020 and December 31, 2019	185	184
Additional paid-in capital	63,886	63,803
Accumulated deficit	(57,002)	(57,360)
Accumulated other comprehensive income (loss)	16	(313)
Treasury stock, at cost, 10,308,087 shares at December 31, 2020 and December 31, 2019	(2,000)	(2,000)
Total stockholders’ equity	5,085	4,314
	$50,376	$54,364

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

F-4

Vaso Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

	Year ended
	December 31,
	2020	2019
Revenues
Managed IT systems and services	$43,894	$45,505
Professional sales services	22,865	26,208
Equipment sales and services	3,091	3,802
Total revenues	69,850	75,515
Cost of revenues
Cost of managed IT systems and services	26,212	26,715
Cost of professional sales services	4,257	4,921
Cost of equipment sales and services	810	1,447
Total cost of revenues	31,279	33,083
Gross profit	38,571	42,432
Operating expenses
Selling, general and administrative	37,054	41,028
Research and development	745	813
Total operating expenses	37,799	41,841
Operating income	772	591
Other (expense) income
Interest and financing costs	(701)	(993)
Interest and other income, net	176	131
Gain on sale of equity in EECP Global	110	-
Total other (expense) income, net	(415)	(862)
Income (loss) before income taxes	357	(271)
Income tax benefit (expense)	1	(111)
Net income (loss)	358	(382)
Other comprehensive income (loss)
Foreign currency translation gain	142	2
Comprehensive income (loss)	$500	$(380)
Earnings (loss) per common share
- basic	$0.00	$(0.00)
- diluted	$0.00	$(0.00)
Weighted average common shares outstanding
- basic	169,932	167,843
- diluted	170,846	167,843

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

F-5

Vaso Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(in thousands)

	Common Stock		Treasury Stock		Additional		Accumulated  Other	Total
	Shares	Amount	Shares	Amount	Paid-in-Capital	Accumulated Deficit	Comprehensive Loss	Stockholders’ Equity
Balance at January 1, 2019	177,417	$178	(10,308)	(2,000)	$63,672	$(56,978)	$(315)	$4,557
Share-based compensation	6,327	6	-	-	135	-	-	141
Shares withheld for employee tax liability	-	-	-	-	(4)	-	-	(4)
Foreign currency translation gain	-	-	-	-	-	-	2	2
Net loss	-	-	-	-	-	(382)		(382)
Balance at December 31, 2019	183,744	$184	(10,308)	$(2,000)	$63,803	$(57,360)	$(313)	$4,314
Balance at January 1, 2020	183,744	$184	(10,308)	(2,000)	$63,803	$(57,360)	$(313)	$4,314
Share-based compensation	1,500	1	-	-	87	-	-	88
Shares withheld for employee tax liability	-	-	-	-	(4)	-	-	(4)
Reclassify accumulated translation loss (see Note N)	-	-	-	-	-	-	187	187
Foreign currency translation gain	-	-	-	-	-	-	142	142
Net income	-	-	-	-	-	358	-	358
Balance at December 31, 2020	185,244	$185	(10,308)	$(2,000)	$63,886	$(57,002)	$16	$5,085

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

F-6

Vaso Corporation and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year ended
	December 31,
	2020	2019
Cash flows from operating activities
Net income (loss)	$358	$(382)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities
Depreciation and amortization	2,462	2,681
Deferred income taxes	(73)	52
Gain from investment in EECP Global	(11)	-
Gain on sale of equity in EECP Global	(110)	-
Provision for doubtful accounts and commission adjustments	663	507
Amortization of debt issue costs	-	14
Share-based compensation	88	141
Changes in operating assets and liabilities:
Accounts and other receivables	5,050	(5,301)
Due from related parties	55	10
Inventories	6	31
Deferred commission expense	407	(200)
Prepaid expenses and other current assets	193	(450)
Other assets, net	350	449
Accounts payable	(1,369)	316
Accrued commissions	(791)	(56)
Accrued expenses and other liabilities	(333)	(261)
Sales tax payable	(243)	(131)
Deferred revenue	(870)	1,258
Due to related party	218	-
Other long-term liabilities	(116)	(11)
Net cash provided by (used in) operating activities	5,934	(1,333)
Cash flows from investing activities
Purchases of equipment and software	(1,000)	(1,205)
Sale of fixed assets	-	22
Purchases of short-term investments	(725)	-
Proceeds from sale of equity in EECP Global	1,150	-
Net cash used in investing activities	(575)	(1,183)
Cash flows from financing activities
Net (repayment) borrowings on revolving lines of credit	(1,375)	1,550
Proceeds from note payable	3,756	-
Payroll taxes paid by withholding shares	(4)	(4)
Repayment of notes payable and finance lease obligations	(1,674)	(367)
Proceeds from notes payable	-	300
Proceeds from notes payable - related parties	-	930
Repayment of notes payable - related parties	(1,256)	(500)
Net cash (used in) provided by financing activities	(553)	1,909
Effect of exchange rate differences on cash and cash equivalents	(111)	63
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	4,695	(544)
Cash and cash equivalents - beginning of period	2,124	2,668
Cash and cash equivalents - end of period	$6,819	$2,124
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
Interest paid	$702	$784
Income taxes paid	$70	$62
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Initial recognition of operating lease right of use asset and liability	$791	$1,107
Equipment acquired through note payable	$42	$-
Equipment acquired through finance lease	$-	$229

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

OTES T

F-7

O CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – DESCRIPTION OF BUSINESS

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

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 business focuses primarily on 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.

F-8

VasoMedical

The proprietary medical equipment business under VasoMedical traces back to 1995 when the Company began the proprietary Enhanced External Counterpulsation (EECP®) technology in the United States and has since diversified to include other medical hardware and software. 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.

Over the last decade the Company’s Equipment business has been significantly expanded from the original EECP®-only operations. In September 2011, the Company acquired FGE, a British Virgin Islands company, which owned or controlled 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 was a variable interest entity (“VIE”) controlled by FGE through certain contracts and an option to acquire all the shares of Biox by FGE’s wholly owned subsidiary Gentone, and in March 2019 Gentone exercised its option to acquire all of the shares of Biox. In August 2014, the Company through Gentone 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 local 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 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. On May 20, 2020, the Company closed on the sale of 51% of the capital stock of its wholly-owned subsidiary EECP Global Corporation (“EECP Global”) to PSK for $1,150,000. EECP Global was formed in September 2019 to hold all the assets and liabilities of its EECP business. Concurrently with the closing of the transaction, the Company signed a three-year Management Service Agreement with EECP Global to provide management service for the business and operation of EECP Global in the United States. Pursuant to the agreement, EECP Global reimburses the Company all direct expenses and pays a management fee starting April 1, 2020, the effective date of the sale.

NOTE B – REVISIONS

The income statement, balance sheet and changes in stockholders’ equity for the year ended December 31, 2019 have been corrected for immaterial errors as a result of what we believe to be the misappropriation of funds by a mid-level management employee, who was not an officer or director of the Company. The correction includes $190 thousand in additional SG&A expense in the year ended December 31, 2019 and a beginning balance addition of total $907 thousand to accumulated deficit at January 1, 2019, of which $333 thousand represents a charge as of the May 2015 acquisition date of the subsidiary affected. The effect on net income (loss) for each of the years ended December 31, 2015 through December 31, 2018 is not material. The individual was suspended on March 29, 2021 and was terminated effective April 1, 2021. Upon additional examination and comprehensive review, the Company believes that this was an isolated incident and non-recurring. The Company has taken immediate steps to implement additional internal control procedures. See also Item 9A – Controls and Procedures.

 In addition, the Company noted accounting errors in our IT segment where certain regulatory fees billed to our customers during the years 2016 through 2019 were partially recorded as revenue. Correction of such errors resulted in a $147 thousand addition to accumulated deficit at January 1, 2019 and the reversal of $231 thousand in revenue in the year ended December 31, 2019.

F-9

The Company assessed the materiality of these misstatements on prior periods’ financial statements in accordance with SEC Staff Accounting Bulletin ("SAB") No. 99, Materiality, codified in ASC 250 ("ASC250"), Presentation of Financial Statements, and concluded that these misstatements were not material to any prior annual or interim periods. Accordingly, in accordance with ASC 250 (SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the Consolidated Financial Statements as of December 31, 2019, and the year then ended, which are presented herein, have been revised. The following are selected line items from the Company's Consolidated Financial Statements illustrating the effect of these corrections:

	Consolidated Statement of Operations and Comprehensive Income (Loss)
	Year ended December 31, 2019
(in thousands, except per share data)	As Reported	Adjustment	As Revised
Revenues
Managed IT systems and services	$45,736	$(231)	$45,505
Gross Profit	42,663	(231)	42,432
Operating expenses
Selling, general and administrative	40,838	190	41,028
Operating income	$1,012	$(421)	$591
Net income (loss)	$39	$(421)	$(382)
Comprehensive income (loss)	$41	$(421)	$(380)
Earnings (loss) per common share
- basic	$0.00	$(0.00)	$(0.00)
- diluted	$0.00	$(0.00)	$(0.00)

	Consolidated Balance Sheet
	As of December 31, 2019
(in thousands)	As Reported	Adjustment	As Revised
Accounts payable	$6,179	$1,475	$7,654
Accumulated deficit	$(55,885)	$(1,475)	$(57,360)

	Consolidated Statement of Cash Flows
	Year ended December 31, 2019
(in thousands)	As Reported	Adjustment	As Revised
Net income (loss)	$39	$(421)	$(382)
Accounts payable	$(105)	$421	$316

	Consolidated Statement of Changes in Stockholders' Equity
	Accumulated Deficit			Total Shareholders' Equity
(in thousands)	As Reported	Adjustment	As Revised	As Reported	Adjustment	As Revised
Balance at January 1, 2019	$(55,924)	$(1,054)	$(56,978)	$5,611	$(1,054)	$4,557
Net income (loss)	$39	$(421)	$(382)	$39	$(421)	$(382)
Balance at December 31, 2019	$(55,885)	$(1,475)	$(57,360)	$5,789	$(1,475)	$4,314

F-10

NOTE C - 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 accounts of the companies over which we exercise control. Significant intercompany balances and transactions have been eliminated.

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 its medical products 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”).

F-11

Disaggregation of Revenue

The following tables present revenues disaggregated by our business operations and timing of revenue recognition:

 (in thousands)

	Year Ended December 31, 2020				Year Ended December 31, 2019
		Professional sales				Professional sales
	IT segment	service segment	Equipment segment	Total	IT segment	service segment	Equipment segment	Total
Network services	$39,908	$-	$-	$39,908	$39,962	$-	$-	$39,962
Software sales and support	3,986	-	-	3,986	5,543	-	-	5,543
Commissions	-	22,865	-	22,865	-	26,208	-	26,208
Medical equipment sales	-	-	2,789	2,789	-	-	2,778	2,778
Medical equipment service	-	-	302	302	-	-	1,024	1,024
	$43,894	$22,865	$3,091	$69,850	$45,505	$26,208	$3,802	$75,515

	Year Ended December 31, 2020				Year Ended December 31, 2019
		Professional sales				Professional sales
	IT segment	service segment	Equipment segment	Total	IT segment	service segment	Equipment segment	Total
Revenue recognized over time	$40,660	$-	$234	$40,894	$40,628	$-	$595	$41,223
Revenue recognized at a point in time	3,234	22,865	2,857	28,956	4,877	26,208	3,207	34,292
	$43,894	$22,865	$3,091	$69,850	$45,505	$26,208	$3,802	$75,515

Transaction Price Allocated to Remaining Performance Obligations

As of December 31, 2020, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $71 million, of which we expect to recognize revenue as follows:

(in thousands)

	Fiscal years of revenue recognition (unaudited)
	2021	2022	2023	Thereafter
Unfulfilled performance obligations	$38,686	$17,825	$5,657	$8,631

F-12

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 $553,000 and $568,000 at December 31, 2020 and 2019, respectively, and are included in accrued expenses and other liabilities in our consolidated balance sheets.

In our VasoHealthcare business, we bill a portion of commissions on the orders we booked in advance of delivery of the underlying equipment. Such amounts aggregated approximately $17,689,000 and $18,565,000 at December 31, 2020 and 2019, 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 $1,118,000 and $1,270,000 at December 31, 2020 and 2019, 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 $15,000 and $778,000 at December 31, 2020 and 2019, respectively, and are classified in our consolidated balance sheets as either current or long-term deferred revenue.

During the year ended December 31, 2020, we recognized approximately $4.9 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 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, 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 are charged to expense at go-live or customer acceptance. In our professional sales services segment, commissions paid to our sales force are deferred until the underlying equipment is accepted by the customer.

At December 31, 2020, our consolidated balance sheet includes approximately $4,037,000 in capitalized sales commissions to be expensed in future periods, of which $2,354,000 is recorded in deferred commission expense and $1,683,000, 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. 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. In addition, the Company records commissions for arranging financing at an estimated rate which is subject to later revision based on certain factors. The Company recognized increases in revenue associated with revisions to variable consideration for previously completed performance obligations of $5,000 for the year ended December 31, 2020.

F-13

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”), 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 grant date fair values. 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, 2020 and 2019.

During the year ended December 31, 2020, the Company granted 1,000,000 restricted shares of common stock valued at $20,000 to an employee. 20% of the shares vested at approximate grant date and the remaining 80% vest over four years from the grant date. The total fair value of shares vested during the year ended December 31, 2020 was $23,000 for officers and $63,000 for employees. The weighted average grant date fair value of shares granted during the year ended December 31, 2020 was $0.02 per share.

During the year ended December 31, 2019, the Company granted 5,500,000 restricted shares of common stock valued at $115,000 to officers. The shares vest over four years from the grant date. The total fair value of shares vested during the year ended December 31, 2019 was $65,000 for officers and $113,000 for employees. The weighted average grant date fair value of shares granted during the year ended December 31, 2019 was $0.02 per share.

The Company did not grant any stock options during the years ended December 31, 2020 or 2019, nor were any options exercised during such periods. No options were outstanding at December 31, 2020 or 2019.

Share-based compensation expense recognized for the years ended December 31, 2020 and 2019 was $88,000 and $141,000, 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 $76,000 at December 31, 2020 and will be recognized over a weighted-average period of approximately 16 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.

Short term investments

The Company's short-term investments consist of bank deposits with yields based on underlying debt and equity securities.

F-14

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,
	2020	2019
Beginning Balance	$4,285	$3,994
Provision for losses on accounts receivable	663	507
Direct write-offs, net of recoveries	(542)	(528)
Commission adjustments	(186)	312
Deconsolidate EECP Global (see Note N)	(12)	-
Ending Balance	$4,208	$4,285

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, 2020 and 2019, 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 and our long history of doing business with GEHC.

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 $582,000 and $352,000 at December 31, 2020 and 2019, respectively.

Inventories

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 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.

F-15

Property and Equipment

Property and equipment, including assets under finance leases, 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, an 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, 2020 and 2019.

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 $541,000 and $494,000 in software development costs for the years ended December 31, 2020 and 2019, 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, 2020 and 2019.

Deferred Revenue

Amounts billable under the agreement with GEHC in advance of delivery of the underlying 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 J)

F-16

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, 2020 and 2019. 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, 2020 and 2019. Generally, the Company is no longer subject to income tax examinations by major domestic taxing authorities for years before 2017. 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 Income (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, 2020 and 2019, other comprehensive income includes gains of $142,000 and $2,000, respectively, which were entirely from foreign currency translation.

Net Income (Loss) Per Common Share

Basic income 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.

Diluted earnings per share were computed based on the weighted average number of shares outstanding plus all potentially dilutive common shares.  A reconciliation of basic to diluted shares used in the earnings per share calculation is as follows:

(in thousands)

	Year ended December 31,
	2020	2019
Basic weighted average shares outstanding	169,932	167,843
Dilutive effect of unvested restricted shares	914	-
Diluted weighted average shares outstanding	170,846	167,843

F-17

The following table represents common stock equivalents that were excluded from the computation of diluted earnings per share for the years ended December 31, 2020 and 2019, because the effect of their inclusion would be anti-dilutive.

(in thousands)

	Year ended December 31,
	2020	2019
Restricted common stock grants	76	1,267

Recently Adopted Accounting Pronouncements

Effective January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842, "Leases." See Note N for further details.

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:

Credit Losses on Financial instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how we determine our allowance for estimated uncollectible receivables. In November 2019, the FASB issued ASU 2019-10, which changed the effective date of ASU 2016-13 for smaller reporting companies as defined by the SEC from first quarter of 2020 to the first quarter of 2023, with early adoption permitted. We are currently evaluating the effect that ASU 2016-13 will have on our consolidated financial statements and related disclosures.

NOTE D – 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 (see Note O) both domestically and internationally, as well as the development, production, marketing and supporting of other medical devices.

F-18

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,
	2020	2019
Revenues from external customers
IT	$43,894	$45,505
Professional sales service	22,865	26,208
Equipment	3,091	3,802
Total revenues	$69,850	$75,515
Gross Profit
IT	$17,682	$18,790
Professional sales service	18,608	21,287
Equipment	2,281	2,355
Total gross profit	$38,571	$42,432
Operating income (loss)
IT	$(1,247)	$(1,170)
Professional sales service	2,977	3,626
Equipment	(155)	(855)
Corporate	(803)	(1,010)
Total operating income (loss)	$772	$591
Depreciation and amortization
IT	$2,010	$2,213
Professional sales service	161	170
Equipment	291	298
Corporate	-	-
Total depreciation and amortization	$2,462	$2,681
Capital expenditures
IT	$960	$1,149
Professional sales service	26	-
Equipment	12	54
Corporate	2	2
Total cash capital expenditures	$1,000	$1,205

	December 31, 2020	December 31, 2019
Identifiable Assets
IT	$28,110	$30,079
Professional sales service	9,171	16,257
Equipment	6,668	6,370
Corporate	6,427	1,658
Total assets	$50,376	$54,364

F-19

For the years ended December 31, 2020 and 2019, GEHC accounted for 33% and 35% of revenue, respectively. Also, GEHC accounted for $5.1 million, or 52%, and $10.9 million, or 69%, of accounts and other receivables at December 31, 2020 and 2019, respectively.

Our revenues were derived from the following geographic areas:

(in thousands)

	Year ended December 31,
	2020	2019
Domestic (United States)	$67,184	$73,019
Non-domestic (foreign)	2,666	2,496
	$69,850	$75,515

NOTE E – ACCOUNTS AND OTHER RECEIVABLES

The following table presents information regarding the Company’s accounts and other receivables as of December 31, 2020 and 2019:

(in thousands)

	December 31, 2020	December 31, 2019
Trade receivables	$13,960	$20,110
Due from employees	24	27
Allowance for doubtful accounts and
commission adjustments	(4,208)	(4,285)
Accounts and other receivables, net	$9,776	$15,852

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.

F-20

NOTE F – INVENTORIES

Inventories, net of reserves, consisted of the following:

(in thousands)

	December 31, 2020	December 31, 2019
Raw materials	$669	$650
Work in process	4	181
Finished goods	711	1,110
	$1,384	$1,941

At December 31, 2020 and 2019, the Company maintained reserves for slow moving inventories of $167,000 and $390,000, respectively.

NOTE G – PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

(in thousands)

	December 31, 2020	December 31, 2019
Office, laboratory and other equipment	$2,328	$2,476
Equipment furnished for customer
or clinical uses	9,176	8,796
Right of use assets - finance leases	1,115	1,115
Furniture and fixtures	99	127
	12,718	12,514
Less: accumulated depreciation and amortization	(8,833)	(7,560)
Property and equipment, net	$3,885	$4,954

Accumulated amortization of right of use (“ROU”) assets under finance leases aggregated approximately $636,000 and $438,000 at December 31, 2020 and 2019, respectively. Depreciation expense amounted to approximately $1,556,000 and $1,738,000 for the years ended December 31, 2020 and 2019, respectively. Amortization of ROU assets under finance leases is included in depreciation expense.

NOTE H – GOODWILL AND OTHER INTANGIBLES

Goodwill of $14,375,000 is attributable to the NetWolves reporting unit within the IT segment. The remaining $1,313,000 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, 2020 and 2019. The changes in the carrying amount of goodwill are as follows:

(in thousands)

	Year ended	Year ended
	December 31, 2020	December 31, 2019
Beginning of period	$17,271	$17,309
Foreign currency translation adjustment	82	(38)
Sale of equity in EECP Global	(1,665)	-
End of period	$15,688	$17,271

F-21

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, 2020	December 31, 2019
Customer-related
Costs	$5,831	$5,831
Accumulated amortization	(3,947)	(3,553)
	1,884	2,278
Patents and Technology
Costs	1,894	2,363
Accumulated amortization	(1,521)	(1,752)
	373	611
Software
Costs	3,394	2,840
Accumulated amortization	(1,702)	(1,428)
	1,692	1,412
	$3,949	$4,301

The Company owns, through our Chinese subsidiaries, thirty invention and utility patents that expire at various times through 2032, 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. Due to the sale of equity in the EECP business, the Company deconsolidated approximately $469,000 in gross patent assets and related accumulated amortization. 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 $906,000 and $943,000 for the years ended December 31, 2020 and 2019, respectively. Amortization of intangibles for the next five years is:

(in thousands)

Years ending December 31,
2021	1,064
2022	768
2023	543
2024	474
2025	408
	$3,257

F-22

NOTE I – OTHER ASSETS

Other assets consist of the following:

(in thousands)

	December 31, 2020	December 31, 2019
Deferred commission expense - noncurrent	$1,683	$1,770
Trade receivables - noncurrent	448	631
Other, net of allowance for loss on loan receivable of
$412 at December 31, 2020 and 2019	59	185
	$2,190	$2,586

NOTE J – DEFERRED REVENUE

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

(in thousands)

	Year ended December 31,
	2020	2019
Deferred revenue at beginning of period	$19,343	$18,086
Deconsolidate EECP Global (see Note O)	(769)	-
Net additions:
Deferred extended service contracts	144	363
Deferred in-service and training	3	13
Deferred service arrangements	5	25
Deferred commission revenues	7,752	11,366
Recognized as revenue:
Deferred extended service contracts	(140)	(566)
Deferred in-service and training	-	(15)
Deferred service arrangements	(5)	(30)
Deferred commission revenues	(8,629)	(9,899)
Deferred revenue at end of period	17,704	19,343
Less: current portion	11,516	12,345
Long-term deferred revenue at end of period	$6,188	$6,998

F-23

NOTE K – ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

(in thousands)

	December 31, 2020	December 31, 2019
Accrued compensation	$1,044	$1,509
Accrued expenses - other	1,854	1,818
Other liabilities	1,969	2,017
	$4,867	$5,344

NOTE L – RELATED-PARTY TRANSACTIONS

The Company recorded interest charges aggregating approximately $287,000 and $467,000 for the years ended December 31, 2020 and 2019, respectively, payable to MedTechnology Investments, LLC (“MedTech”) pursuant to its promissory notes (“Notes”). The MedTech Notes were used in 2015 to partially fund the purchase of NetWolves. $2,300,000 of the $4,800,000 provided by MedTech was provided by directors of the Company, or by family members. The Notes bore interest, payable quarterly, at an annual rate of 9% through their original maturity date of May 29, 2019. In August 2018, MedTech agreed to extend, if necessary, the maturity date of $3,600,000 of the Notes an additional year from May 29, 2019 to May 29, 2020, provided that a minimum of $1,200,000 of the principal was paid on or before December 31, 2019 and the annual interest rate for the balance increased to 10% during the extension. The $1,200,000 principal payment was waived pursuant to MedTech’s consent to the bank line of credit maturity extension to September 30, 2020. The Notes 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. In April 2020, $1.2 million in principal was repaid and the maturity date of $3.6 million of the Notes were extended through April 30, 2021 at a new interest rate of 6% per annum. The maturity date was extended again in March 2021 to June 30, 2022, provided $1.2 million is paid prior to April 1, 2021, and $50,000 is paid quarterly beginning June 30, 2021 (see Note U). The interest rate remains at 6% per annum. Approximately $1.4 million of the $3.6 million outstanding balance of the MedTech Notes is included in current liabilities in the Company’s consolidated balance sheet as of December 31, 2020. Interest charges aggregating approximately $55,000 were outstanding at December 31, 2020 and paid on January 4, 2021.

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 and Associates, LLP, which performs certain legal services for the Company. Fees of approximately $227,000 and $280,000 were billed by the firm for the years ended December 31, 2020 and 2019, respectively, at which dates no amounts were outstanding.

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). In August 2019, the Company modified the notes, which had a remaining principal balance of RMB2,250,000, to change the interest rate from 9% to 10% per annum, effective August 27, 2019, and to extend the maturity date from August 26, 2019 to February 26, 2020. Unsecured notes and accrued interest aggregating approximately $339,000 was payable to officers of Biox at December 31, 2019. The notes and accrued interest were repaid in March 2020.

In the year ended December 31, 2019, the Company issued notes aggregating $930,000 to third parties, including directors and employees. The notes matured from January 2020 to July 2020 and bore interest at 10% per annum payable quarterly. In March 2020, the notes were extended for six months, substantially all of which matured by November 2020, at a reduced interest rate of 8%, and permitted prepayment without penalty. In June and July 2020, the Company repaid the notes and accrued interest.

F-24

NOTE M – NOTES PAYABLE

Notes payable consist of the following:

(in thousands)

	December 31, 2020	December 31, 2019
Line of credit	$4,346	$5,721
Notes payable	3,803	300
Notes payable - MedTech	3,600	4,800
Notes payable - related parties	-	1,253
Total debt	11,749	12,074
Less: current portion (including related parties)	(5,970)	(3,933)
	$5,779	$8,141

Line of Credit

NetWolves maintains a $4.0 million line of credit with a lending institution. In December 2019, the line’s expiration date was extended from December 18, 2019 to September 30, 2020, and the interest rate was increased 25 basis points to LIBOR plus 3.50%. In April 2020, the lending institution extended the maturity date to April 30, 2021 and established a minimum LIBOR rate of 0.50%. The maturity date was extended again in March 2021 to June 30, 2022 provided $825,000 is paid prior to April 1, 2021, and $50,000 is paid quarterly beginning June 30, 2021 (see Note U). Advances under the line are secured by substantially all of the assets of NetWolves Network Services, LLC and guaranteed by Vaso Corporation. During the year ended December 31, 2020, $100,000 in draw was repaid. At December 31, 2020, the Company had drawn approximately $3.7 million against the line, of which amount $975,000 is included in notes payable – current portion in the Company’s consolidated balance sheet at December 31, 2020.

The Company maintained an additional $2.0 million line of credit with a lending institution. In December 2019, the line’s expiration date was extended from December 18, 2019 to September 30, 2020, and the interest rate was increased 25 basis points to LIBOR plus 3.50%. Advances under the line are secured by substantially all of the assets of the Company. In April 2020, the lending institution extended the maturity date to April 30, 2021 and established a minimum LIBOR rate of 0.50%, and $1.2 million in draw was repaid. At December 31, 2020, the Company had drawn $675,000 against the line. In March 2021, the $675,000 balance and accrued interest was paid off in full and the line was closed (see Note U). The line of credit agreement includes certain financial covenants, and the Company was in compliance with such covenants at December 31, 2020. The $675,000 balance is included in notes payable – current portion in the Company’s consolidated balance sheet at December 31, 2020.

Notes Payable

In August 2019, the Company issued to a private party a $300,000 note bearing interest at 10% and maturing November 15, 2019. In November, 2019, the note’s maturity date was extended to January 15, 2020, and repaid upon maturity.

In April 2020, the Company’s Biox subsidiary issued a note RMB1,000,000 (approximately $153,000) with a Chinese bank for working capital purposes. The note was secured by the assets of Biox and bore interest at 4.35% per annum. It matured on April 15, 2021 and was repaid upon maturity.

In August 2020, the Company issued a note for approximately $42,000 for the purchase of equipment. The note is secured by the purchased equipment, bears interest at 1.9% and is payable in 60 equal monthly installments maturing August 2025.

F-25

Paycheck Protection Program debt

In April 2020, the Company received funding of a $3,610,900 Note (the “PPP Note”) issued by PNC Bank, National Association (“PNC”) pursuant to the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s Paycheck Protection Program (the “Program”).

The Company accounts for the PPP Note in accordance with Financial Accounting Standards Board ASC Topic 470, “Debt”, and Technical Question and Answer (TQA) 3200.18, “Borrower Accounting for a Forgivable Loan Received Under the Small Business Administration Paycheck Protection Program”. Under the TQA, the Company:

●

Initially records the cash inflow from the PPP loan as a financial liability and accrues interest in accordance with the interest method under ASC Subtopic 835-30.

●

Does not impute additional interest at a market rate.

●

Continues to record the proceeds from the loan as a liability until either (i) the loan is partly or wholly forgiven and the debtor has been legally released or (ii) the debtor pays off the loan.

●

Reduces the liability by the amount forgiven and records a gain on extinguishment once the loan is partly or wholly forgiven and legal release is received.

Amounts outstanding on the PPP Note are at the annual interest rate of 1%. During the first six months of the PPP Note, there is no principal nor interest required to be paid. Thereafter, to the extent the PPP Note is not forgiven under the Program, the outstanding balance of the PPP Note converts to an amortizing term loan payable monthly over an eighteen-month period, which has been updated according to the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). The PPP Note can be prepaid at any time without penalty.

In June 2020, the Flexibility Act was signed into law, which amended the CARES Act. The Flexibility Act changed key provisions of the PPP, including, but not limited to, (i) provisions relating to the maturity of PPP loans, (ii) the deferral period covering of PPP loan payments and (iii) the process for measurement of loan forgiveness. More specifically, the Flexibility Act provides a minimum maturity of five years for all PPP loans made on or after the date of the enactment of the Flexibility Act (“June 5, 2020”) and permits lenders and borrowers to extend the maturity date of earlier PPP loans by mutual agreement. As of the date of this filing, the Company has not approached the lender to request an extension of the maturity date from two years to five years. The Flexibility Act also provides that if a borrower does not apply for forgiveness of a loan within 10 months after the last day of the measurement period (“covered period”), the PPP loan is no longer deferred and the borrower must begin paying principal and interest. In addition, the Flexibility Act extended the length of the covered period from eight weeks to 24 weeks from receipt of proceeds, while allowing borrowers that received PPP loans before June 5, 2020 to determine, at their sole discretion, a covered period of either 8 weeks or 24 weeks.

After reviewing the applicable terms and conditions of the Flexibility Act, the Company elected to extend the length of the covered period from the lesser of (i) period whereby qualified expenses equal loan proceeds or (ii) 24 weeks. The Company has performed initial calculations for the PPP loan forgiveness according to the terms and conditions of the SBA’s Loan Forgiveness Application (Revised June 16, 2020) and, based on such calculations, expects that the PPP loan will be forgiven in full over a period less than 24 weeks. In October 2020, the Company submitted its application to PNC for forgiveness of the PPP Note in an amount equal to the sum of the following costs incurred by the Company during the covered period beginning on the date of first disbursement of the PPP Note proceeds:

(a) payroll costs;

(b) any payment of interest on a covered mortgage obligation;

(c) any covered rent payment; and

(d) any covered utility payment.

The amount of forgiveness is calculated in accordance with the requirements of the Program. In this regard, no more than 40% of the amount forgiven can be attributable to non-payroll costs.

F-26

NOTE N – LEASES

ASC 842, “Leases”, 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 ASC 842 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 enters into finance leases, typically with terms of 3 to 5 years, to acquire equipment for its data center. The Company enters into operating leases for its facilities in New York, Florida, and China, as well as for vehicles provided to certain employees in the professional sales services segment. The operating lease terms range from 2 to 7 years. The Company excluded the renewal option on its applicable facility leases from the calculation of its right-of-use assets and lease liabilities.

Finance and operating lease liabilities consist of the following:

(in thousands)

	December 31, 2020	December 31, 2019
Lease liabilities - current
Finance leases	$190	$170
Operating leases	540	549
	$730	$719
Lease liabilities - net of current portion
Finance leases	$246	$437
Operating leases	469	321
	$715	$758

A reconciliation of undiscounted cash flows to finance and operating lease liabilities recognized in the consolidated balance sheet at December 31, 2020 is set forth below:

(in thousands)

Years ending December 31,	Finance leases	Operating leases	Total
2021	227	613	840
2022	200	374	574
2023	62	98	160
Undiscounted lease payments	489	1,085	1,574
Amount representing interest	(53)	(76)	(129)
Discounted lease liabilities	436	1,009	1,445

F-27

Additional disclosures of lease data are set forth below:

(in thousands)

	Year ended December 31, 2020
Lease costs:
Finance lease costs:
Amortization of right-of-use assets	$198
Interest on lease liabilities	56
	254
Operating lease costs:	712
Short-term lease costs:	82
Total lease cost	$1,048
Other information:
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows from finance leases	$56
Operating cash flows from operating leases	712
Financing cash flows from finance leases	171
	$939

	December 31, 2020
Weighted-average remaining lease term - finance leases (months)	29
Weighted-average remaining lease term - operating leases (months)	23
Weighted-average discount rate - finance leases	12.1%
Weighted-average discount rate - operating leases	8.6%

The Company used the rate implicit in the lease, where known, or its incremental borrowing rate as the rate used to discount the future lease payments.

F-28

NOTE O – SALE OF EQUITY IN THE EECP BUSINESS

On May 20, 2020, the Company closed on the sale of 51% of the capital stock of its wholly-owned subsidiary EECP Global Corporation (“EECP Global”) to Chongqing PSK-Health Sci-Tech Development Co. Ltd, a China-based company, for $1,150,000. EECP Global was formed in September 2019 to hold all the assets and liabilities of its EECP business. Concurrently with the closing of the transaction, the Company signed a three-year Management Service Agreement with EECP Global to provide management service for the business and operation of EECP Global in the United States. Pursuant to the agreement, EECP Global reimburses the Company all direct expenses and pays a management fee starting April 1, 2020, the effective date of the sale.

Due to the Company’s now minority ownership of EECP Global, it deconsolidated the EECP Global operations effective April 1, 2020 and recorded a gain on sale of approximately $110,000, of which approximately $54,000 resulted from the gain related to the remeasurement of the retained noncontrolling investment in EECP Global to fair value. The gain on sale includes the effect of the reclassification of approximately $187,000 in accumulated translation losses from accumulated other comprehensive loss.

The Company uses the equity method to account for its interest in EECP Global, as it has the ability to exercise significant influence over the entity, and reports its share of EECP Global operations in Other Income (Expense) on its condensed consolidated statements of operations. For the year ended December 31, 2020, the Company’s share of EECP Global’s income was approximately $11,000. At December 31, 2020, the Company recorded a net payable to related parties of approximately $233,000 on its consolidated balance sheet for amounts due to EECP Global for receivables collected on its behalf net of amounts due from EECP Global for fees and cost reimbursements.

NOTE P – 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, 2020 and 2019, 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.

NOTE Q - 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.

F-29

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, 2020. In June 2020, the 2010 Plan terminated with 15,059 ungranted authorized shares.

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, 2020, no shares of common stock were granted under the 2013 Plan, 251,250 shares were forfeited, and 77,369 shares were withheld for withholding taxes.

No shares of common stock or options were granted under the 2013 Plan during the year ended December 31, 2020.

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.

No shares of common stock or options were granted under the 2016 Plan during the year ended December 31, 2020.

2019 Stock Option and Stock Issuance Plan

In May 2019, the Board of Directors ("Board") approved the 2019 Stock Plan (the "2019 Plan") for officers, directors, and senior employees of the Corporation or any subsidiary of the Corporation. The stock issuable under the 2019 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 2019 Plan is 15,000,000 shares.

The 2019 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.

F-30

During the year ended December 31, 2020, 1,000,000 shares were granted under the 2019 Plan.

The following table summarizes non-vested restricted shares under all plans for the year ended December 31, 2020:

(in thousands) 

	Shares Available for Future Issuance	Unvested shares	Weighted Average Grant Date Fair Value
Balance at December 31, 2018	1,901,817	2,387,500	$0.12
Authorized	15,000,000	-	$-
Granted	(5,500,000)	5,500,000	$0.02
Vested	-	(2,077,089)	$0.08
Forfeited	290,203	(290,203)	$0.14
Balance at December 31, 2019	11,692,020	5,520,208	$0.03
Authorized	-	-	$-
Granted	(1,000,000)	1,000,000	$0.02
Vested	-	(1,799,923)	$0.05
Forfeited	328,619	(328,619)	$0.10
Expired	(15,059)	-	$-
Balance at December 31, 2020	11,005,580	4,391,666	$0.02

There were 53,558,455 remaining authorized shares of common stock after reserves for all stock option plans.

NOTE R - INCOME TAXES

The following is a geographical breakdown of income (loss) before the provision for income taxes:

(in thousands)

	Year ended December 31,
	2020	2019
Domestic	$(74)	$(152)
Foreign	431	(119)
Income (loss) before provision for income taxes	$357	$(271)

F-31

The provision for income taxes consisted of the following:

(in thousands)

	Year ended December 31,
	2020	2019
Current provision (benefit)
Federal	$-	$-
State	78	43
Foreign	(7)	16
Total current provision (benefit)	71	59
Deferred provision (benefit)
Federal	41	41
State	11	11
Foreign	(124)	-
Total deferred provision (benefit)	(72)	52
Total income tax (benefit) provision	$(1)	$111
Effective income tax rate	-0.28%	-41.02%

Income tax benefit for the year ended December 31, 2020 was $1,000 due primarily to a $124,000 reduction in foreign deferred tax liability, partially offset by $78,000 in state income taxes. The income tax provision of $111,000 for the year ended December 31, 2019 was due primarily to $43,000 in state income taxes and a $52,000 reduction in deferred tax assets.

The following is a reconciliation of the effective income tax rate to the federal statutory rate:

(in thousands)  

	Year ended December 31,
	2020	2019
	%	%
Federal statutory rate	21.00	21.00
State income taxes	19.39	(16.91)
Change in valuation allowance
relating to operations	2.13	12.81
Foreign tax rate differential	(61.99)	(15.27)
R&D credit	(1.39)	5.64
Nondeductible expenses	8.06	(29.32)
Other	12.52	(18.97)
	(0.28)	(41.02)

F-32

The effective tax rate increased mainly due to the change from pre-tax loss in 2019 to pre-tax profit in 2020, and the impact of foreign taxes and non-deductible expenses.

As of December 31, 2020, the recorded deferred tax assets were $14,917,000, reflecting a decrease of $428,000 during the year ended December 31, 2020, which was offset by a valuation allowance of $12,145,000, reflecting a decrease of $182,000.

The components of our deferred tax assets and liabilities are summarized as follows:

  (in (thousands)

	December 31, 2020	December 31, 2019
Deferred Tax Assets:
Net operating loss carryforwards	$12,026	$12,517
Amortization	344	338
Stock-based compensation	6	6
Allowance for doubtful accounts	110	84
Reserve for slow moving inventory	47	169
Tax credits	449	444
Expense accruals	543	457
Excess interest carryforwards	-	171
Deferred revenue	1,392	1,159
Total gross deferred taxes	14,917	15,345
Valuation allowance	(12,145)	(12,327)
Net deferred tax assets	2,772	3,018
Deferred Tax Liabilities:
Deferred commissions	(370)	(302)
Goodwill	(1,445)	(1,186)
Differences in timing of revenue recognition	-	(124)
Depreciation	(686)	(1,207)
Total deferred tax liabilities	(2,501)	(2,819)
Total deferred tax assets (liabilities)	271	199
Recorded as:
Non-current deferred tax assets	271	323
Non-current deferred tax liabilities	-	(124)
Total deferred tax assets (liabilities)	$271	$199

F-33

The activity in the valuation allowance is set forth below:

(in thousands)

	2020	2019
Valuation allowance, January 1,	$12,327	$12,362
Change in valuation allowance	(182)	(35)
Valuation allowance, December 31,	$12,145	$12,327

At December 31, 2020, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $38 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.

NOTE S - 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 by GEHC without cause with certain conditions, 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 accounts in the 48 contiguous states of the United States and the District of Columbia. The circumstances under which early termination of the agreement may occur with cause include: not materially achieving certain sales goals, not maintaining a minimum number of sales representatives, and not meeting various legal and GEHC policy requirements. The Company met all the contractual conditions in 2020 except achieving certain sales goals due to the adverse impact of the COVID-19 pandemic.

Employment Agreements

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

F-34

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 December 2020, NetWolves extended the licensing and support service agreement of its billing system for an additional three years, to expire December 2023. The agreement provides for monthly recurring charges based on a percentage of billed revenues using these services, which charges aggregated approximately $301,000 and $331,000 for the years ended December 31, 2020 and 2019, respectively.

Letters of Credit

At December 31, 2020 we are contingently liable under a standby letter of credit approximating $220,500. The letter of credit is being maintained as security for payments to a vendor.

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, 2020 and 2019, the Company had and continues to have operations in China. Operating transactions in China are denominated in the Chinese currency called RMB or CNY, 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.

NOTE T - 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, subject to applicable IRS annual limitations. In the years ended December 31, 2020 and 2019 the Company made discretionary contributions, to match a percentage of employee contributions, of approximately $114,000 and $118,000, respectively.

NOTE U – SUBSEQUENT EVENT

Extension of debt maturity dates

In March 2021, the Company made principal payments aggregating $1.5 million on its lines of credit and $1.2 million on its MedTech Notes, and extended the maturity dates of its remaining line of credit and its MedTech Notes to June 30, 2022. The extensions require subsequent principal payments of $50,000 per quarter beginning June 30, 2021 through March 31, 2022 under both the line of credit and the MedTech Notes. No change was made to the interest rates in effect at the time of extensions.

F-35

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a/15d OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jun Ma, certify that:

1.

I have reviewed this report on Form 10-K of Vaso Corporation and subsidiaries (the “registrant”);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Jun Ma.

Jun Ma

President and Chief Executive Officer

Dated: May 4, 2021

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a/15d OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Beecher, certify that:

1.

I have reviewed this report on Form 10-K of Vaso Corporation and subsidiaries (the “registrant”);

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Michael Beecher

Michael Beecher

Chief Financial Officer

Dated: May 4, 2021

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Jun Ma, President and Chief Executive Officer of Vaso Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1)

the Annual Report on Form 10-K of the Company for the year ended December 31, 2020 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 4, 2021

/s/ Jun Ma 

Jun Ma

President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Beecher, Chief Financial Officer of Vaso Corporation (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1)

the Annual Report on Form 10-K of the Company for the year ended December 31, 2020 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 4, 2021

/s/ Michael Beecher 

Michael Beecher

Chief Financial Officer

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2020	Apr. 23, 2021	Jun. 28, 2020
Cover [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 Interactive Data Current	Yes
Entity Incorporation, State or Country Code	DE
Entity File Number	0-18105
Entity Public Float			$ 1,900,000
Entity Common Stock, Shares Outstanding		174,936,212
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2020

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
CURRENT ASSETS
Cash and cash equivalents	$ 6,819	$ 2,124
Short-term investments	766	0
Accounts and other receivables, net of an allowance for doubtful accounts and commission adjustments of $4,208 at December 31, 2020 and $4,285 at December 31, 2019	9,776	15,852
Receivables due from related parties	18	18
Inventories	1,384	1,941
Deferred commission expense	2,354	2,785
Prepaid expenses and other current assets	1,151	1,339
Total current assets	22,268	24,059
Property and equipment, net of accumulated depreciation of $8,833 at December 31, 2020 and $7,560 at December 31, 2019	3,885	4,954
Operating lease right of use assets	1,009	870
Goodwill	15,688	17,271
Intangibles, net	3,949	4,301
Other assets, net	2,190	2,586
Investment in EECP Global	1,116	0
Deferred tax assets, net	271	323
Total assets	50,376	54,364
CURRENT LIABILITIES
Accounts payable	6,285	7,654
Accrued commissions	1,474	2,102
Accrued expenses and other liabilities	4,867	5,344
Finance lease liabilities - current	190	170
Operating lease liabilities - current	540	549
Sales tax payable	621	887
Deferred revenue - current portion	11,516	12,345
Notes payable - current portion	5,970	2,700
Notes payable - related parties - current portion	0	1,233
Due to related party	236	19
Total current liabilities	31,699	33,003
LONG-TERM LIABILITIES
Notes payable, net of current portion	5,779	8,121
Notes payable - related parties, net of current portion	0	20
Finance lease liabilities, net of current portion	246	437
Operating lease liabilities, net of current portion	469	321
Deferred revenue, net of current portion	6,188	6,998
Deferred tax liability	0	124
Other long-term liabilities	910	1,026
Total long-term liabilities	13,592	17,047
Commitments and contingencies (Note S)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 1,000,000 shares authorized; nil shares issued and outstanding at December 31, 2020 and December 31, 2019	0	0
Common stock, $.001 par value; 250,000,000 shares authorized; 185,244,299 and 183,744,376 shares issued at December 31, 2020 and December 31, 2019; 174,936,212 and 173,436,289 shares outstanding at December 31, 2020 and December 31, 2019	185	184
Additional paid-in capital	63,886	63,803
Accumulated deficit	(57,002)	(57,360)
Accumulated other comprehensive income (loss)	16	(313)
Treasury stock, at cost, 10,308,087 shares at December 31, 2020 and December 31, 2019	(2,000)	(2,000)
Total stockholders' equity	5,085	4,314
Total liabilities and stockholders' equity	$ 50,376	$ 54,364

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
CURRENT ASSETS
Accounts and other receivables, allowance for doubtful accounts and commission adjustments	$ 4,208	$ 4,285
Property and equipment, accumulated depreciation	$ 8,833	$ 7,560
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	185,244,299	183,744,376
Common stock, shares outstanding	174,936,212	173,436,289
Treasury stock, at cost	10,308,087	10,308,087

XML

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Revenues
Total revenues	$ 69,850	$ 75,515
Cost of revenues
Total cost of revenues	31,279	33,083
Gross profit	38,571	42,432
Operating expenses
Selling, general and administrative	37,054	41,028
Research and development	745	813
Total operating expenses	37,799	41,841
Operating income (loss)	772	591
Other (expense) income
Interest and financing costs	(701)	(993)
Interest and other income, net	176	131
Gain on sale of equity in EECP Global	110	0
Total other (expense) income, net	(415)	(862)
Income (loss) before income taxes	357	(271)
Income tax benefit (expense)	1	(111)
Net income (loss)	358	(382)
Other comprehensive income (loss)
Foreign currency translation gain	142	2
Comprehensive income (loss)	$ 500	$ (380)
Earnings (loss) per common share
- basic	$ .00	$ (0.00)
- diluted	$ .00	$ (0.00)
Weighted average common shares outstanding
- basic (in thousands)	169,932	167,843
- diluted (in thousands)	170,846	167,843
Managed IT Systems and Services
Revenues
Total revenues	$ 43,894	$ 45,505
Cost of revenues
Total cost of revenues	26,212	26,715
Professional Sales Services
Revenues
Total revenues	22,865	26,208
Cost of revenues
Total cost of revenues	4,257	4,921
Equipment Sales and Services
Revenues
Total revenues	3,091	3,802
Cost of revenues
Total cost of revenues	$ 810	$ 1,447

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Treasury Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss	Total
Beginning balance, shares (in thousands) at Dec. 31, 2018	177,417	(10,308)
Beginning balance at Dec. 31, 2018	$ 178	$ (2,000)	$ 63,672	$ (56,978)	$ (315)	$ 4,557
Share-based compensation, shares (in thousands)	6,327
Share-based compensation	$ 6		135			141
Shares withheld for employee tax liability			(4)			(4)
Foreign currency translation gain					2	2
Net (loss) income				(382)		(382)
Ending balance, shares (in thousands) at Dec. 31, 2019	183,744	(10,308)
Ending balance at Dec. 31, 2019	$ 184	$ (2,000)	63,803	(57,360)	(313)	4,314
Share-based compensation, shares (in thousands)	1,500
Share-based compensation	$ 1		87			88
Shares withheld for employee tax liability			(4)			(4)
Reclassify accumulated translation loss (see Note N)					187	187
Foreign currency translation gain					142	142
Net (loss) income				358		358
Ending balance, shares (in thousands) at Dec. 31, 2020	185,244	(10,308)
Ending balance at Dec. 31, 2020	$ 185	$ (2,000)	$ 63,886	$ (57,002)	$ 16	$ 5,085

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Cash flows from operating activities
Net income (loss)	$ 358	$ (382)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization	2,462	2,681
Deferred income taxes	(73)	52
Gain from investment in EECP Global	(11)	0
Gain on sale of equity in EECP Global	(110)	0
Provision for doubtful accounts and commission adjustments	663	507
Amortization of debt issue costs	0	14
Share-based compensation	88	141
Changes in operating assets and liabilities:
Accounts and other receivables	5,050	(5,301)
Due from related parties	55	10
Inventories	6	31
Deferred commission expense	407	(200)
Prepaid expenses and other current assets	193	(450)
Other assets, net	350	449
Accounts payable	(1,369)	316
Accrued commissions	(791)	(56)
Accrued expenses and other liabilities	(333)	(261)
Sales tax payable	(243)	(131)
Deferred revenue	(870)	1,258
Due to related party	218	0
Other long-term liabilities	(116)	(11)
Net cash provided by (used in) operating activities	5,934	(1,333)
Cash flows from investing activities
Purchases of equipment and software	(1,000)	(1,205)
Sale of fixed assets	0	22
Purchases of short-term investments	(725)	0
Proceeds from sale of equity in EECP Global	1,150	0
Net cash used in investing activities	(575)	(1,183)
Cash flows from financing activities
Net (repayment) borrowings on revolving lines of credit	(1,375)	1,550
Proceeds from notes payable	3,756	300
Payroll taxes paid by withholding shares	(4)	(4)
Repayment of notes payable and finance lease obligations	(1,674)	(367)
Proceeds from notes payable - related parties	0	930
Repayment of notes payable - related parties	(1,256)	(500)
Net cash (used in) provided by financing activities	(553)	1,909
Effect of exchange rate differences on cash and cash equivalents	(111)	63
Net increase (decrease) in cash and cash equivalents	4,695	(544)
Cash and cash equivalents - beginning of period	2,124	2,668
Cash and cash equivalents - end of period	6,819	2,124
SUPPLEMENTAL DISCLOSURE OF CASH INFORMATION
Interest paid	702	784
Income taxes paid	70	62
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Initial recognition of operating lease right of use asset and liability	791	1,107
Equipment acquired through note payable	42	0
Equipment acquired through finance lease	$ 0	$ 229

XML

DESCRIPTION OF BUSINESS

12 Months Ended

Dec. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

DESCRIPTION OF BUSINESS

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

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 business focuses primarily on 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.

VasoMedical

The proprietary medical equipment business under VasoMedical traces back to 1995 when the Company began the proprietary Enhanced External Counterpulsation (EECP®) technology in the United States and has since diversified to include other medical hardware and software. 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.

Over the last decade the Company’s Equipment business has been significantly expanded from the original EECP®-only operations. In September 2011, the Company acquired FGE, a British Virgin Islands company, which owned or controlled 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 was a variable interest entity (“VIE”) controlled by FGE through certain contracts and an option to acquire all the shares of Biox by FGE’s wholly owned subsidiary Gentone, and in March 2019 Gentone exercised its option to acquire all of the shares of Biox. In August 2014, the Company through Gentone 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 local 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 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. On May 20, 2020, the Company closed on the sale of 51% of the capital stock of its wholly-owned subsidiary EECP Global Corporation (“EECP Global”) to PSK for $1,150,000. EECP Global was formed in September 2019 to hold all the assets and liabilities of its EECP business. Concurrently with the closing of the transaction, the Company signed a three-year Management Service Agreement with EECP Global to provide management service for the business and operation of EECP Global in the United States. Pursuant to the agreement, EECP Global reimburses the Company all direct expenses and pays a management fee starting April 1, 2020, the effective date of the sale.

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REVISIONS

12 Months Ended

Dec. 31, 2020

Accounting Changes and Error Corrections [Abstract]

REVISIONS

The income statement, balance sheet and changes in stockholders’ equity for the year ended December 31, 2019 have been corrected for immaterial errors as a result of what we believe to be the misappropriation of funds by a mid-level management employee, who was not an officer or director of the Company. The correction includes $190 thousand in additional SG&A expense in the year ended December 31, 2019 and a beginning balance addition of total $907 thousand to accumulated deficit at January 1, 2019, of which $333 thousand represents a charge as of the May 2015 acquisition date of the subsidiary affected. The effect on net income (loss) for each of the years ended December 31, 2015 through December 31, 2018 is not material. The individual was suspended on March 29, 2021 and was terminated effective April 1, 2021. Upon additional examination and comprehensive review, the Company believes that this was an isolated incident and non-recurring. The Company has taken immediate steps to implement additional internal control procedures. See also Item 9A – Controls and Procedures.

In addition, the Company noted accounting errors in our IT segment where certain regulatory fees billed to our customers during the years 2016 through 2019 were partially recorded as revenue. Correction of such errors resulted in a $147 thousand addition to accumulated deficit at January 1, 2019 and the reversal of $231 thousand in revenue in the year ended December 31, 2019.

The Company assessed the materiality of these misstatements on prior periods’ financial statements in accordance with SEC Staff Accounting Bulletin ("SAB") No. 99, Materiality, codified in ASC 250 ("ASC250"), Presentation of Financial Statements, and concluded that these misstatements were not material to any prior annual or interim periods. Accordingly, in accordance with ASC 250 (SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements), the Consolidated Financial Statements as of December 31, 2019, and the year then ended, which are presented herein, have been revised. The following are selected line items from the Company's Consolidated Financial Statements illustrating the effect of these corrections:

	Consolidated Statement of Operations and Comprehensive Income (Loss)
	Year ended December 31, 2019
(in thousands, except per share data)	As Reported		Adjustment			As Revised
Revenues
Managed IT systems and services	$	45,736	$	(231	)	$	45,505
Gross Profit		42,663		(231	)		42,432
Operating expenses
Selling, general and administrative		40,838		190			41,028
Operating income	$	1,012	$	(421	)	$	591
Net income (loss)	$	39	$	(421	)	$	(382	)
Comprehensive income (loss)	$	41	$	(421	)	$	(380	)
Earnings (loss) per common share
- basic	$	0.00	$	(0.00	)	$	(0.00	)
- diluted	$	0.00	$	(0.00	)	$	(0.00	)

	Consolidated Balance Sheet
	As of December 31, 2019
(in thousands)	As Reported			Adjustment			As Revised
Accounts payable	$	6,179		$	1,475		$	7,654
Accumulated deficit	$	(55,885	)	$	(1,475	)	$	(57,360	)

	Consolidated Statement of Cash Flows
	Year ended December 31, 2019
(in thousands)	As Reported			Adjustment			As Revised
Net income (loss)	$	39		$	(421	)	$	(382	)
Accounts payable	$	(105	)	$	421		$	316

	Consolidated Statement of Changes in Stockholders’ Equity
	Accumulated Deficit									Total Shareholders' Equity
(in thousands)	As Reported			Adjustment			As Revised			As Reported		Adjustment			As Revised
Balance at January 1, 2019	$	(55,924	)	$	(1,054	)	$	(56,978	)	$	5,611	$	(1,054	)	$	4,557
Net income (loss)		39			(421	)		(382	)		39		(421	)		(382	)
Balance at December 31, 2019	$	(55,885	)	$	(1,475	)	$	(57,360	)	$	5,789	$	(1,475	)	$	4,314

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2020

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 accounts of the companies over which we exercise control. Significant intercompany balances and transactions have been eliminated.

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 its medical products 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”).

Disaggregation of Revenue

The following tables present revenues disaggregated by our business operations and timing of revenue recognition:

(in thousands)

	Year Ended December 31, 2020								Year Ended December 31, 2019
			Professional sales								Professional sales
	IT segment		service segment		Equipment segment		Total		IT segment		service segment		Equipment segment		Total
Network services	$	39,908	$	-	$	-	$	39,908	$	39,962	$	-	$	-	$	39,962
Software sales and support		3,986		-		-		3,986		5,543		-		-		5,543
Commissions		-		22,865		-		22,865		-		26,208		-		26,208
Medical equipment sales		-		-		2,789		2,789		-		-		2,778		2,778
Medical equipment service		-		-		302		302		-		-		1,024		1,024
	$	43,894	$	22,865	$	3,091	$	69,850	$	45,505	$	26,208	$	3,802	$	75,515

	Year Ended December 31, 2020								Year Ended December 31, 2019
			Professional sales								Professional sales
	IT segment		service segment		Equipment segment		Total		IT segment		service segment		Equipment segment		Total
Revenue recognized over time	$	40,660	$	-	$	234	$	40,894	$	40,628	$	-	$	595	$	41,223
Revenue recognized at a point in time		3,234		22,865		2,857		28,956		4,877		26,208		3,207		34,292
	$	43,894	$	22,865	$	3,091	$	69,850	$	45,505	$	26,208	$	3,802	$	75,515

Transaction Price Allocated to Remaining Performance Obligations

As of December 31, 2020, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $71 million, of which we expect to recognize revenue as follows:

(in thousands)

	Fiscal years of revenue recognition (unaudited)
	2021		2022		2023		Thereafter
Unfulfilled performance obligations	$	38,686	$	17,825	$	5,657	$	8,631

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 $553,000 and $568,000 at December 31, 2020 and 2019, respectively, and are included in accrued expenses and other liabilities in our consolidated balance sheets.

In our VasoHealthcare business, we bill a portion of commissions on the orders we booked in advance of delivery of the underlying equipment. Such amounts aggregated approximately $17,689,000 and $18,565,000 at December 31, 2020 and 2019, 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 $1,118,000 and $1,270,000 at December 31, 2020 and 2019, 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 $15,000 and $778,000 at December 31, 2020 and 2019, respectively, and are classified in our consolidated balance sheets as either current or long-term deferred revenue.

During the year ended December 31, 2020, we recognized approximately $4.9 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 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, 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 are charged to expense at go-live or customer acceptance. In our professional sales services segment, commissions paid to our sales force are deferred until the underlying equipment is accepted by the customer.

At December 31, 2020, our consolidated balance sheet includes approximately $4,037,000 in capitalized sales commissions to be expensed in future periods, of which $2,354,000 is recorded in deferred commission expense and $1,683,000, 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. 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. In addition, the Company records commissions for arranging financing at an estimated rate which is subject to later revision based on certain factors. The Company recognized increases in revenue associated with revisions to variable consideration for previously completed performance obligations of $5,000 for the year ended December 31, 2020.

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”), 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 grant date fair values. 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, 2020 and 2019.

During the year ended December 31, 2020, the Company granted 1,000,000 restricted shares of common stock valued at $20,000 to an employee. 20% of the shares vested at approximate grant date and the remaining 80% vest over four years from the grant date. The total fair value of shares vested during the year ended December 31, 2020 was $23,000 for officers and $63,000 for employees. The weighted average grant date fair value of shares granted during the year ended December 31, 2020 was $0.02 per share.

During the year ended December 31, 2019, the Company granted 5,500,000 restricted shares of common stock valued at $115,000 to officers. The shares vest over four years from the grant date. The total fair value of shares vested during the year ended December 31, 2019 was $65,000 for officers and $113,000 for employees. The weighted average grant date fair value of shares granted during the year ended December 31, 2019 was $0.02 per share.

The Company did not grant any stock options during the years ended December 31, 2020 or 2019, nor were any options exercised during such periods. No options were outstanding at December 31, 2020 or 2019.

Share-based compensation expense recognized for the years ended December 31, 2020 and 2019 was $88,000 and $141,000, 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 $76,000 at December 31, 2020 and will be recognized over a weighted-average period of approximately 16 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.

Short term investments

The Company's short-term investments consist of bank deposits with yields based on underlying debt and equity securities.

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,
	2020			2019
Beginning Balance	$	4,285		$	3,994
Provision for losses on accounts receivable		663			507
Direct write-offs, net of recoveries		(542	)		(528	)
Commission adjustments		(186	)		312
Deconsolidate EECP Global (see Note N)		(12	)		-
Ending Balance	$	4,208		$	4,285

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, 2020 and 2019, 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 and our long history of doing business with GEHC.

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 $582,000 and $352,000 at December 31, 2020 and 2019, respectively.

Inventories

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 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 finance leases, 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, an 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, 2020 and 2019.

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 $541,000 and $494,000 in software development costs for the years ended December 31, 2020 and 2019, 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, 2020 and 2019.

Deferred Revenue

Amounts billable under the agreement with GEHC in advance of delivery of the underlying 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 J)

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, 2020 and 2019. 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, 2020 and 2019. Generally, the Company is no longer subject to income tax examinations by major domestic taxing authorities for years before 2017. 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 Income (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, 2020 and 2019, other comprehensive income includes gains of $142,000 and $2,000, respectively, which were entirely from foreign currency translation.

Net Income (Loss) Per Common Share

Basic income 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.

Diluted earnings per share were computed based on the weighted average number of shares outstanding plus all potentially dilutive common shares.  A reconciliation of basic to diluted shares used in the earnings per share calculation is as follows:

    (in thousands)

	Year ended December 31,
	2020		2019
Basic weighted average shares outstanding		169,932		167,843
Dilutive effect of unvested restricted shares		914		-
Diluted weighted average shares outstanding		170,846		167,843

The following table represents common stock equivalents that were excluded from the computation of diluted earnings per share for the years ended December 31, 2020 and 2019, because the effect of their inclusion would be anti-dilutive.

(in thousands)

	Year ended December 31,
	2020		2019
Restricted common stock grants		76		1,267

Recently Adopted Accounting Pronouncements

Effective January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842, "Leases." See Note N for further details.

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:

Credit Losses on Financial instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how we determine our allowance for estimated uncollectible receivables. In November 2019, the FASB issued ASU 2019-10, which changed the effective date of ASU 2016-13 for smaller reporting companies as defined by the SEC from first quarter of 2020 to the first quarter of 2023, with early adoption permitted. We are currently evaluating the effect that ASU 2016-13 will have on our consolidated financial statements and related disclosures.

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SEGMENT REPORTING

12 Months Ended

Dec. 31, 2020

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 (see Note O) 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,
	2020			2019
Revenues from external customers
IT	$	43,894		$	45,505
Professional sales service		22,865			26,208
Equipment		3,091			3,802
Total revenues	$	69,850		$	75,515
Gross Profit
IT	$	17,682		$	18,790
Professional sales service		18,608			21,287
Equipment		2,281			2,355
Total gross profit	$	38,571		$	42,432
Operating income (loss)
IT	$	(1,247	)	$	(1,170	)
Professional sales service		2,977			3,626
Equipment		(155	)		(855	)
Corporate		(803	)		(1,010	)
Total operating income (loss)	$	772		$	591
Depreciation and amortization
IT	$	2,010		$	2,213
Professional sales service		161			170
Equipment		291			298
Corporate		-			-
Total depreciation and amortization	$	2,462		$	2,681
Capital expenditures
IT	$	960		$	1,149
Professional sales service		26			-
Equipment		12			54
Corporate		2			2
Total cash capital expenditures	$	1,000		$	1,205

	December 31, 2020		December 31, 2019
Identifiable Assets
IT	$	28,110	$	30,079
Professional sales service		9,171		16,257
Equipment		6,668		6,370
Corporate		6,427		1,658
Total assets	$	50,376	$	54,364

For the years ended December 31, 2020 and 2019, GEHC accounted for 33% and 35% of revenue, respectively. Also, GEHC accounted for $5.1 million, or 52%, and $10.9 million, or 69%, of accounts and other receivables at December 31, 2020 and 2019, respectively.

Our revenues were derived from the following geographic areas:

(in thousands)

	Year ended December 31,
	2020		2019
Domestic (United States)	$	67,184	$	73,019
Non-domestic (foreign)		2,666		2,496
	$	69,850	$	75,515

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ACCOUNTS AND OTHER RECEIVABLES

12 Months Ended

Dec. 31, 2020

Receivables [Abstract]

ACCOUNTS AND OTHER RECEIVABLES

The following table presents information regarding the Company’s accounts and other receivables as of December 31, 2020 and 2019:

(in thousands)

	December 31, 2020			December 31, 2019
Trade receivables	$	13,960		$	20,110
Due from employees		24			27
Allowance for doubtful accounts and
commission adjustments		(4,208	)		(4,285	)
Accounts and other receivables, net	$	9,776		$	15,852

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.

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INVENTORIES

12 Months Ended

Dec. 31, 2020

Inventory Disclosure [Abstract]

INVENTORIES

Inventories, net of reserves, consisted of the following:

(in thousands)

	December 31, 2020		December 31, 2019
Raw materials	$	669	$	650
Work in process		4		181
Finished goods		711		1,110
	$	1,384	$	1,941

At December 31, 2020 and 2019, the Company maintained reserves for slow moving inventories of $167,000 and $390,000, respectively.

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PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2020

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

(in thousands)

	December 31, 2020			December 31, 2019
Office, laboratory and other equipment	$	2,328		$	2,476
Equipment furnished for customer
or clinical uses		9,176			8,796
Right of use assets - finance leases		1,115			1,115
Furniture and fixtures		99			127
		12,718			12,514
Less: accumulated depreciation and amortization		(8,833	)		(7,560	)
Property and equipment, net	$	3,885		$	4,954

Accumulated amortization of right of use (“ROU”) assets under finance leases aggregated approximately $636,000 and $438,000 at December 31, 2020 and 2019, respectively. Depreciation expense amounted to approximately $1,556,000 and $1,738,000 for the years ended December 31, 2020 and 2019, respectively. Amortization of ROU assets under finance leases is included in depreciation expense.

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GOODWILL AND OTHER INTANGIBLES

12 Months Ended

Dec. 31, 2020

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 $1,313,000 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, 2020 and 2019. The changes in the carrying amount of goodwill are as follows:

(in thousands)

	Year ended			Year ended
	December 31, 2020			December 31, 2019
Beginning of period	$	17,271		$	17,309
Foreign currency translation adjustment		82			(38	)
Sale of equity in EECP Global		(1,665	)		-
End of period	$	15,688		$	17,271

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, 2020			December 31, 2019
Customer-related
Costs	$	5,831		$	5,831
Accumulated amortization		(3,947	)		(3,553	)
		1,884			2,278
Patents and Technology
Costs		1,894			2,363
Accumulated amortization		(1,521	)		(1,752	)
		373			611
Software
Costs		3,394			2,840
Accumulated amortization		(1,702	)		(1,428	)
		1,692			1,412
	$	3,949		$	4,301

The Company owns, through our Chinese subsidiaries, thirty invention and utility patents that expire at various times through 2032, 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. Due to the sale of equity in the EECP business, the Company deconsolidated approximately $469,000 in gross patent assets and related accumulated amortization. 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 $906,000 and $943,000 for the years ended December 31, 2020 and 2019, respectively. Amortization of intangibles for the next five years is:

(in thousands)

Years ending December 31,
2021		1,064
2022		768
2023		543
2024		474
2025		408
	$	3,257

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OTHER ASSETS

12 Months Ended

Dec. 31, 2020

Other Assets [Abstract]

OTHER ASSETS

Other assets consist of the following:

(in thousands)

	December 31, 2020		December 31, 2019
Deferred commission expense - noncurrent	$	1,683	$	1,770
Trade receivables - noncurrent		448		631
Other, net of allowance for loss on loan receivable of
$412 at December 31, 2020 and 2019		59		185
	$	2,190	$	2,586

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DEFERRED REVENUE

12 Months Ended

Dec. 31, 2020

Deferred Revenue Disclosure [Abstract]

DEFERRED REVENUE

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

(in thousands)

	Year ended December 31,
	2020			2019
Deferred revenue at beginning of period	$	19,343		$	18,086
Deconsolidate EECP Global (see Note O)		(769	)		-
Net additions:
Deferred extended service contracts		144			363
Deferred in-service and training		3			13
Deferred service arrangements		5			25
Deferred commission revenues		7,752			11,366
Recognized as revenue:
Deferred extended service contracts		(140	)		(566	)
Deferred in-service and training		-			(15	)
Deferred service arrangements		(5	)		(30	)
Deferred commission revenues		(8,629	)		(9,899	)
Deferred revenue at end of period		17,704			19,343
Less: current portion		11,516			12,345
Long-term deferred revenue at end of period	$	6,188		$	6,998

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ACCRUED EXPENSES AND OTHER LIABILITIES

12 Months Ended

Dec. 31, 2020

Payables and Accruals [Abstract]

ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

(in thousands) 

	December 31, 2020		December 31, 2019
Accrued compensation	$	1,044	$	1,509
Accrued expenses - other		1,854		1,818
Other liabilities		1,969		2,017
	$	4,867	$	5,344

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RELATED-PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2020

Related Party Transactions [Abstract]

RELATED-PARTY TRANSACTIONS

The Company recorded interest charges aggregating approximately $287,000 and $467,000 for the years ended December 31, 2020 and 2019, respectively, payable to MedTechnology Investments, LLC (“MedTech”) pursuant to its promissory notes (“Notes”). The MedTech Notes were used in 2015 to partially fund the purchase of NetWolves. $2,300,000 of the $4,800,000 provided by MedTech was provided by directors of the Company, or by family members. The Notes bore interest, payable quarterly, at an annual rate of 9% through their original maturity date of May 29, 2019. In August 2018, MedTech agreed to extend, if necessary, the maturity date of $3,600,000 of the Notes an additional year from May 29, 2019 to May 29, 2020, provided that a minimum of $1,200,000 of the principal was paid on or before December 31, 2019 and the annual interest rate for the balance increased to 10% during the extension. The $1,200,000 principal payment was waived pursuant to MedTech’s consent to the bank line of credit maturity extension to September 30, 2020. The Notes 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. In April 2020, $1.2 million in principal was repaid and the maturity date of $3.6 million of the Notes were extended through April 30, 2021 at a new interest rate of 6% per annum. The maturity date was extended again in March 2021 to June 30, 2022, provided $1.2 million is paid prior to April 1, 2021, and $50,000 is paid quarterly beginning June 30, 2021 (see Note U). The interest rate remains at 6% per annum. Approximately $1.4 million of the $3.6 million outstanding balance of the MedTech Notes is included in current liabilities in the Company’s consolidated balance sheet as of December 31, 2020. Interest charges aggregating approximately $55,000 were outstanding at December 31, 2020 and paid on January 4, 2021.

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 and Associates, LLP, which performs certain legal services for the Company. Fees of approximately $227,000 and $280,000 were billed by the firm for the years ended December 31, 2020 and 2019, respectively, at which dates no amounts were outstanding.

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). In August 2019, the Company modified the notes, which had a remaining principal balance of RMB2,250,000, to change the interest rate from 9% to 10% per annum, effective August 27, 2019, and to extend the maturity date from August 26, 2019 to February 26, 2020. Unsecured notes and accrued interest aggregating approximately $339,000 was payable to officers of Biox at December 31, 2019. The notes and accrued interest were repaid in March 2020.

In the year ended December 31, 2019, the Company issued notes aggregating $930,000 to third parties, including directors and employees. The notes matured from January 2020 to July 2020 and bore interest at 10% per annum payable quarterly. In March 2020, the notes were extended for six months, substantially all of which matured by November 2020, at a reduced interest rate of 8%, and permitted prepayment without penalty. In June and July 2020, the Company repaid the notes and accrued interest.

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NOTES PAYABLE

12 Months Ended

Dec. 31, 2020

Debt and Lease Obligation [Abstract]

NOTES PAYABLE

Notes payable consist of the following:

(in thousands)

	December 31, 2020			December 31, 2019
Line of credit	$	4,346		$	5,721
Notes payable		3,803			300
Notes payable - MedTech		3,600			4,800
Notes payable - related parties		-			1,253
Total debt		11,749			12,074
Less: current portion (including related parties)		(5,970	)		(3,933	)
	$	5,779		$	8,141

Line of Credit

NetWolves maintains a $4.0 million line of credit with a lending institution. In December 2019, the line’s expiration date was extended from December 18, 2019 to September 30, 2020, and the interest rate was increased 25 basis points to LIBOR plus 3.50%. In April 2020, the lending institution extended the maturity date to April 30, 2021 and established a minimum LIBOR rate of 0.50%. The maturity date was extended again in March 2021 to June 30, 2022 provided $825,000 is paid prior to April 1, 2021, and $50,000 is paid quarterly beginning June 30, 2021 (see Note U). Advances under the line are secured by substantially all of the assets of NetWolves Network Services, LLC and guaranteed by Vaso Corporation. During the year ended December 31, 2020, $100,000 in draw was repaid. At December 31, 2020, the Company had drawn approximately $3.7 million against the line, of which amount $975,000 is included in notes payable – current portion in the Company’s consolidated balance sheet at December 31, 2020.

The Company maintained an additional $2.0 million line of credit with a lending institution. In December 2019, the line’s expiration date was extended from December 18, 2019 to September 30, 2020, and the interest rate was increased 25 basis points to LIBOR plus 3.50%. Advances under the line are secured by substantially all of the assets of the Company. In April 2020, the lending institution extended the maturity date to April 30, 2021 and established a minimum LIBOR rate of 0.50%, and $1.2 million in draw was repaid. At December 31, 2020, the Company had drawn $675,000 against the line. In March 2021, the $675,000 balance and accrued interest was paid off in full and the line was closed (see Note U). The line of credit agreement includes certain financial covenants, and the Company was in compliance with such covenants at December 31, 2020. The $675,000 balance is included in notes payable – current portion in the Company’s consolidated balance sheet at December 31, 2020.

Notes Payable

In August 2019, the Company issued to a private party a $300,000 note bearing interest at 10% and maturing November 15, 2019. In November, 2019, the note’s maturity date was extended to January 15, 2020, and repaid upon maturity.

In April 2020, the Company’s Biox subsidiary issued a note RMB1,000,000 (approximately $153,000) with a Chinese bank for working capital purposes. The note was secured by the assets of Biox and bore interest at 4.35% per annum. It matured on April 15, 2021 and was repaid upon maturity.

In August 2020, the Company issued a note for approximately $42,000 for the purchase of equipment. The note is secured by the purchased equipment, bears interest at 1.9% and is payable in 60 equal monthly installments maturing August 2025.

Paycheck Protection Program debt

In April 2020, the Company received funding of a $3,610,900 Note (the “PPP Note”) issued by PNC Bank, National Association (“PNC”) pursuant to the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s Paycheck Protection Program (the “Program”).

The Company accounts for the PPP Note in accordance with Financial Accounting Standards Board ASC Topic 470, “Debt”, and Technical Question and Answer (TQA) 3200.18, “Borrower Accounting for a Forgivable Loan Received Under the Small Business Administration Paycheck Protection Program”. Under the TQA, the Company:

● Initially records the cash inflow from the PPP loan as a financial liability and accrues interest in accordance with the interest method under ASC Subtopic 835-30.

● Does not impute additional interest at a market rate.

● Continues to record the proceeds from the loan as a liability until either (i) the loan is partly or wholly forgiven and the debtor has been legally released or (ii) the debtor pays off the loan.

● Reduces the liability by the amount forgiven and records a gain on extinguishment once the loan is partly or wholly forgiven and legal release is received.

Amounts outstanding on the PPP Note are at the annual interest rate of 1%. During the first six months of the PPP Note, there is no principal nor interest required to be paid. Thereafter, to the extent the PPP Note is not forgiven under the Program, the outstanding balance of the PPP Note converts to an amortizing term loan payable monthly over an eighteen-month period, which has been updated according to the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). The PPP Note can be prepaid at any time without penalty.

In June 2020, the Flexibility Act was signed into law, which amended the CARES Act. The Flexibility Act changed key provisions of the PPP, including, but not limited to, (i) provisions relating to the maturity of PPP loans, (ii) the deferral period covering of PPP loan payments and (iii) the process for measurement of loan forgiveness. More specifically, the Flexibility Act provides a minimum maturity of five years for all PPP loans made on or after the date of the enactment of the Flexibility Act (“June 5, 2020”) and permits lenders and borrowers to extend the maturity date of earlier PPP loans by mutual agreement. As of the date of this filing, the Company has not approached the lender to request an extension of the maturity date from two years to five years. The Flexibility Act also provides that if a borrower does not apply for forgiveness of a loan within 10 months after the last day of the measurement period (“covered period”), the PPP loan is no longer deferred and the borrower must begin paying principal and interest. In addition, the Flexibility Act extended the length of the covered period from eight weeks to 24 weeks from receipt of proceeds, while allowing borrowers that received PPP loans before June 5, 2020 to determine, at their sole discretion, a covered period of either 8 weeks or 24 weeks.

After reviewing the applicable terms and conditions of the Flexibility Act, the Company elected to extend the length of the covered period from the lesser of (i) period whereby qualified expenses equal loan proceeds or (ii) 24 weeks. The Company has performed initial calculations for the PPP loan forgiveness according to the terms and conditions of the SBA’s Loan Forgiveness Application (Revised June 16, 2020) and, based on such calculations, expects that the PPP loan will be forgiven in full over a period less than 24 weeks. In October 2020, the Company submitted its application to PNC for forgiveness of the PPP Note in an amount equal to the sum of the following costs incurred by the Company during the covered period beginning on the date of first disbursement of the PPP Note proceeds:

(a) payroll costs;

(b) any payment of interest on a covered mortgage obligation;

(c) any covered rent payment; and

(d) any covered utility payment.

The amount of forgiveness is calculated in accordance with the requirements of the Program. In this regard, no more than 40% of the amount forgiven can be attributable to non-payroll costs.

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LEASES

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

LEASES

ASC 842, “Leases”, 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 ASC 842 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 enters into finance leases, typically with terms of 3 to 5 years, to acquire equipment for its data center. The Company enters into operating leases for its facilities in New York, Florida, and China, as well as for vehicles provided to certain employees in the professional sales services segment. The operating lease terms range from 2 to 7 years. The Company excluded the renewal option on its applicable facility leases from the calculation of its right-of-use assets and lease liabilities.

Finance and operating lease liabilities consist of the following:

(in thousands) 

	December 31, 2020		December 31, 2019
Lease liabilities - current
Finance leases	$	190	$	170
Operating leases		540		549
	$	730	$	719
Lease liabilities - net of current portion
Finance leases	$	246	$	437
Operating leases		469		321
	$	715	$	758

A reconciliation of undiscounted cash flows to finance and operating lease liabilities recognized in the consolidated balance sheet at December 31, 2020 is set forth below:

(in thousands) 

Years ending December 31,	Finance leases			Operating leases			Total
2021		227			613			840
2022		200			374			574
2023		62			98			160
Undiscounted lease payments		489			1,085			1,574
Amount representing interest		(53	)		(76	)		(129	)
Discounted lease liabilities		436			1,009			1,445

Additional disclosures of lease data are set forth below:

(in thousands) 

	Year ended December 31, 2020
Lease costs:
Finance lease costs:
Amortization of right-of-use assets	$	198
Interest on lease liabilities		56
		254
Operating lease costs:		712
Short-term lease costs:		82
Total lease cost	$	1,048
Other information:
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows from finance leases	$	56
Operating cash flows from operating leases		712
Financing cash flows from finance leases		171
	$	939

	December 31, 2020
Weighted-average remaining lease term - finance leases (months)		29
Weighted-average remaining lease term - operating leases (months)		23
Weighted-average discount rate - finance leases		12.1	%
Weighted-average discount rate - operating leases		8.6	%

The Company used the rate implicit in the lease, where known, or its incremental borrowing rate as the rate used to discount the future lease payments.

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SALE OF EQUITY IN THE EECP BUSINESS

12 Months Ended

Dec. 31, 2020

Proceeds from Issuance or Sale of Equity [Abstract]

SALE OF EQUITY IN THE EECP BUSINESS

On May 20, 2020, the Company closed on the sale of 51% of the capital stock of its wholly-owned subsidiary EECP Global Corporation (“EECP Global”) to Chongqing PSK-Health Sci-Tech Development Co. Ltd, a China-based company, for $1,150,000. EECP Global was formed in September 2019 to hold all the assets and liabilities of its EECP business. Concurrently with the closing of the transaction, the Company signed a three-year Management Service Agreement with EECP Global to provide management service for the business and operation of EECP Global in the United States. Pursuant to the agreement, EECP Global reimburses the Company all direct expenses and pays a management fee starting April 1, 2020, the effective date of the sale.

Due to the Company’s now minority ownership of EECP Global, it deconsolidated the EECP Global operations effective April 1, 2020 and recorded a gain on sale of approximately $110,000, of which approximately $54,000 resulted from the gain related to the remeasurement of the retained noncontrolling investment in EECP Global to fair value. The gain on sale includes the effect of the reclassification of approximately $187,000 in accumulated translation losses from accumulated other comprehensive loss.

The Company uses the equity method to account for its interest in EECP Global, as it has the ability to exercise significant influence over the entity, and reports its share of EECP Global operations in Other Income (Expense) on its condensed consolidated statements of operations. For the year ended December 31, 2020, the Company’s share of EECP Global’s income was approximately $11,000. At December 31, 2020, the Company recorded a net payable to related parties of approximately $233,000 on its consolidated balance sheet for amounts due to EECP Global for receivables collected on its behalf net of amounts due from EECP Global for fees and cost reimbursements.

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STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2020

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, 2020 and 2019, 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.

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OPTION PLANS

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [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, 2020. In June 2020, the 2010 Plan terminated with 15,059 ungranted authorized shares.

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, 2020, no shares of common stock were granted under the 2013 Plan, 251,250 shares were forfeited, and 77,369 shares were withheld for withholding taxes.

No shares of common stock or options were granted under the 2013 Plan during the year ended December 31, 2020.

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.

No shares of common stock or options were granted under the 2016 Plan during the year ended December 31, 2020.

2019 Stock Option and Stock Issuance Plan

In May 2019, the Board of Directors ("Board") approved the 2019 Stock Plan (the "2019 Plan") for officers, directors, and senior employees of the Corporation or any subsidiary of the Corporation. The stock issuable under the 2019 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 2019 Plan is 15,000,000 shares.

The 2019 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.

During the year ended December 31, 2020, 1,000,000 shares were granted under the 2019 Plan.

The following table summarizes non-vested restricted shares under all plans for the year ended December 31, 2020:

	Shares Available for Future Issuance			Unvested shares			Weighted Average Grant Date Fair Value
Balance at December 31, 2018		1,901,817			2,387,500		$	0.12
Authorized		15,000,000			-		$	-
Granted		(5,500,000	)		5,500,000		$	0.02
Vested		-			(2,077,089	)	$	0.08
Forfeited		290,203			(290,203	)	$	0.14
Balance at December 31, 2019		11,692,020			5,520,208		$	0.03
Authorized		-			-		$	-
Granted		(1,000,000	)		1,000,000		$	0.02
Vested		-			(1,799,923	)	$	0.05
Forfeited		328,619			(328,619	)	$	0.10
Expired		(15,059	)		-		$	-
Balance at December 31, 2020		11,005,580			4,391,666		$	0.02

There were 53,558,455 remaining authorized shares of common stock after reserves for all stock option plans.

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INCOME TAXES

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

The following is a geographical breakdown of income (loss) before the provision for income taxes:

(in thousands) 

	Year ended December 31,
	2020			2019
Domestic	$	(74	)	$	(152	)
Foreign		431			(119	)
Income (loss) before provision for income taxes	$	357		$	(271	)

The provision for income taxes consisted of the following:

(in thousands) 

	Year ended December 31,
	2020			2019
Current provision (benefit)
Federal	$	-		$	-
State		78			43
Foreign		(7	)		16
Total current provision (benefit)		71			59
Deferred provision (benefit)
Federal		41			41
State		11			11
Foreign		(124	)		-
Total deferred provision (benefit)		(72	)		52
Total income tax (benefit) provision	$	(1	)	$	111
Effective income tax rate		-0.28	%		-41.02	%

Income tax benefit for the year ended December 31, 2020 was $1,000 due primarily to a $124,000 reduction in foreign deferred tax liability, partially offset by $78,000 in state income taxes. The income tax provision of $111,000 for the year ended December 31, 2019 was due primarily to $43,000 in state income taxes and a $52,000 reduction in deferred tax assets.

The following is a reconciliation of the effective income tax rate to the federal statutory rate: 

	Year ended December 31,
	2020			2019
	%			%
Federal statutory rate		21.00			21.00
State income taxes		19.39			(16.91	)
Change in valuation allowance
relating to operations		2.13			12.81
Foreign tax rate differential		(61.99	)		(15.27	)
R&D credit		(1.39	)		5.64
Nondeductible expenses		8.06			(29.32	)
Other		12.52			(18.97	)
		(0.28	)		(41.02	)

The effective tax rate increased mainly due to the change from pre-tax loss in 2019 to pre-tax profit in 2020, and the impact of foreign taxes and non-deductible expenses.

As of December 31, 2020, the recorded deferred tax assets were $14,917,000, reflecting a decrease of $428,000 during the year ended December 31, 2020, which was offset by a valuation allowance of $12,145,000, reflecting a decrease of $182,000.

The components of our deferred tax assets and liabilities are summarized as follows:

(in thousands) 

	December 31, 2020			December 31, 2019
Deferred Tax Assets:
Net operating loss carryforwards	$	12,026		$	12,517
Amortization		344			338
Stock-based compensation		6			6
Allowance for doubtful accounts		110			84
Reserve for slow moving inventory		47			169
Tax credits		449			444
Expense accruals		543			457
Excess interest carryforwards		-			171
Deferred revenue		1,392			1,159
Total gross deferred taxes		14,917			15,345
Valuation allowance		(12,145	)		(12,327	)
Net deferred tax assets		2,772			3,018
Deferred Tax Liabilities:
Deferred commissions		(370	)		(302	)
Goodwill		(1,445	)		(1,186	)
Differences in timing of revenue recognition		-			(124	)
Depreciation		(686	)		(1,207	)
Total deferred tax liabilities		(2,501	)		(2,819	)
Total deferred tax assets (liabilities)		271			199
Recorded as:
Non-current deferred tax assets		271			323
Non-current deferred tax liabilities		-			(124	)
Total deferred tax assets (liabilities)	$	271		$	199

The activity in the valuation allowance is set forth below:

(in thousands) 

	2020			2019
Valuation allowance, January 1,	$	12,327		$	12,362
Change in valuation allowance		(182	)		(35	)
Valuation allowance, December 31,	$	12,145		$	12,327

At December 31, 2020, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $38 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.

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2020

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 by GEHC without cause with certain conditions, 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 accounts in the 48 contiguous states of the United States and the District of Columbia. The circumstances under which early termination of the agreement may occur with cause include: not materially achieving certain sales goals, not maintaining a minimum number of sales representatives, and not meeting various legal and GEHC policy requirements. The Company met all the contractual conditions in 2020 except achieving certain sales goals due to the adverse impact of the COVID-19 pandemic.

Employment Agreements

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

On 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 December 2020, NetWolves extended the licensing and support service agreement of its billing system for an additional three years, to expire December 2023. The agreement provides for monthly recurring charges based on a percentage of billed revenues using these services, which charges aggregated approximately $301,000 and $331,000 for the years ended December 31, 2020 and 2019, respectively.

Letters of Credit

At December 31, 2020 we are contingently liable under a standby letter of credit approximating $220,500. The letter of credit is being maintained as security for payments to a vendor.

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, 2020 and 2019, the Company had and continues to have operations in China. Operating transactions in China are denominated in the Chinese currency called RMB or CNY, 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.

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401(k) PLANS

12 Months Ended

Dec. 31, 2020

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, subject to applicable IRS annual limitations. In the years ended December 31, 2020 and 2019 the Company made discretionary contributions, to match a percentage of employee contributions, of approximately $114,000 and $118,000, respectively.

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2020

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

Extension of debt maturity dates

In March 2021, the Company made principal payments aggregating $1.5 million on its lines of credit and $1.2 million on its MedTech Notes, and extended the maturity dates of its remaining line of credit and its MedTech Notes to June 30, 2022. The extensions require subsequent principal payments of $50,000 per quarter beginning June 30, 2021 through March 31, 2022 under both the line of credit and the MedTech Notes. No change was made to the interest rates in effect at the time of extensions.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Principles of Consolidation

The consolidated financial statements include the accounts of Vaso Corporation, its wholly-owned subsidiaries, and the accounts of the companies over which we exercise control. Significant intercompany balances and transactions have been eliminated.

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 its medical products 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”).

Disaggregation of Revenue

The following tables present revenues disaggregated by our business operations and timing of revenue recognition:

(in thousands)

	Year Ended December 31, 2020								Year Ended December 31, 2019
			Professional sales								Professional sales
	IT segment		service segment		Equipment segment		Total		IT segment		service segment		Equipment segment		Total
Network services	$	39,908	$	-	$	-	$	39,908	$	39,962	$	-	$	-	$	39,962
Software sales and support		3,986		-		-		3,986		5,543		-		-		5,543
Commissions		-		22,865		-		22,865		-		26,208		-		26,208
Medical equipment sales		-		-		2,789		2,789		-		-		2,778		2,778
Medical equipment service		-		-		302		302		-		-		1,024		1,024
	$	43,894	$	22,865	$	3,091	$	69,850	$	45,505	$	26,208	$	3,802	$	75,515

	Year Ended December 31, 2020								Year Ended December 31, 2019
			Professional sales								Professional sales
	IT segment		service segment		Equipment segment		Total		IT segment		service segment		Equipment segment		Total
Revenue recognized over time	$	40,660	$	-	$	234	$	40,894	$	40,628	$	-	$	595	$	41,223
Revenue recognized at a point in time		3,234		22,865		2,857		28,956		4,877		26,208		3,207		34,292
	$	43,894	$	22,865	$	3,091	$	69,850	$	45,505	$	26,208	$	3,802	$	75,515

Transaction Price Allocated to Remaining Performance Obligations

As of December 31, 2020, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $71 million, of which we expect to recognize revenue as follows:

(in thousands)

	Fiscal years of revenue recognition (unaudited)
	2021		2022		2023		Thereafter
Unfulfilled performance obligations	$	38,686	$	17,825	$	5,657	$	8,631

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 $553,000 and $568,000 at December 31, 2020 and 2019, respectively, and are included in accrued expenses and other liabilities in our consolidated balance sheets.

In our VasoHealthcare business, we bill a portion of commissions on the orders we booked in advance of delivery of the underlying equipment. Such amounts aggregated approximately $17,689,000 and $18,565,000 at December 31, 2020 and 2019, 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 $1,118,000 and $1,270,000 at December 31, 2020 and 2019, 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 $15,000 and $778,000 at December 31, 2020 and 2019, respectively, and are classified in our consolidated balance sheets as either current or long-term deferred revenue.

During the year ended December 31, 2020, we recognized approximately $4.9 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 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, 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 are charged to expense at go-live or customer acceptance. In our professional sales services segment, commissions paid to our sales force are deferred until the underlying equipment is accepted by the customer.

At December 31, 2020, our consolidated balance sheet includes approximately $4,037,000 in capitalized sales commissions to be expensed in future periods, of which $2,354,000 is recorded in deferred commission expense and $1,683,000, 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. 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. In addition, the Company records commissions for arranging financing at an estimated rate which is subject to later revision based on certain factors. The Company recognized increases in revenue associated with revisions to variable consideration for previously completed performance obligations of $5,000 for the year ended December 31, 2020.

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”), 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 grant date fair values. 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, 2020 and 2019.

During the year ended December 31, 2020, the Company granted 1,000,000 restricted shares of common stock valued at $20,000 to an employee. 20% of the shares vested at approximate grant date and the remaining 80% vest over four years from the grant date. The total fair value of shares vested during the year ended December 31, 2020 was $23,000 for officers and $63,000 for employees. The weighted average grant date fair value of shares granted during the year ended December 31, 2020 was $0.02 per share.

During the year ended December 31, 2019, the Company granted 5,500,000 restricted shares of common stock valued at $115,000 to officers. The shares vest over four years from the grant date. The total fair value of shares vested during the year ended December 31, 2019 was $65,000 for officers and $113,000 for employees. The weighted average grant date fair value of shares granted during the year ended December 31, 2019 was $0.02 per share.

The Company did not grant any stock options during the years ended December 31, 2020 or 2019, nor were any options exercised during such periods. No options were outstanding at December 31, 2020 or 2019.

Share-based compensation expense recognized for the years ended December 31, 2020 and 2019 was $88,000 and $141,000, 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 $76,000 at December 31, 2020 and will be recognized over a weighted-average period of approximately 16 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.

Short Term Investments

The Company's short-term investments consist of bank deposits with yields based on underlying debt and equity securities.

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,
	2020			2019
Beginning Balance	$	4,285		$	3,994
Provision for losses on accounts receivable		663			507
Direct write-offs, net of recoveries		(542	)		(528	)
Commission adjustments		(186	)		312
Deconsolidate EECP Global (see Note N)		(12	)		-
Ending Balance	$	4,208		$	4,285

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, 2020 and 2019, 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 and our long history of doing business with GEHC.

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 $582,000 and $352,000 at December 31, 2020 and 2019, respectively.

Inventories

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 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 finance leases, 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, an 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, 2020 and 2019.

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 $541,000 and $494,000 in software development costs for the years ended December 31, 2020 and 2019, 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, 2020 and 2019.

Deferred Revenue

Amounts billable under the agreement with GEHC in advance of delivery of the underlying 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 J)

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, 2020 and 2019. 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, 2020 and 2019. Generally, the Company is no longer subject to income tax examinations by major domestic taxing authorities for years before 2017. 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 Income (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, 2020 and 2019, other comprehensive income includes gains of $142,000 and $2,000, respectively, which were entirely from foreign currency translation.

Net Income (Loss) Per Common Share

Basic income 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.

Diluted earnings per share were computed based on the weighted average number of shares outstanding plus all potentially dilutive common shares.  A reconciliation of basic to diluted shares used in the earnings per share calculation is as follows:

    (in thousands)

	Year ended December 31,
	2020		2019
Basic weighted average shares outstanding		169,932		167,843
Dilutive effect of unvested restricted shares		914		-
Diluted weighted average shares outstanding		170,846		167,843

The following table represents common stock equivalents that were excluded from the computation of diluted earnings per share for the years ended December 31, 2020 and 2019, because the effect of their inclusion would be anti-dilutive.

(in thousands)

	Year ended December 31,
	2020		2019
Restricted common stock grants		76		1,267

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Effective January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842, "Leases." See Note N for further details.

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:

Credit Losses on Financial instruments

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides new guidance regarding the measurement and recognition of credit impairment for certain financial assets. Such guidance will impact how we determine our allowance for estimated uncollectible receivables. In November 2019, the FASB issued ASU 2019-10, which changed the effective date of ASU 2016-13 for smaller reporting companies as defined by the SEC from first quarter of 2020 to the first quarter of 2023, with early adoption permitted. We are currently evaluating the effect that ASU 2016-13 will have on our consolidated financial statements and related disclosures.

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REVISIONS (Tables)

12 Months Ended

Dec. 31, 2020

Accounting Changes and Error Corrections [Abstract]

Revisions

	Consolidated Statement of Operations and Comprehensive Income (Loss)
	Year ended December 31, 2019
(in thousands, except per share data)	As Reported		Adjustment			As Revised
Revenues
Managed IT systems and services	$	45,736	$	(231	)	$	45,505
Gross Profit		42,663		(231	)		42,432
Operating expenses
Selling, general and administrative		40,838		190			41,028
Operating income	$	1,012	$	(421	)	$	591
Net income (loss)	$	39	$	(421	)	$	(382	)
Comprehensive income (loss)	$	41	$	(421	)	$	(380	)
Earnings (loss) per common share
- basic	$	0.00	$	(0.00	)	$	(0.00	)
- diluted	$	0.00	$	(0.00	)	$	(0.00	)

	Consolidated Balance Sheet
	As of December 31, 2019
(in thousands)	As Reported			Adjustment			As Revised
Accounts payable	$	6,179		$	1,475		$	7,654
Accumulated deficit	$	(55,885	)	$	(1,475	)	$	(57,360	)

	Consolidated Statement of Cash Flows
	Year ended December 31, 2019
(in thousands)	As Reported			Adjustment			As Revised
Net income (loss)	$	39		$	(421	)	$	(382	)
Accounts payable	$	(105	)	$	421		$	316

	Consolidated Statement of Changes in Stockholders’ Equity
	Accumulated Deficit									Total Shareholders' Equity
(in thousands)	As Reported			Adjustment			As Revised			As Reported		Adjustment			As Revised
Balance at January 1, 2019	$	(55,924	)	$	(1,054	)	$	(56,978	)	$	5,611	$	(1,054	)	$	4,557
Net income (loss)		39			(421	)		(382	)		39		(421	)		(382	)
Balance at December 31, 2019	$	(55,885	)	$	(1,475	)	$	(57,360	)	$	5,789	$	(1,475	)	$	4,314

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Disaggregation of revenue

	Year Ended December 31, 2020								Year Ended December 31, 2019
			Professional sales								Professional sales
	IT segment		service segment		Equipment segment		Total		IT segment		service segment		Equipment segment		Total
Network services	$	39,908	$	-	$	-	$	39,908	$	39,962	$	-	$	-	$	39,962
Software sales and support		3,986		-		-		3,986		5,543		-		-		5,543
Commissions		-		22,865		-		22,865		-		26,208		-		26,208
Medical equipment sales		-		-		2,789		2,789		-		-		2,778		2,778
Medical equipment service		-		-		302		302		-		-		1,024		1,024
	$	43,894	$	22,865	$	3,091	$	69,850	$	45,505	$	26,208	$	3,802	$	75,515

	Year Ended December 31, 2020								Year Ended December 31, 2019
			Professional sales								Professional sales
	IT segment		service segment		Equipment segment		Total		IT segment		service segment		Equipment segment		Total
Revenue recognized over time	$	40,660	$	-	$	234	$	40,894	$	40,628	$	-	$	595	$	41,223
Revenue recognized at a point in time		3,234		22,865		2,857		28,956		4,877		26,208		3,207		34,292
	$	43,894	$	22,865	$	3,091	$	69,850	$	45,505	$	26,208	$	3,802	$	75,515

Transaction price allocated to remaining performance obligations

	Fiscal years of revenue recognition (unaudited)
	2021		2022		2023		Thereafter
Unfulfilled performance obligations	$	38,686	$	17,825	$	5,657	$	8,631

Changes in allowance for doubtful accounts and commission adjustments

	Year ended December 31,
	2020			2019
Beginning Balance	$	4,285		$	3,994
Provision for losses on accounts receivable		663			507
Direct write-offs, net of recoveries		(542	)		(528	)
Commission adjustments		(186	)		312
Deconsolidate EECP Global (see Note N)		(12	)		-
Ending Balance	$	4,208		$	4,285

Weighted average shares outstanding

	Year ended December 31,
	2020		2019
Basic weighted average shares outstanding		169,932		167,843
Dilutive effect of unvested restricted shares		914		-
Diluted weighted average shares outstanding		170,846		167,843

Anti-dilutive securities

	Year ended December 31,
	2020		2019
Restricted common stock grants		76		1,267

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SEGMENT REPORTING (Tables)

12 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Summary financial information

	Year ended December 31,
	2020			2019
Revenues from external customers
IT	$	43,894		$	45,505
Professional sales service		22,865			26,208
Equipment		3,091			3,802
Total revenues	$	69,850		$	75,515
Gross Profit
IT	$	17,682		$	18,790
Professional sales service		18,608			21,287
Equipment		2,281			2,355
Total gross profit	$	38,571		$	42,432
Operating income (loss)
IT	$	(1,247	)	$	(1,170	)
Professional sales service		2,977			3,626
Equipment		(155	)		(855	)
Corporate		(803	)		(1,010	)
Total operating income (loss)	$	772		$	591
Depreciation and amortization
IT	$	2,010		$	2,213
Professional sales service		161			170
Equipment		291			298
Corporate		-			-
Total depreciation and amortization	$	2,462		$	2,681
Capital expenditures
IT	$	960		$	1,149
Professional sales service		26			-
Equipment		12			54
Corporate		2			2
Total cash capital expenditures	$	1,000		$	1,205

	December 31, 2020		December 31, 2019
Identifiable Assets
IT	$	28,110	$	30,079
Professional sales service		9,171		16,257
Equipment		6,668		6,370
Corporate		6,427		1,658
Total assets	$	50,376	$	54,364

Geographic revenues

	Year ended December 31,
	2020		2019
Domestic (United States)	$	67,184	$	73,019
Non-domestic (foreign)		2,666		2,496
	$	69,850	$	75,515

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ACCOUNTS AND OTHER RECEIVABLES (Tables)

12 Months Ended

Dec. 31, 2020

Receivables [Abstract]

Accounts and other receivables

	December 31, 2020			December 31, 2019
Trade receivables	$	13,960		$	20,110
Due from employees		24			27
Allowance for doubtful accounts and
commission adjustments		(4,208	)		(4,285	)
Accounts and other receivables, net	$	9,776		$	15,852

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INVENTORIES (Tables)

12 Months Ended

Dec. 31, 2020

Inventory Disclosure [Abstract]

Inventories

	December 31, 2020		December 31, 2019
Raw materials	$	669	$	650
Work in process		4		181
Finished goods		711		1,110
	$	1,384	$	1,941

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PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2020

Property, Plant and Equipment [Abstract]

Property and equipment

	December 31, 2020			December 31, 2019
Office, laboratory and other equipment	$	2,328		$	2,476
Equipment furnished for customer
or clinical uses		9,176			8,796
Right of use assets - finance leases		1,115			1,115
Furniture and fixtures		99			127
		12,718			12,514
Less: accumulated depreciation and amortization		(8,833	)		(7,560	)
Property and equipment, net	$	3,885		$	4,954

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GOODWILL AND OTHER INTANGIBLES (Tables)

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

	Year ended			Year ended
	December 31, 2020			December 31, 2019
Beginning of period	$	17,271		$	17,309
Foreign currency translation adjustment		82			(38	)
Sale of equity in EECP Global		(1,665	)		-
End of period	$	15,688		$	17,271

Other intangible assets

	December 31, 2020			December 31, 2019
Customer-related
Costs	$	5,831		$	5,831
Accumulated amortization		(3,947	)		(3,553	)
		1,884			2,278
Patents and Technology
Costs		1,894			2,363
Accumulated amortization		(1,521	)		(1,752	)
		373			611
Software
Costs		3,394			2,840
Accumulated amortization		(1,702	)		(1,428	)
		1,692			1,412
	$	3,949		$	4,301

Amortization expense

Years ending December 31,
2021		1,064
2022		768
2023		543
2024		474
2025		408
	$	3,257

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OTHER ASSETS (Tables)

12 Months Ended

Dec. 31, 2020

Other Assets [Abstract]

Other assets

	December 31, 2020		December 31, 2019
Deferred commission expense - noncurrent	$	1,683	$	1,770
Trade receivables - noncurrent		448		631
Other, net of allowance for loss on loan receivable of
$412 at December 31, 2020 and 2019		59		185
	$	2,190	$	2,586

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DEFERRED REVENUE (Tables)

12 Months Ended

Dec. 31, 2020

Deferred Revenue Disclosure [Abstract]

Deferred revenues

	Year ended December 31,
	2020			2019
Deferred revenue at beginning of period	$	19,343		$	18,086
Deconsolidate EECP Global (see Note O)		(769	)		-
Net additions:
Deferred extended service contracts		144			363
Deferred in-service and training		3			13
Deferred service arrangements		5			25
Deferred commission revenues		7,752			11,366
Recognized as revenue:
Deferred extended service contracts		(140	)		(566	)
Deferred in-service and training		-			(15	)
Deferred service arrangements		(5	)		(30	)
Deferred commission revenues		(8,629	)		(9,899	)
Deferred revenue at end of period		17,704			19,343
Less: current portion		11,516			12,345
Long-term deferred revenue at end of period	$	6,188		$	6,998

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ACCRUED EXPENSES AND OTHER LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2020

Payables and Accruals [Abstract]

Accrued expenses and other liabilities

	December 31, 2020		December 31, 2019
Accrued compensation	$	1,044	$	1,509
Accrued expenses - other		1,854		1,818
Other liabilities		1,969		2,017
	$	4,867	$	5,344

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NOTES PAYABLE (Tables)

12 Months Ended

Dec. 31, 2020

Debt and Lease Obligation [Abstract]

Notes payable

	December 31, 2020			December 31, 2019
Line of credit	$	4,346		$	5,721
Notes payable		3,803			300
Notes payable - MedTech		3,600			4,800
Notes payable - related parties		-			1,253
Total debt		11,749			12,074
Less: current portion (including related parties)		(5,970	)		(3,933	)
	$	5,779		$	8,141

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LEASES (Tables)

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

Lease liabilities

	December 31, 2020		December 31, 2019
Lease liabilities - current
Finance leases	$	190	$	170
Operating leases		540		549
	$	730	$	719
Lease liabilities - net of current portion
Finance leases	$	246	$	437
Operating leases		469		321
	$	715	$	758

Discounted lease liabilities

Years ending December 31,	Finance leases			Operating leases			Total
2021		227			613			840
2022		200			374			574
2023		62			98			160
Undiscounted lease payments		489			1,085			1,574
Amount representing interest		(53	)		(76	)		(129	)
Discounted lease liabilities		436			1,009			1,445

Additional disclosures

	Year ended December 31, 2020
Lease costs:
Finance lease costs:
Amortization of right-of-use assets	$	198
Interest on lease liabilities		56
		254
Operating lease costs:		712
Short-term lease costs:		82
Total lease cost	$	1,048
Other information:
Cash paid for amounts included in the
measurement of lease liabilities:
Operating cash flows from finance leases	$	56
Operating cash flows from operating leases		712
Financing cash flows from finance leases		171
	$	939

	December 31, 2020
Weighted-average remaining lease term - finance leases (months)		29
Weighted-average remaining lease term - operating leases (months)		23
Weighted-average discount rate - finance leases		12.1	%
Weighted-average discount rate - operating leases		8.6	%

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OPTION PLANS (Tables)

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Non-vested restricted shares activity

	Shares Available for Future Issuance			Unvested shares			Weighted Average Grant Date Fair Value
Balance at December 31, 2018		1,901,817			2,387,500		$	0.12
Authorized		15,000,000			-		$	-
Granted		(5,500,000	)		5,500,000		$	0.02
Vested		-			(2,077,089	)	$	0.08
Forfeited		290,203			(290,203	)	$	0.14
Balance at December 31, 2019		11,692,020			5,520,208		$	0.03
Authorized		-			-		$	-
Granted		(1,000,000	)		1,000,000		$	0.02
Vested		-			(1,799,923	)	$	0.05
Forfeited		328,619			(328,619	)	$	0.10
Expired		(15,059	)		-		$	-
Balance at December 31, 2020		11,005,580			4,391,666		$	0.02

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Geographical breakdown of income (loss) before provision for income taxes

	Year ended December 31,
	2020			2019
Domestic	$	(74	)	$	(152	)
Foreign		431			(119	)
Income (loss) before provision for income taxes	$	357		$	(271	)

Provision for income taxes

	Year ended December 31,
	2020			2019
Current provision (benefit)
Federal	$	-		$	-
State		78			43
Foreign		(7	)		16
Total current provision (benefit)		71			59
Deferred provision (benefit)
Federal		41			41
State		11			11
Foreign		(124	)		-
Total deferred provision (benefit)		(72	)		52
Total income tax (benefit) provision	$	(1	)	$	111
Effective income tax rate		-0.28	%		-41.02	%

Reconciliation of effective income tax rate

	Year ended December 31,
	2020			2019
	%			%
Federal statutory rate		21.00			21.00
State income taxes		19.39			(16.91	)
Change in valuation allowance
relating to operations		2.13			12.81
Foreign tax rate differential		(61.99	)		(15.27	)
R&D credit		(1.39	)		5.64
Nondeductible expenses		8.06			(29.32	)
Other		12.52			(18.97	)
		(0.28	)		(41.02	)

Deferred tax assets and liabilities

	December 31, 2020			December 31, 2019
Deferred Tax Assets:
Net operating loss carryforwards	$	12,026		$	12,517
Amortization		344			338
Stock-based compensation		6			6
Allowance for doubtful accounts		110			84
Reserve for slow moving inventory		47			169
Tax credits		449			444
Expense accruals		543			457
Excess interest carryforwards		-			171
Deferred revenue		1,392			1,159
Total gross deferred taxes		14,917			15,345
Valuation allowance		(12,145	)		(12,327	)
Net deferred tax assets		2,772			3,018
Deferred Tax Liabilities:
Deferred commissions		(370	)		(302	)
Goodwill		(1,445	)		(1,186	)
Differences in timing of revenue recognition		-			(124	)
Depreciation		(686	)		(1,207	)
Total deferred tax liabilities		(2,501	)		(2,819	)
Total deferred tax assets (liabilities)		271			199
Recorded as:
Non-current deferred tax assets		271			323
Non-current deferred tax liabilities		-			(124	)
Total deferred tax assets (liabilities)	$	271		$	199

Valuation allowance activity

	2020			2019
Valuation allowance, January 1,	$	12,327		$	12,362
Change in valuation allowance		(182	)		(35	)
Valuation allowance, December 31,	$	12,145		$	12,327

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DESCRIPTION OF BUSINESS (Details Narrative)	12 Months Ended
	Dec. 31, 2020 Segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of business segments	3

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REVISIONS (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Revenues
Managed IT systems and services	$ 69,850	$ 75,515
Gross profit	38,571	42,432
Operating expenses
Selling, general and administrative	37,054	41,028
Operating income	772	591
Net income (loss)	358	(382)
Comprehensive income (loss)	$ 500	$ (380)
Earnings (loss) per common share
- basic	$ .00	$ (0.00)
- diluted	$ .00	$ (0.00)
As Reported
Revenues
Managed IT systems and services		$ 45,736
Gross profit		42,663
Operating expenses
Selling, general and administrative		40,838
Operating income		1,012
Net income (loss)		39
Comprehensive income (loss)		$ 41
Earnings (loss) per common share
- basic		$ 0.00
- diluted		$ 0.00
Adjustment
Revenues
Managed IT systems and services		$ (231)
Gross profit		(231)
Operating expenses
Selling, general and administrative		190
Operating income		(421)
Net income (loss)		(421)
Comprehensive income (loss)		$ (421)
Earnings (loss) per common share
- basic		$ (0.00)
- diluted		$ (0.00)
Managed IT Systems and Services
Revenues
Managed IT systems and services	$ 43,894	$ 45,505
Managed IT Systems and Services | As Reported
Revenues
Managed IT systems and services		45,736
Managed IT Systems and Services | Adjustment
Revenues
Managed IT systems and services		$ (231)

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REVISIONS (Details 1) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Accounts payable	$ 6,285	$ 7,654
Accumulated deficit	$ (57,002)	(57,360)	$ (56,978)
As Reported
Accounts payable		6,179
Accumulated deficit		(55,885)	(55,924)
Adjustment
Accounts payable		1,475
Accumulated deficit		$ (1,475)	$ (1,054)

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REVISIONS (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Net income (loss)	$ 358	$ (382)
Accounts payable	$ (1,369)	316
As Reported
Net income (loss)		39
Accounts payable		(105)
Adjustment
Net income (loss)		(421)
Accounts payable		$ 421

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REVISIONS (Details 3) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Accumulated deficit	$ (57,002)	$ (57,360)	$ (56,978)
Total shareholders' equity	5,085	4,314	4,557
Net income (loss)	$ 358	(382)
As Reported
Accumulated deficit		(55,885)	(55,924)
Total shareholders' equity		5,789	5,611
Net income (loss)		39
Adjustment
Accumulated deficit		(1,475)	(1,054)
Total shareholders' equity		(1,475)	$ (1,054)
Net income (loss)		$ (421)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Revenue	$ 69,850	$ 75,515
Network Services
Revenue	39,908	39,962
Software Sales and Support
Revenue	3,986	5,543
Commissions
Revenue	22,865	26,208
Medical Equipment Sales
Revenue	2,789	2,778
Medical Equipment Service
Revenue	302	1,024
Managed IT Systems and Services
Revenue	43,894	45,505
Managed IT Systems and Services | Network Services
Revenue	39,908	39,962
Managed IT Systems and Services | Software Sales and Support
Revenue	3,986	5,543
Managed IT Systems and Services | Commissions
Revenue	0	0
Managed IT Systems and Services | Medical Equipment Sales
Revenue	0	0
Managed IT Systems and Services | Medical Equipment Service
Revenue	0	0
Professional Sales Services
Revenue	22,865	26,208
Professional Sales Services | Network Services
Revenue	0	0
Professional Sales Services | Software Sales and Support
Revenue	0	0
Professional Sales Services | Commissions
Revenue	22,865	26,208
Professional Sales Services | Medical Equipment Sales
Revenue	0	0
Professional Sales Services | Medical Equipment Service
Revenue	0	0
Equipment Sales and Services
Revenue	3,091	3,802
Equipment Sales and Services | Network Services
Revenue	0	0
Equipment Sales and Services | Software Sales and Support
Revenue	0	0
Equipment Sales and Services | Commissions
Revenue	0	0
Equipment Sales and Services | Medical Equipment Sales
Revenue	2,789	2,778
Equipment Sales and Services | Medical Equipment Service
Revenue	$ 302	$ 1,024

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Revenue	$ 69,850	$ 75,515
Revenue Recognized over Time
Revenue	40,894	41,223
Revenue Recognized at a Point in Time
Revenue	28,956	34,292
Managed IT Systems and Services
Revenue	43,894	45,505
Managed IT Systems and Services | Revenue Recognized over Time
Revenue	40,660	40,628
Managed IT Systems and Services | Revenue Recognized at a Point in Time
Revenue	3,234	4,877
Professional Sales Services
Revenue	22,865	26,208
Professional Sales Services | Revenue Recognized over Time
Revenue	0	0
Professional Sales Services | Revenue Recognized at a Point in Time
Revenue	22,865	26,208
Equipment Sales and Services
Revenue	3,091	3,802
Equipment Sales and Services | Revenue Recognized over Time
Revenue	234	595
Equipment Sales and Services | Revenue Recognized at a Point in Time
Revenue	$ 2,857	$ 3,207

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) $ in Thousands	Dec. 31, 2020 USD ($)
2021
Unfulfilled performance obligations	$ 38,686
2022
Unfulfilled performance obligations	17,825
2023
Unfulfilled performance obligations	5,657
Thereafter
Unfulfilled performance obligations	$ 8,631

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Accounting Policies [Abstract]
Allowance for doubtful accounts and commission adjustments, beginning balance	$ 4,285	$ 3,994
Provision for losses on accounts receivable	663	507
Direct write-offs, net of recoveries	(542)	(528)
Commission adjustments	(186)	312
Deconsolidate EECP Global (see Note N)	(12)	0
Allowance for doubtful accounts and commission adjustments, ending balance	$ 4,208	$ 4,285

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) - shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Accounting Policies [Abstract]
Basic weighted average shares outstanding (in thousands)	169,932	167,843
Dilutive effect of unvested restricted shares (in thousands)	914	0
Diluted weighted average shares outstanding (in thousands)	170,846	167,843

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) - shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Restricted Stock
Common stock equivalents excluded from computation of diluted earnings per share (in thousands)	76	1,267

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Accounting Policies [Abstract]
Contract liabilities	$ 553	$ 568
Advance of customer acceptance of equipment	17,689	18,565
Customer order reductions	1,118	1,270
Post-delivery services and varying duration service contracts	15	$ 778
Revenues recognized	4,900
Capitalized sales commissions	$ 4,037
Restricted shares of common stock granted	1,000,000	5,500,000
Fair value of shares vested	$ 86	$ 178
Weighted average grant date fair value	$ .02	$ 0.02
Share-based compensation expense	$ 88	$ 141
Unrecognized expense related to existing share-based arrangements	76
FDIC uninsured amount	582	352
Capitalized software development costs	541	494
Foreign currency translation gain	$ 142	$ 2

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SEGMENT REPORTING (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Revenues	$ 69,850	$ 75,515
Gross profit	38,571	42,432
Operating income (loss)	772	591
Depreciation and amortization	2,462	2,681
Capital expenditures	1,000	1,205
Total assets	50,376	54,364
Information Technology Segment
Revenues	43,894	45,505
Gross profit	17,682	18,790
Operating income (loss)	(1,247)	(1,170)
Depreciation and amortization	2,010	2,213
Capital expenditures	960	1,149
Total assets	28,110	30,079
Professional Sales Service Segment
Revenues	22,865	26,208
Gross profit	18,608	21,287
Operating income (loss)	2,977	3,626
Depreciation and amortization	161	170
Capital expenditures	26	0
Total assets	9,171	16,257
Equipment Segment
Revenues	3,091	3,802
Gross profit	2,281	2,355
Operating income (loss)	(155)	(855)
Depreciation and amortization	291	298
Capital expenditures	12	54
Total assets	6,668	6,370
Corporate
Operating income (loss)	(803)	(1,010)
Depreciation and amortization	0	0
Capital expenditures	2	2
Total assets	$ 6,427	$ 1,658

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SEGMENT REPORTING (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Revenues	$ 69,850	$ 75,515
Domestic (United States)
Revenues	67,184	73,019
Non-Domestic (Foreign)
Revenues	$ 2,666	$ 2,496

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SEGMENT REPORTING (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Accounts and other receivables	$ 9,776	$ 15,852
GEHC | Sales Revenue, Net
Concentration risk percentage	33.00%	35.00%
GEHC | Accounts and Other Receivables
Concentration risk percentage	52.00%	69.00%
Accounts and other receivables	$ 5,100	$ 10,900

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ACCOUNTS AND OTHER RECEIVABLES (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Receivables [Abstract]
Trade receivables	$ 13,960	$ 20,110
Due from employees	24	27
Allowance for doubtful accounts and commission adjustments	(4,208)	(4,285)
Accounts and other receivables, net	$ 9,776	$ 15,852

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INVENTORIES (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Raw materials	$ 669	$ 650
Work in process	4	181
Finished goods	711	1,110
Inventories	$ 1,384	$ 1,941

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INVENTORIES (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Reserves for slow moving inventories	$ 167	$ 390

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PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Property and equipment, gross	$ 12,718	$ 12,514
Less: accumulated depreciation	(8,833)	(7,560)
Property and equipment, net	3,885	4,954
Office, Laboratory and Other Equipment
Property and equipment, gross	2,328	2,476
Equipment Furnished for Customer or Clinical Uses
Property and equipment, gross	9,176	8,796
Right of Use Assets - Finance Leases
Property and equipment, gross	1,115	1,115
Furniture and Fixtures
Property and equipment, gross	$ 99	$ 127

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PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Property, Plant and Equipment [Abstract]
Accumulated amortization of ROU assets	$ 636	$ 438
Depreciation expense	$ 1,556	$ 1,738

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GOODWILL AND OTHER INTANGIBLES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill, beginning balance	$ 17,271	$ 17,309
Foreign currency translation adjustment	82	(38)
Sale of equity in EECP Global	(1,665)	0
Goodwill, ending balance	$ 15,688	$ 17,271

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GOODWILL AND OTHER INTANGIBLES (Details 1) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Intangible assets, net	$ 3,949	$ 4,301
Customer-Related
Costs	5,831	5,831
Accumulated amortization	(3,947)	(3,553)
Intangible assets, net	1,884	2,278
Patents and Technology
Costs	1,894	2,363
Accumulated amortization	(1,521)	(1,752)
Intangible assets, net	373	611
Software
Costs	3,394	2,840
Accumulated amortization	(1,702)	(1,428)
Intangible assets, net	$ 1,692	$ 1,412

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GOODWILL AND OTHER INTANGIBLES (Details 2) $ in Thousands	Dec. 31, 2020 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2021	$ 1,064
2022	768
2023	543
2024	474
2025	408
Total	$ 3,257

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GOODWILL AND OTHER INTANGIBLES (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 906	$ 943

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OTHER ASSETS (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Other Assets [Abstract]
Deferred commission expense - noncurrent	$ 1,683	$ 1,770
Trade receivables - noncurrent	448	631
Other, net of allowance for loss on loan receivable of $412 at December 31, 2020 and 2019	59	185
Total	$ 2,190	$ 2,586

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DEFERRED REVENUE (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Deferred revenue, beginning balance	$ 19,343	$ 18,086
Deconsolidate EECP Global (see Note N)	(769)	0
Additions	7,904	11,767
Recognized as revenue	(8,774)	(10,510)
Deferred revenue, ending balance	17,704	19,343
Less: current portion	11,516	12,345
Long-term deferred revenue at end of year	6,188	6,998
Extended Service Contracts
Additions	144	363
Recognized as revenue	(140)	(566)
In Service and Training
Additions	3	13
Recognized as revenue	0	(15)
Service Arrangements
Additions	5	25
Recognized as revenue	(5)	(30)
Commission Revenues
Additions	7,752	11,366
Recognized as revenue	$ (8,629)	$ (9,899)

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ACCRUED EXPENSES AND OTHER LIABILITIES (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Accrued compensation	$ 1,044	$ 1,509
Accrued expenses - other	1,854	1,818
Other liabilities	1,969	2,017
Accrued expenses and other liabilities	$ 4,867	$ 5,344

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NOTES PAYABLE (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Debt and lease obligations	$ 11,749	$ 12,074
Less: current portion (including related parties)	(5,970)	(3,933)
Total	5,779	8,141
Notes Payable
Debt and lease obligations	3,803	300
Notes Payable - MedTech
Debt and lease obligations	3,600	4,800
Notes Payable - Related Parties
Debt and lease obligations	0	1,253
Line of Credit
Debt and lease obligations	$ 4,346	$ 5,721

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LEASES (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019
Leases [Abstract]
Finance leases	$ 190	$ 170
Operating leases	540	549
Lease liabilities - current	730	719
Finance leases	246	437
Operating leases	469	321
Lease liabilities - net of current portion	$ 715	$ 758

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LEASES (Details 1) $ in Thousands	Dec. 31, 2020 USD ($)
Leases [Abstract]
2021	$ 227
2022	200
2023	62
Undiscounted lease payments	489
Amount representing interest	(53)
Discounted lease liabilities	436
2021	613
2022	374
2023	98
Undiscounted lease payments	1,085
Amount representing interest	(76)
Discounted lease liabilities	1,009
2021	840
2022	574
2023	160
Undiscounted lease payments	1,574
Amount representing interest	(129)
Discounted lease liabilities	$ 1,445

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LEASES (Details 2) $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($)
Lease costs:
Amortization of right-of-use assets	$ 198
Interest on lease liabilities	56
Finance lease costs	254
Operating lease costs	712
Short-term lease costs	82
Total lease cost	1,048
Other information:
Operating cash flows from finance leases	56
Operating cash flows from operating leases	712
Financing cash flows from finance leases	171
Cash paid for amounts included in the measurement of lease liabilities:	$ 939
Weighted-average remaining lease term - finance leases	29 months
Weighted-average remaining lease term - operating leases	23 months
Weighted-average discount rate - finance leases	12.10%
Weighted-average discount rate - operating leases	8.60%

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SALE OF EQUITY IN THE EECP BUSINESS (Details Narrative) $ in Thousands	12 Months Ended
	Dec. 31, 2020 USD ($)
Proceeds from Issuance or Sale of Equity [Abstract]
EECP Global income (loss)	$ 11
Payable due to a related party	$ 233

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OPTION PLANS (Details) - $ / shares	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Weighted average grant date fair value
Granted	$ .02	$ 0.02
Restricted Stock
Shares available for future issuance
Balance, beginning of period	11,692,020	1,901,817
Authorized	0	15,000,000
Granted	(1,000,000)	(5,500,000)
Vested	0	0
Forfeited	328,619	290,203
Expired	(15,059)
Balance, end of period	11,005,580	11,692,020
Unvested shares
Balance, beginning of period	5,520,208	2,387,500
Authorized	0	0
Granted	1,000,000	5,500,000
Vested	(1,799,923)	(2,077,089)
Forfeited	(328,619)	(290,203)
Expired	0
Balance, end of period	4,391,666	5,520,208
Weighted average grant date fair value
Balance, beginning of period	$ 0.03	$ 0.12
Authorized	.00	.00
Granted	.02	0.02
Vested	.05	0.08
Forfeited	.10	0.14
Expired	.00
Balance, end of period	$ .02	$ 0.03

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INCOME TAXES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Domestic	$ (74)	$ (152)
Foreign	431	(119)
Income (loss) before provision for income taxes	$ 357	$ (271)

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INCOME TAXES (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Current provision (benefit)
Federal	$ 0	$ 0
State	78	43
Foreign	(7)	16
Total current (benefit) provision	71	59
Deferred provision (benefit)
Federal	41	41
State	11	11
Foreign	(124)	0
Total deferred provision	(72)	52
Total provision for income taxes	$ (1)	$ 111
Effective income tax rate	(0.28%)	(41.02%)

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INCOME TAXES (Details 2)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Federal statutory rate	21.00%	21.00%
State income taxes	19.39%	(16.91%)
Change in valuation allowance relating to operations	2.13%	12.81%
Foreign tax rate differential	(61.99%)	(15.27%)
R&D credit	(1.39%)	5.64%
Nondeductible expenses	8.06%	(29.32%)
Other	12.52%	(18.97%)
Total	(0.28%)	(41.02%)

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INCOME TAXES (Details 3) - USD ($) $ in Thousands	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Deferred Tax Assets
Net operating loss carryforwards	$ 12,026	$ 12,517
Amortization	344	338
Stock-based compensation	6	6
Allowance for doubtful accounts	110	84
Reserve for slow moving inventory	47	169
Tax credits	449	444
Expense accruals	543	457
Excess interest carryforwards	0	171
Deferred revenue	1,392	1,159
Total gross deferred taxes	14,917	15,345
Valuation allowance	(12,145)	(12,327)	$ (12,362)
Net deferred tax assets	2,772	3,018
Deferred Tax Liabilities
Deferred commissions	(370)	(302)
Goodwill	(1,445)	(1,186)
Differences in timing of revenue recognition	0	(124)
Depreciation	(686)	(1,207)
Total deferred tax liabilities	(2,501)	(2,819)
Total deferred tax assets (liabilities)	271	199
Recorded as
Non-current deferred tax assets	271	323
Non-current deferred tax liabilities	0	(124)
Total deferred tax assets (liabilities)	$ 271	$ 199

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INCOME TAXES (Details 4) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Valuation allowance, beginning of period	$ 12,327	$ 12,362
Change in valuation allowance	(182)	(35)
Valuation allowance, end of period	$ 12,145	$ 12,327

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INCOME TAXES (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Income tax benefit (expense)	$ 1	$ (111)
Deferred tax assets	14,917	15,345
Increase (decrease) in deferred tax assets	(182)	(35)
Valuation allowance	12,145	$ 12,327	$ 12,362
Net operating loss carryforwards	$ 45,000
Minimum
Net operating loss carryforwards expiration date	Dec. 31, 2020
Maximum
Net operating loss carryforwards expiration date	Dec. 31, 2037

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401(k) PLANS (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Retirement Benefits [Abstract]
Company's discretionary annual contributions	$ 114	$ 118