Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

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

The information contained in this report contains forward-looking statements (as such term is defined in the Securities Exchange Act of 1934 and the regulations thereunder). These forward-looking statements may include projections of, or guidance on, the Company's future financial performance, expected levels of future revenue and expenses, anticipated growth strategies, and anticipated trends in the Company's business or financial results. When used in this report, words such as "anticipates", "continue", "believes", "could", "estimates", "expects", "may", "plans", "potential", "future", "intends", the negative of these terms and similar expressions identify forward-looking statements. Any forward-looking statement made by the Company in this document is based only on the Company's current expectations, estimates and projections about future events and financial trends affecting the financial condition of its business based on information currently available to the Company and speaks only as of the date when made. Forward-looking statements are not historical facts or guarantees of future performance. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict, many of which are outside of the Company's control. Actual results may differ materially from this forward-looking information and therefore, should not be unduly relied upon. Among the factors that could cause actual results to differ materially are the following: the effect of business and economic conditions, including the possibility of a downturn or disruptions in the U.S. economy; the impact of U.S. tariff policies; 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

Our Business Segments

Vaso Corporation ("Vaso") was incorporated in Delaware in July 1987. Prior to the two divestitures described below, we principally operated in three distinct business segments in the healthcare and information technology industries. We managed and evaluated our operations, and reported our financial results, through these three business segments.

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IT segment, operating through a wholly-owned subsidiary VasoTechnology, Inc. ("VasoTechnology"), primarily focuses on managed network technology services. As described in Note C, the NetWolves managed network services operations are reported as discontinued operations and no longer included in segment disclosures. Historical results of VasoHeathcare IT Corp, the other operation within the IT segment and which was sold in November 2025, continue to be presented in segment disclosures;

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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 GE HealthCare Technologies, Inc. ("GEHC") into the healthcare provider middle market; and

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Equipment segment, 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, primarily focuses on the design, manufacture, sale and service of proprietary medical devices and software.

The Company has ended its operations in the IT segment after the sale of VHC-IT in November 2025 and the sale of NetWolves in July 2026.

Vaso Corporation and Subsidiaries

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon the accompanying unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Although these estimates are based on our knowledge of current events, our actual amounts and results could differ from those estimates. The estimates made are based on historical factors, current circumstances, and the experience and judgment of our management, who continually evaluate the judgments, estimates and assumptions and may employ outside experts to assist in the evaluations.

Certain of our accounting policies are deemed "critical", as they are both most important to the financial statement presentation and require management's most difficult, subjective or complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. For a discussion of our critical accounting policies, see Note B to the condensed consolidated financial statements contained in this report, and see "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on March 31, 2026.

Unless otherwise noted, this Management's Discussion and Analysis of Financial Condition and Results of Operations relates solely to our continuing operations and does not include the operations of NetWolves. See Note C - Discontinued Operations of the notes to condensed consolidated financial statements for additional information about the disposal group. The IT segment reported no amounts in 2026 as a result of the divestiture of VasoHealthcare IT in November 2025. Certain corporate overhead costs previously allocated to NetWolves were removed from the results of the discontinued operations as such costs will continue, and were reallocated to the professional sales services and equipment segments.

Results of Operations - For the Three Months Ended June 30, 2026 and 2025

Revenues

Total revenue for the three months ended June 30, 2026 and 2025 was $11,187,000 and $10,331,000, respectively, representing an increase of $856,000, or 8% year-over-year. On a segment basis, revenue in the IT, professional sales services, and equipment segments (decreased)/increased ($1,058,000), $1,750,000, and $164,000, respectively.

Commission revenues in the professional sales service segment were $10,494,000 in the second quarter of 2026, an increase of $1,750,000, or 20%, as compared to $8,744,000 in the same quarter of 2025. The increase in commission revenues was due primarily to higher deliveries of diagnostic imaging equipment, partially offset by decreased deliveries of ultrasound products, by GEHC in the second quarter of 2026, as compared to the second quarter of 2025, and by lower blended commission rates. The Company only recognizes commission revenue when the underlying equipment has been accepted at the customer site in accordance with the specific terms of the sales agreement. Consequently, amounts billable, or billed and received, under the agreement with GEHC prior to customer acceptance of the equipment are recorded as deferred revenue in the condensed consolidated balance sheets. As of June 30, 2026, $41,513,000 in deferred commission revenue was recorded in the Company's condensed consolidated balance sheet, of which $20,903,000 was long-term. As of June 30, 2025, $38,112,000 in deferred commission revenue was recorded in the Company's condensed consolidated balance sheet, of which $20,350,000 was long-term. The increase in deferred revenue is principally due to higher value of new orders booked than of the delivered equipment during the 12-month period (see Note M to the condensed consolidated financial statements).

Revenue in the equipment segment increased by $164,000, or 31%, to $693,000 for the three-month period ended June 30, 2026 from $529,000 for the same period of the prior year, due primarily to higher equipment deliveries in our China operations.

Vaso Corporation and Subsidiaries

Gross Profit

Gross profit for the three months ended June 30, 2026 and 2025 was $8,889,000, or 79% of revenue, and $7,941,000, or 77% of revenue, respectively, representing an increase of $948,000, or 12% year-over-year. On a segment basis, gross profit in the IT segment decreased $469,000, while professional sales service segment and equipment segment gross profit increased by $1,385,000, or 20%; and $32,000, or 8%, respectively.

Professional sales service segment gross profit was $8,470,000, or 81% of segment revenue, for the three months ended June 30, 2026 as compared to $7,085,000, or 81% of the segment revenue, for the three months ended June 30, 2025, reflecting an increase of $1,385,000, or 20%. The increase in absolute dollars was primarily due to higher commission revenue, as well as to lower blended cost of commission rates. Cost of commissions in the professional sales service segment of $2,024,000 and $1,659,000, for the three months ended June 30, 2026 and 2025, respectively, reflected commission expense associated with recognized commission revenues.

Commission expense associated with short-term deferred revenue is recorded as short-term deferred commission expense, or with long-term deferred revenue as part of other assets, on the condensed consolidated balance sheets until the related commission revenue is recognized.

Equipment segment gross profit increased to $419,000, or 60% of segment revenues, for the second quarter of 2026 compared to $387,000, or 73% of segment revenues, for the same quarter of 2025. The $32,000, or 8%, increase in gross profit was the result of higher revenue in our China operations, partially offset by lower SaaS margins in the US.

Operating Income

Operating income for the three months ended June 30, 2026 and 2025 was $974,000 and $93,000, respectively, representing an increase of $881,000, or 948%, due primarily to the increase in gross profit, partially offset by higher selling, general, and administrative ("SG&A") costs. On a segment basis, the IT segment recorded no operating income in the second quarter of 2026 and operating income of $18,000 in the second quarter of 2025; the professional sales service segment recorded operating income of $1,462,000 in the second quarter of 2026 as opposed to operating income of $556,000 in the same period of 2025; and the equipment segment recorded an operating loss of $220,000 in the second quarter of 2026 as compared to an operating loss of $177,000 in the same period of 2025.

Operating income in the professional sales service segment increased by $906,000 to $1,462,000 in the three-month period ended June 30, 2026 as compared to operating income of $556,000 in the same period of 2025, due primarily to higher gross profit, partially offset by higher SG&A costs. The equipment segment reported an operating loss of $220,000 in the second quarter of 2026, compared to an operating loss of $177,000 in the second quarter 2025, an increase in loss of $43,000, due mainly to higher research and development ("R&D") expenses in our U.S. operations and higher SG&A costs in our China operations, partially offset by higher gross profit.

SG&A costs for the three months ended June 30, 2026 and 2025 were $7,703,000 and $7,681,000, respectively, representing an increase of $22,000, or less than 1%, year-over-year. On a segment basis, there were no SG&A costs in the IT segment in the second quarter of 2026 and $451,000 in the second quarter of 2025; SG&A costs in the professional sales service segment increased $479,000 due mainly to additional sales personnel costs in the diagnostic imaging sector; and SG&A costs in the equipment segment increased $30,000 due mainly to higher personnel costs in China. Corporate costs not allocated to segments decreased $36,000, due mainly to lower investor relations costs, in 2026.

R&D expenses increased by $45,000, or 27%, to $212,000 in the second quarter of 2026 from $167,000 for the second quarter of 2025, primarily due to higher personnel costs in our US operations.

Vaso Corporation and Subsidiaries

Adjusted EBITDA

We utilize Adjusted EBITDA in evaluating our performance internally, and this non-U.S. GAAP financial measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Company's industry. Management believes that this non-U.S. GAAP financial measure, in addition to U.S. GAAP measures, is also useful to investors to evaluate the Company's results.

Adjusted EBITDA is not a measure of financial performance under U.S. GAAP and should not be considered a substitute for net (loss) income, which we consider to be the most directly comparable U.S. GAAP measure. Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, you should not consider Adjusted EBITDA in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with U.S. GAAP. Investors should recognize that the Company's presentation of this non-U.S. GAAP financial measure might not be comparable to similarly-titled measures of other companies limiting its usefulness as a comparative measure.

A reconciliation of net income from continuing operations to Adjusted EBITDA is set forth below:

		(in thousands)
		Three Months Ended June 30,
		2026				2025
		(unaudited)				(unaudited)
Net income from continuing operations		$	840			$	323
Interest expense (income), net			(297	)			(289	)
Income tax expense			387				28
Depreciation and amortization			120				74
Share-based compensation			2				9
Adjusted EBITDA from continuing operations		$	1,052			$	145

Adjusted EBITDA from continuing operations increased by $907,000, to $1,052,000 in the quarter ended June 30, 2026 from $145,000 in the quarter ended June 30, 2025. The increase was attributable mainly to the increases in net income and income tax expense.

A reconciliation of net loss from discontinued operations to Adjusted EBITDA is set forth below:

		Three Months Ended June 30,
		2026				2025
		(unaudited)				(unaudited)
Net loss from discontinued operations		$	(296	)		$	(520	)
Interest expense (income), net			(3	)			(8	)
Income tax (benefit) expense			(65	)			12
Depreciation and amortization			119				118
Share-based compensation			-				-
Adjusted EBITDA from discontinued operations		$	(245	)		$	(398	)

Adjusted EBITDA from discontinued operations increased by $153,000, to ($245,000) in the quarter ended June 30, 2026 from ($398,000) in the quarter ended June 30, 2025. The increase was attributable mainly to the decreases in net loss and income tax expense.

Interest and Other Income (Expense)

Interest and other income (expense) for the three months ended June 30, 2026 was $253,000 as compared to $258,000 for the corresponding period of 2025. The decrease in interest and other income (expense) was due primarily to lower other income in the second quarter of 2026 in our China operations, partially offset by higher interest income.

Vaso Corporation and Subsidiaries

Income Tax Expense

For the three months ended June 30, 2026, we recorded income tax expense of $386,000 as compared to $28,000 for the corresponding period of 2025. The $358,000 increase arose mainly from lower deferred tax assets.

Net Income from continuing operations

Net income from continuing operations for the three months ended June 30, 2026 was $840,000 as compared to $323,000 for the three months ended June 30, 2025, representing an increase of $517,000. Income per share of $0.00 was recorded in the three-month periods ended June 30, 2026 and 2025. The principal cause of the increase in net income was the increase in operating income, partially offset by higher income tax expense.

Results of Operations - For the Six Months Ended June 30, 2026 and 2025

Revenues

Total revenue for the six months ended June 30, 2026 and 2025 was $20,982,000 and $20,464,000, respectively, representing an increase of $518,000, or 3%, year-over-year. On a segment basis, revenue in the IT, professional sales service, and equipment segments (decreased)/increased ($2,045,000), $2,280,000 and $283,000, respectively.

Commission revenues in the professional sales service segment were $19,729,000 in the first half of 2026, an increase of $2,280,000, or 13%, as compared to $17,449,000 in the first half of 2025. The increase in commission revenues was due primarily to increased deliveries of diagnostic imaging equipment, partially offset by lower deliveries of ultrasound products, by GEHC in the first half of 2026, as compared to the first half of 2025, and by higher blended commission rates. The Company recognizes commission revenue when the underlying equipment has been accepted at the customer site in accordance with the specific terms of the sales agreement. Consequently, amounts billable, or billed and received, under the agreement with GEHC prior to customer acceptance of the equipment are recorded as deferred revenue in the condensed consolidated balance sheets. As of June 30, 2026, $41,513,000 in deferred commission revenue was recorded in the Company's condensed consolidated balance sheet, of which $20,903,000 was long-term. As of June 30, 2025, $38,112,000 in deferred commission revenue was recorded in the Company's condensed consolidated balance sheet, of which $20,350,000 was long-term. The increase in deferred revenue is principally due to higher value of new orders booked than of the delivered equipment during the 12-month period (see Note M to the condensed consolidated financial statements).

Revenue in the equipment segment increased by $283,000, or 29%, to $1,253,000 for the six-month period ended June 30, 2026 from $970,000 for the same period of the prior year, principally due to higher equipment deliveries in our China operations.

Gross Profit

Gross profit for the six months ended June 30, 2026 and 2025 was $16,410,000, or 78% of revenue, and $15,577,000, or 76% of revenue, respectively, representing an increase of $833,000, or 5% year-over-year. On a segment basis, gross profit in the IT segment decreased $885,000; gross profit in the professional sales service segment increased $1,712,000, or 12%; and gross profit in the equipment segment increased $6,000, or less than 1%.

Professional sales service segment gross profit was $15,692,000, or 80% of segment revenue, for the six months ended June 30, 2026 as compared to $13,980,000, or 80% of the segment revenue, for the six months ended June 30, 2025, reflecting an increase of $1,712,000, or 12%. The increase in absolute dollars was primarily due to higher commission revenue, partially offset by higher blended cost of commission rates. Cost of commissions in the professional sales service segment of $4,037,000 and $3,469,000, for the six months ended June 30, 2026 and 2025, respectively, reflected commission expense associated with recognized commission revenues.

Vaso Corporation and Subsidiaries

Commission expense associated with short-term deferred revenue is recorded as short-term Deferred commission expense, or with long-term deferred revenue as part of Other assets, on the condensed consolidated balance sheets until the related commission revenue is recognized.

Equipment segment gross profit increased to $718,000, or 57% of segment revenues, for the first half of 2026 compared to $712,000, or 73% of segment revenues, for the same half of 2025. The $6,000, or less than 1%, increase in gross profit was primarily the result of higher revenue partially offset by lower ARCS^® cloud-based SaaS margins in our U.S. operations.

Operating Loss

Operating loss for the six months ended June 30, 2026 and 2025 was $80,000 and $519,000, respectively, representing a decrease in loss of $439,000, or 85%, due primarily to higher gross profit, partially offset by higher SG&A costs. On a segment basis, the IT segment recorded an operating loss of $0 and $52,000 in the first half of 2026 and 2025, respectively; the professional sales service segment recorded operating income of $1,346,000 in the first half of 2026 as compared to operating income of $800,000 in the same period of 2025; and the equipment segment recorded an operating loss of $595,000 in the first half of 2026 as compared to an operating loss of $442,000 in the same period of 2025.

The professional sales service segment reported operating income of $1,346,000 in the first half of 2026, an increase of $546,000 from operating income of $800,000 in the six-month period ended June 30, 2025, due to higher gross profit, partially offset by higher SG&A costs. The equipment segment reported an operating loss of $595,000 in the first half of 2026, compared to an operating loss of $442,000 in the first half 2025, an increase in loss of $153,000 due mainly to higher SG&A and R&D costs.

SG&A costs for the six months ended June 30, 2026 and 2025 were $16,095,000 and $15,751,000, respectively, representing an increase of $344,000, or 2% year-over-year. On a segment basis, SG&A costs in the IT segment were $0 and $937,000 in the first half of 2026 and 2025, respectively; SG&A costs in the professional sales service segment increased by $1,167,000 due mainly to higher personnel cost in the diagnostic imaging sector; and SG&A costs in the equipment segment increased by $108,000 due mainly to higher personnel costs in our China operations. Corporate costs not allocated to segments increased $6,000 due mainly to higher legal and accounting costs, partially offset by lower investor relations costs.

R&D expenses were $395,000, or 2% of revenues, for the first half of 2026, an increase of $50,000, or 15%, from $345,000, or 2% of revenues, for the first half of 2025. The increase is primarily attributable to higher personnel and software development costs in the equipment segment.

Adjusted EBITDA

We utilize Adjusted EBITDA in evaluating our performance internally, and this non-U.S. GAAP financial measure is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Company's industry. Management believes that this non-U.S. GAAP financial measure, in addition to U. S. GAAP measures, is also useful to investors to evaluate the Company's results.

Adjusted EBITDA is not a measure of financial performance under U.S. GAAP and should not be considered a substitute for net (loss) income, which we consider to be the most directly comparable U.S. GAAP measure. Adjusted EBITDA has limitations as an analytical tool, and when assessing our operating performance, you should not consider Adjusted EBITDA in isolation, or as a substitute for net income or other consolidated income statement data prepared in accordance with U.S. GAAP. Investors should recognize that the Company's presentation of this non-U.S. GAAP financial measure might not be comparable to similarly-titled measures of other companies limiting its usefulness as a comparative measure.

Vaso Corporation and Subsidiaries

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

		(in thousands)
		Six Months Ended June 30,
		2026				2025
		(unaudited)				(unaudited)
Net income (loss) from continuing operations		$	115			$	(143	)
Interest expense (income), net			(539	)			(528	)
Income tax expense			261				56
Depreciation and amortization			235				126
Share-based compensation			19				16
Adjusted EBITDA from continuing operations		$	90			$	(473	)

Adjusted EBITDA from continuing operations increased by $563,000 to $90,000 in the six-month period ended June 30, 2026 from ($473,000) in the same period ended June 30, 2025. The increase was primarily attributable to lower net loss and higher depreciation and amortization and income tax expense in the six months ended June 30, 2026.

A reconciliation of net loss from discontinued operations to Adjusted EBITDA is set forth below:

		Six Months Ended June 30,
		2026				2025
		(unaudited)				(unaudited)
Net loss from discontinued operations		$	(458	)		$	(1,129	)
Interest expense (income), net			(9	)			(18	)
Income tax (benefit) expense			(129	)			24
Depreciation and amortization			237				226
Share-based compensation			-				1
Adjusted EBITDA from discontinued operations		$	(359	)		$	(896	)

Adjusted EBITDA from discontinued operations increased by $537,000 to ($359,000) in the six-month period ended June 30, 2026 from ($896,000) in the same period ended June 30, 2025. The increase was primarily attributable to lower net loss, partially offset by the change from income tax expense to income tax benefit in the six months ended June 30, 2026.

Interest and Other Income (Expense)

Interest and other income (expense) for the six months ended June 30, 2026 was $455,000 as compared to $432,000 for the corresponding period of 2025. The increase in interest and other income was due primarily to higher interest income on money market and short-term Treasury bill balances due to higher invested amounts, partially offset by lower interest rates.

Income Tax Expense

We recorded income tax expense of $261,000 and $56,000 for the six-month periods ended June 30, 2026 and 2025, respectively. The increase arose mainly from lower deferred tax assets.

Net Loss

Net loss for the six months ended June 30, 2026 was $343,000 as compared to $1,272,000 for the six months ended June 30, 2025, representing a decrease in loss of $929,000. Loss per share of ($0.00) and ($0.01) was recorded in the six-month periods ended June 30, 2026 and 2025, respectively. The principal cause of the decrease in net loss was lower operating loss from both continuing and discontinued operations, partially offset by higher income tax expense in the six months ended June 30, 2026.

Vaso Corporation and Subsidiaries

Liquidity and Capital Resources

Cash and Cash Flow

We have financed our operations from working capital during the six months ended June 30, 2026. At June 30, 2026, we had cash and cash equivalents of $38,291,000 and working capital of $22,323,000, compared to cash and cash equivalents of $34,081,000 and working capital of $21,714,000 at December 31, 2025.

Cash provided by operating activities was $4,819,000, which consisted of net loss after adjustments to reconcile net loss to net cash of $500,000 and cash provided by operating assets and liabilities of $4,319,000, during the six months ended June 30, 2026, compared to cash provided by operating activities of $6,229,000 for the same period in 2025. The changes in the account balances primarily reflect a decrease in accounts and other receivables of $7,238,000 and an increase in deferred revenue of $2,919,000, partially offset by decreases in accrued commissions of $1,400,000 and accrued expenses of $4,158,000.

Cash used in investing activities during the six-month period ended June 30, 2026 was $963,000 for the purchase of equipment and software.

Cash used in financing activities during the six-month period ended June 30, 2026 was $146,000 for the repayment of notes payable and finance lease obligations.

Liquidity

The Company expects to generate sufficient cash flow from operations to satisfy its obligations for at least the next twelve months.