Quarterly Report for Quarter Ending September 30, 2025 (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 US 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. We principally operate in three distinct business segments in the healthcare and information technology industries. We manage and evaluate our operations, and report our financial results, through these three business segments.

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IT segment, operating through a wholly-owned subsidiary VasoTechnology, Inc. ("VasoTechnology"), 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 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.

Termination of Business Combination Agreement

On September 17, 2024 Vaso provided notice to Achari to terminate its previously disclosed Business Combination Agreement with Achari. Vaso intends to continue to seek opportunities to increase stockholder value, including through internal growth, new partnerships and strategic investments with a concentration on medical and IT service companies.

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 and "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, 2024 as filed with the SEC on March 31, 2025.

Results of Operations - For the Three Months Ended September 30, 2025 and 2024

Revenues

Total revenue for the three months ended September 30, 2025 and 2024 was $22,657,000 and $20,769,000, respectively, representing an increase of $1,888,000, or 9% year-over-year. On a segment basis, revenue in the IT, professional sales services and equipment segments increased by $136,000, $1,706,000 and $46,000, respectively.

Revenue in the IT segment for the three months ended September 30, 2025 was $11,218,000 compared to $11,082,000 for the three months ended September 30, 2024, an increase of $136,000, or 1%, of which $299,000 resulted from higher network services revenue, offset by $163,000 lower revenues in the healthcare IT business. Monthly recurring revenue in the IT segment accounted for $9,806,000 or 87% of the segment revenue in the third quarter of 2025, and $9,341,000 or 84% of the segment revenue for the same quarter last year (see Note C).

Commission revenues in the professional sales service segment were $10,820,000 in the third quarter of 2025, an increase of $1,706,000, or 19%, as compared to $9,114,000 in the same quarter of 2024. The increase in commission revenues was due primarily to an increase in the volume of underlying equipment delivered by GEHC during the period, slightly offset by a lower blended commission rate applicable to such deliveries. The Company only recognizes commission revenue when the underlying equipment has been accepted at the customer site in accordance with the specific terms of the sales agreement. Consequently, amounts billable, or billed and received, under the agreement with GEHC prior to customer acceptance of the equipment are recorded as deferred revenue in the condensed consolidated balance sheet. As of September 30, 2025, $39,412,000 in deferred commission revenue was recorded in the Company's condensed consolidated balance sheet, of which $21,854,000 was long-term. As of September 30, 2024, $33,117,000 in deferred commission revenue was recorded in the Company's condensed consolidated balance sheet, of which $15,623,000 was long-term. The increase in deferred revenue is principally due to new orders exceeding deliveries during the period.

Revenue in the equipment segment increased by $46,000, or 8%, to $619,000 for the three-month period ended September 30, 2025 from $573,000 for the same period of the prior year, due primarily to higher ARCS^® subscription revenues in our US operations, partially offset by lower deliveries in our China operations.

Gross Profit

Gross profit for the three months ended September 30, 2025 and 2024 was $13,896,000, or 61% of revenue, and $11,756,000, or 57% of revenue, respectively, representing an increase of $2,140,000, or 18% year-over-year. On a segment basis, gross profit in the IT, professional sales service and equipment segments increased $622,000, or 15%; $1,471,000, or 20%; and $47,000, or 13%, respectively.

Vaso Corporation and Subsidiaries

IT segment gross profit for the three months ended September 30, 2025 was $4,733,000, or 42% of the segment revenue, compared to $4,111,000, or 37% of the segment revenue for the three months ended September 30, 2024. The year-over-year increase of $622,000, or 15%, was primarily a result of a higher margin sales mix in the network services business.

Professional sales service segment gross profit was $8,747,000, or 81% of segment revenue, for the three months ended September 30, 2025 as compared to $7,276,000, or 80% of the segment revenue, for the three months ended September 30, 2024, reflecting an increase of $1,471,000, or 20%. The increase was due to higher commission revenue as a result of higher volume of GEHC equipment delivered during the third quarter of 2025, when compared to the same period last year, offset by a lower blended commission rate and higher commission expenses. Cost of commissions in the professional sales service segment of $2,073,000 and $1,838,000, for the three months ended September 30, 2025 and 2024, 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 balance sheet until the related commission revenue is recognized.

Equipment segment gross profit increased to $416,000, or 67% of segment revenues, for the third quarter of 2025 compared to $369,000, or 64% of segment revenues, for the same quarter of 2024. The $47,000, or 13%, increase in gross profit was primarily the result of higher ARCS^® subscription revenues in the US market and improved gross margin in our China operations.

Operating Income (Loss)

Operating income (loss) for the three months ended September 30, 2025 was $1,538,000 compared to $(1,393,000) for the same quarter in 2024, representing an increase of $2,931,000, or 210%, due primarily to $1,549,000 lower costs for investment banking activities, and to increased gross profit in all three operating segments. On a segment basis, the IT segment recorded an operating loss of $93,000 in the third quarter of 2025 as compared to an operating loss of $695,000 in the same period of 2024; the professional sales service segment recorded operating income of $2,108,000 in the third quarter of 2025 as opposed to operating income of $1,531,000 in the same period of 2024; and the equipment segment recorded an operating loss of $163,000 in the third quarter of 2025 as compared to an operating loss of $223,000 in the same period of 2024.

Operating loss in the IT segment decreased to $93,000 for the three-month period ended September 30, 2025 from an operating loss of $695,000 in the same period of 2024, due mainly to higher gross profit. Operating income in the professional sales service segment increased to $2,108,000 in the three-month period ended September 30, 2025 as compared to operating income of $1,531,000 in the same period of 2024, due to higher gross profit, partially offset by higher SG&A costs. The equipment segment reported an operating loss of $163,000 in the third quarter of 2025, compared to an operating loss of $223,000 in the third quarter 2024, a decrease of $60,000, primarily due to higher gross profit.

SG&A costs for the three months ended September 30, 2025 and 2024 were $12,212,000 and $11,409,000, respectively, representing an increase of $803,000, or 7% year-over-year. On a segment basis, SG&A costs in the IT segment increased by $38,000 in the third quarter of 2025 from the same quarter of the prior year due primarily to higher personnel and credit loss costs, partially offset by lower credit card fees and third-party commission costs; SG&A costs in the professional sales service segment increased by $894,000 due mainly to higher personnel costs associated with provision of expanded services; and SG&A costs in the equipment segment increased by $14,000 due primarily to higher personnel costs. Corporate SG&A costs not allocated to segments decreased $143,000 due mainly to lower annual meeting costs, partially offset by higher legal fees. Investment banking expenses for the business combination with Achari Ventures Holdings I were $1,539,000 in the third quarter of 2024 and none incurred in 2025.

Research and development expenses were $146,000, or 1% of revenues, for the third quarter of 2025, a decrease of $45,000, or 24%, from $191,000, or 1% of revenues, for the third quarter of 2024. The decrease is primarily attributable to lower product development expenses in both the IT and equipment segments.

Vaso Corporation and Subsidiaries

Adjusted EBITDA

We utilize Adjusted EBITDA in evaluating our performance internally, and this non-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-GAAP financial measure, in addition to 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 income (loss), 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-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 (loss) to Adjusted EBITDA is set forth below:

		(in thousands)
		Three Months Ended September 30,
		2025				2024
		(unaudited)				(unaudited)
Net income (loss)		$	1,711			$	(1,181	)
Interest expense (income), net			(316	)			(284	)
Income tax expense			35				30
Depreciation and amortization			179				219
Share-based compensation			8				8
Adjusted EBITDA		$	1,617			$	(1,208	)

Adjusted EBITDA increased by $2,825,000, to $1,617,000 in the quarter ended September 30, 2025 from $(1,208,000) in the quarter ended September 30, 2024. The increase was primarily attributable to the increase in net income partially offset by lower depreciation and amortization.

Interest and Other Income (Expense)

Interest and other income (expense) for the three months ended September 30, 2025 was $208,000 as compared to $242,000 for the corresponding period of 2024. The decrease in interest and other income (expense) was due primarily to higher loss at EECP Global, partially offset by higher interest income resulting from higher money market and US Treasury bill balances.

Income Tax Expense

For the three months ended September 30, 2025, we recorded income tax expense of $35,000 as compared to $30,000for the corresponding period of 2024. The $5,000 increase is due mainly to higher state tax expense.

Net Income (Loss)

Net income for the three months ended September 30, 2025 was $1,711,000 as compared to net loss of $1,181,000 for the three months ended September 30, 2024, representing an increase of $2,892,000. Income (loss) per share of $0.01 and $(0.01) was recorded in the three-month periods ended September 30, 2025 and 2024, respectively. The principal cause of the increase in net income is the increase in gross profit and decrease in business combination transaction costs, partially offset by the increase in SG&A costs.

Vaso Corporation and Subsidiaries

Results of Operations - For the Nine Months Ended September 30, 2025 and 2024

Revenues

Total revenue for the nine months ended September 30, 2025 and 2024 was $62,076,000 and $59,732,000, respectively, representing an increase of $2,344,000, or 4% year-over-year. On a segment basis, revenue in the IT, professional sales service and equipment segments increased $393,000, $1,919,000 and $32,000, respectively.

Revenue in the IT segment for the nine months ended September 30, 2025 was $32,218,000 compared to $31,825,000 for the nine months ended September 30, 2024, an increase of $393,000, or 1%, of which $840,000 resulted from higher network services revenue, partially offset by $447,000 lower revenue from healthcare IT services. Our monthly recurring revenue in the IT segment accounted for $29,034,000 or 90% of the segment revenue in the first nine months of 2025, and $27,445,000 or 86% of the segment revenue for the same period last year (see Note C).

Commission revenues in the professional sales service segment were $28,269,000 in the first nine months of 2025, an increase of $1,919,000, or 7%, as compared to $26,350,000 in the first nine months of 2024. The increase in commission revenues was due to both an increase in the volume of underlying equipment delivered by GEHC during the period and a higher blended commission rate applicable to such deliveries. 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 sheet. As of September 30, 2025, $39,412,000 in deferred commission revenue was recorded in the Company's condensed consolidated balance sheet, of which $21,854,000 was long-term. As of September 30, 2024, $33,117,000 in deferred commission revenue was recorded in the Company's condensed consolidated balance sheet, of which $15,623,000 was long-term. The increase in deferred revenue is principally due to new orders exceeding deliveries during the period.

Revenue in the equipment segment increased by $32,000, or 2%, to $1,589,000 for the nine-month period ended September 30, 2025 from $1,557,000 for the same period of the prior year, due primarily to higher ARCS^® subscription revenues in our US operations, partially offset by lower deliveries in our China operations.

Gross Profit

Gross profit for the nine months ended September 30, 2025 and 2024 was $37,053,000, or 60% of revenue, and $34,824,000, or 58% of revenue, respectively, representing an increase of $2,229,000, or 6% year-over-year. On a segment basis, gross profit in the IT, professional sales service, and equipment segments increased $311,000, or 2%; $1,900,000, or 9%; and $18,000, or 2%, respectively.

IT segment gross profit for the nine months ended September 30, 2025 was $13,197,000, or 41% of the segment revenue, compared to $12,886,000, or 40% of the segment revenue for the nine months ended September 30, 2024. The year-over-year increase of $311,000, or 2%, was primarily a result of higher margin product sales mix and increased revenues in the network service business, offset by lower margin product sales mix and decreased revenues in the healthcare IT business.

Professional sales service segment gross profit was $22,727,000, or 80% of segment revenue, for the nine months ended September 30, 2025 as compared to $20,827,000, or 79% of the segment revenue, for the nine months ended September 30, 2024, reflecting an increase of $1,900,000, or 9%. The increase was due to higher commission revenue as a result of higher volume of GEHC equipment delivered during the nine months ended September 30, 2025, when compared to the same period last year, and a higher blended commission rate. Cost of commissions in the professional sales service segment of $5,542,000 and $5,523,000, for the nine months ended September 30, 2025 and 2024, 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 balance sheet until the related commission revenue is recognized.

Vaso Corporation and Subsidiaries

Equipment segment gross profit increased to $1,129,000, or 71% of segment revenues, for the first nine months of 2025 compared to $1,111,000, or 71% of segment revenues, for the same period in 2024. The $18,000, or 2%, increase in gross profit was primarily the result of higher ARCS^® subscription revenues in the US market, partially offset by lower revenues in our China operations.

Operating Loss

Operating loss for the nine months ended September 30, 2025 and 2024 was $101,000, and $1,866,000, respectively, representing a decrease in loss of $1,765,000 as a combined result of gross profit increasing $2,229,000 and operating costs (below) increasing $464,000, year-over-year. On a segment basis, the IT segment recorded an operating loss of $1,479,000 in the first nine months of 2025 as compared to an operating loss of $1,288,000 in the same period of 2024; operating income in the professional sales service segment decreased by $93,000, from $3,182,000 in the first nine months of 2024 to $3,089,000 in the same period of 2025; and the equipment segment recorded an operating loss of $572,000 in the first nine months of 2025 as compared to an operating loss of $809,000 in the same period of 2024.

Operating loss in the IT segment increased to $1,479,000 for the nine-month period ended September 30, 2025 as compared to an operating loss of $1,288,000 in the same period of 2024, due primarily to higher SG&A costs partially offset by higher gross profit. Operating income in the professional sales service segment decreased $93,000 to $3,089,000 in the nine-month period ended September 30, 2025 as compared to operating income of $3,182,000 in the same period of 2024, due to higher SG&A costs partially offset by higher gross profit. The equipment segment reported an operating loss of $572,000 in the first nine months of 2025, compared to an operating loss of $809,000 in the first nine months of 2024, a decrease of $237,000, due mainly to lower SG&A and R&D costs.

SG&A costs for the nine months ended September 30, 2025 and 2024 were $36,663,000 and $34,316,000, respectively, representing an increase of $2,347,000, or 7% year-over-year. On a segment basis, SG&A costs in the IT segment increased by $554,000 in the first nine months of 2025 from the same period of the prior year due mainly to higher personnel and credit loss costs, partially offset by lower credit card fees and third-party commission costs; SG&A costs in the professional sales service segment increased by $1,993,000 due to higher personnel costs associated with the provision of expanded services, and to higher IT infrastructure costs; and SG&A costs in the equipment segment decreased by $174,000 due mainly to lower personnel costs in our China operations. Corporate SG&A costs not allocated to segments decreased $27,000 due mainly to lower annual meeting costs, partially offset by higher insurance costs. Expenses for investment banking activities associated with the business combination with Achari Ventures Holdings I were $1,787,000 in the nine months ended September 30, 2024 as compared to none in the same period of 2025.

Research and development ("R&D") expenses were $491,000, or 1% of revenues, for the first nine months of 2025, a decrease of $96,000, or 16%, from $587,000, or 1% of revenues, for the first nine months of 2024. The decrease is primarily attributable to lower product development expenses in the IT and equipment segments.

Adjusted EBITDA

We utilize Adjusted EBITDA in evaluating our performance internally, and this non-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-GAAP financial measure, in addition to 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 income (loss), 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-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) to Adjusted EBITDA is set forth below:

		(in thousands)
		Nine Months Ended September 30,
		2025				2024
Net income (loss)		$	439			$	(1,199	)
Interest expense (income), net			(862	)			(884	)
Income tax expense			115				154
Depreciation and amortization			531				630
Share-based compensation			25				26
Adjusted EBITDA		$	248			$	(1,273	)

Adjusted EBITDA increased by $1,521,000 to $248,000 in the nine months ended September 30, 2025 from $(1,273,000) in the nine months ended September 30, 2024. The increase was primarily attributable to higher net income, partially offset by lower depreciation and amortization.

Interest and Other Income (Expense)

Interest and other income (expense) for the nine months ended September 30, 2025 was $655,000 as compared to $821,000 for the corresponding period of 2024. The decrease in interest and other income was due primarily to higher loss at EECP Global.

Income Tax Expense

For the nine months ended September 30, 2025, we recorded income tax expense of $115,000 as compared to income tax expense of $154,000 for the corresponding period of 2024. The decrease was due mainly to lower state tax expense.

Net Income (Loss)

Net income for the nine months ended September 30, 2025 was $439,000 as compared to net loss of $1,199,000 for the nine months ended September 30, 2024, representing an increase of $1,638,000, or 137%. Income (loss) per share of $0.00 and $(0.01) was recorded in the nine-month periods ended September 30, 2025 and 2024, respectively. The principal cause of the increase was higher operating income, partially offset by higher loss at EECP Global as discussed above.

Liquidity and Capital Resources

Cash and Cash Flow

We have financed our operations from working capital. At September 30, 2025, we had cash and cash equivalents of $34,859,000 and working capital of $20,308,000, compared to cash and cash equivalents of $26,271,000 and working capital of $16,465,000 at December 31, 2024.

Vaso Corporation and Subsidiaries

Cash provided by operating activities was $9,012,000, which consisted of net income after adjustments to reconcile net income to net cash of $1,479,000 and cash provided by operating assets and liabilities of $7,533,000, during the nine months ended September 30, 2025, compared to cash provided by operating activities of $3,648,000 for the same period in 2024. The changes in the account balances primarily reflect a decrease in accounts and other receivables of $7,573,000 and an increase in deferred revenue of $4,518,000; partially offset by decreases in accrued commissions and accrued expenses of $1,373,000 and $2,154,000, respectively, and an increase in other assets of $1,428,000.

Cash used in investing activities during the nine-month period ended September 30, 2025 was $642,000 for the purchase of equipment and software.

Cash provided by financing activities during the nine-month period ended September 30, 2025 was $246,000 resulting primarily from $1,243,000 in proceeds from notes payable partially offset by the repayment of $996,000 in 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.