VASO Corp: Form 10-Q for the period ended Jun 30, 2025

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.

• IT segment, operating through a wholly-owned subsidiary VasoTechnology, Inc. (“VasoTechnology”), primarily focuses on healthcare IT and managed network technology services;
• Professional sales service segment, operating through a wholly-owned subsidiary Vaso Diagnostics, Inc. d/b/a VasoHealthcare, primarily focuses on the sale of healthcare capital equipment for GE HealthCare Technologies, Inc. (“GEHC”) into the healthcare provider middle market; and
• 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.

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

Results of Operations – For the Three Months Ended June 30, 2025 and 2024

Revenues

Total revenue for the three months ended June 30, 2025 and 2024 was $19,957,000 and $20,226,000, respectively, representing a decrease of $269,000, or 1% year-over-year. On a segment basis, revenue in the IT, professional sales services, and equipment segments increased/(decreased) $93,000, ($366,000), and $4,000, respectively.

Revenue in the IT segment for the three months ended June 30, 2025 was $10,684,000 compared to $10,591,000 for the three months ended June 30, 2024, an increase of $93,000, or 1%, of which $156,000 resulted from higher network service revenues, offset by $63,000 lower revenues in the healthcare IT business. Our monthly recurring revenue in the IT segment accounted for $9,557,000 or 89% of the segment revenue in the second quarter of 2025, and $8,804,000 or 83% of the segment revenue for the same quarter last year (see Note C to condensed consolidated financial statements).

Commission revenues in the professional sales service segment were $8,744,000 in the second quarter of 2025, a decrease of $366,000, or 4%, as compared to $9,110,000 in the same quarter of 2024. The decrease in commission revenues was due primarily to lower deliveries of diagnostic imaging equipment, partially offset by increased deliveries of ultrasound products, by GEHC in the second quarter of 2025, as compared to the second quarter of 2024, and by slightly higher 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, 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. As of June 30, 2024, $31,696,000 in deferred commission revenue was recorded in the Company’s condensed consolidated balance sheet, of which $15,774,000 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 condensed consolidated financial statements).

Revenue in the equipment segment increased by $4,000, or 1%, to $529,000 for the three-month period ended June 30, 2025 from $525,000 for the same period of the prior year, due to higher sales of ARCS® cloud software as a service (SaaS) in the US, largely offset by lower equipment deliveries in our China operations.

Gross Profit

Gross profit for the three months ended June 30, 2025 and 2024 was $11,797,000, or 59% of revenue, and $12,151,000, or 60% of revenue, respectively, representing a decrease of $354,000, or 3% year-over-year. On a segment basis, gross profit in the IT, professional sales service, and equipment segments decreased by $257,000, or 6%; $88,000, or 1%; and $9,000, or 2%, respectively.

IT segment gross profit for the three months ended June 30, 2025 was $4,325,000, or 40% of the segment revenue, compared to $4,582,000, or 43% of the segment revenue for the three months ended June 30, 2024. The year-over-year decrease of $257,000, or 6%, was primarily due to lower gross margin as a result of product mix changes reflecting higher network service revenues and lower healthcare IT revenues, as well as due to higher costs in both businesses.

Professional sales service segment gross profit was $7,085,000, or 81% of segment revenue, for the three months ended June 30, 2025 as compared to $7,173,000, or 79% of the segment revenue, for the three months ended June 30, 2024, reflecting a decrease of $88,000, or 1%. The decrease in absolute dollars was primarily due to lower commission revenue, partially offset by lower blended cost of commission rates. Cost of commissions in the professional sales service segment of $1,659,000 and $1,937,000, for the three months ended June 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 condensed consolidated balance sheets until the related commission revenue is recognized.

Equipment segment gross profit decreased to $387,000, or 73% of segment revenues, for the second quarter of 2025 compared to $396,000, or 75% of segment revenues, for the same quarter of 2024. The $9,000, or 2%, decrease in gross profit was the result of lower margins in our China operations, partially offset by higher SaaS margins in the US.

Operating (Loss) Income

Operating (loss) income for the three months ended June 30, 2025 and 2024 was ($421,000) and $996,000, respectively, representing a decrease of $1,417,000, or 142%, due primarily to the decrease in gross profit and to higher selling, general, and administrative (“SG&A”) costs. On a segment basis, the IT segment recorded an operating loss of $590,000 in the second quarter of 2025 as compared to operating loss of $173,000 in the same period of 2024; the professional sales service segment recorded operating income of $636,000 in the second quarter of 2025 as opposed to operating income of $1,658,000 in the same period of 2024; and the equipment segment recorded an operating loss of $163,000 in the second quarter of 2025 as compared to an operating loss of $291,000 in the same period of 2024.

Operating loss in the IT segment was $590,000 for the three-month period ended June 30, 2025 as compared to operating loss of $173,000 in the same period of 2024, due mainly to lower gross profit and higher SG&A costs. Operating income in the professional sales service segment decreased by $1,022,000 to $636,000 in the three-month period ended June 30, 2025 as compared to operating income of $1,658,000 in the same period of 2024, due primarily to higher SG&A costs. The equipment segment reported an operating loss of $163,000 in the second quarter of 2025, compared to an operating loss of $291,000 in the second quarter 2024, an improvement of $128,000, due mainly to lower SG&A costs in our China operations.

SG&A costs for the three months ended June 30, 2025 and 2024 were $12,051,000 and $10,841,000, respectively, representing an increase of $1,209,000, or 11%, year-over-year. On a segment basis, SG&A costs in the IT segment increased by $178,000 in the second quarter of 2025 from the same quarter of the prior year due mainly to higher personnel costs; SG&A costs in the professional sales service segment increased $935,000 due mainly to additional sales personnel costs in the diagnostic imaging sector; and SG&A costs in the equipment segment decreased $117,000 due mainly to lower personnel costs in China. Corporate costs not allocated to segments increased $105,000 due mainly to capitalization of business combination transaction costs in the second quarter of 2024 and higher investor relations costs in 2025.

Research and development (“R&D”) expenses decreased by $38,000, or 19%, to $167,000 in the second quarter of 2025 from $205,000 for the second quarter of 2024, primarily due to lower software development costs in our China operations.

Business combination transaction costs reflect accounting, advisory, and other fees associated with the Achari Business Combination Agreement.

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 (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-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 (loss) income to Adjusted EBITDA is set forth below:

(in thousands)

(unaudited)

(unaudited)

Adjusted EBITDA decreased by $1,454,000, to ($253,000) in the quarter ended June 30, 2025 from $1,201,000 in the quarter ended June 30, 2024. The decrease was attributable mainly to the decrease in net income.

Interest and Other Income (Expense)

Interest and other income (expense) for the three months ended June 30, 2025 was $264,000 as compared to $271,000 for the corresponding period of 2024. The decrease in interest and other income (expense) was due primarily to lower interest income earned on money market and short-term investment balances in the second quarter of 2025 due to lower interest rates.

Income Tax Expense

For the three months ended June 30, 2025, we recorded income tax expense of $40,000 as compared to $112,000 for the corresponding period of 2024. The $72,000 decrease arose mainly from lower state tax expense.

Net (Loss) Income

Net loss for the three months ended June 30, 2025 was $197,000 as compared to net income of $1,155,000 for the three months ended June 30, 2024, representing a decrease of $1,352,000. (Loss) income per share of ($0.00) and $0.01 was recorded in the three-month periods ended June 30, 2025 and 2024, respectively. The principal cause of the decrease in net income was the change from operating income to operating loss, partially offset by lower income tax expense.

Results of Operations – For the Six Months Ended June 30, 2025 and 2024

Revenues

Total revenue for the six months ended June 30, 2025 and 2024 was $39,418,000 and $38,963,000, respectively, representing an increase of $455,000, or 1%, year-over-year. On a segment basis, revenue in the IT, professional sales service, and equipment segments increased/(decreased) $256,000, $212,000, and ($13,000), respectively.

Revenue in the IT segment for the six months ended June 30, 2025 was $20,999,000 compared to $20,743,000 for the six months ended June 30, 2024, an increase of $256,000, or 1%, resulting from $541,000 higher network service revenue and $285,000 lower healthcare IT revenue. Our monthly recurring revenue in the IT segment accounted for $18,954,000, or 90% of the segment revenue in the first half of 2025, and $18,105,000, or 87% of the segment revenue for the same period last year (see Note C to condensed consolidated financial statements).

Commission revenues in the professional sales service segment were $17,449,000 in the first half of 2025, an increase of $212,000, or 1%, as compared to $17,237,000 in the first half of 2024. The increase in commission revenues was due primarily to increased deliveries of ultrasound products, partially offset by lower deliveries of diagnostic imaging equipment, by GEHC in the first half of 2025, as compared to the first half of 2024, and by slightly 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, 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. As of June 30, 2024, $31,696,000 in deferred commission revenue was recorded in the Company’s condensed consolidated balance sheet, of which $15,774,000 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 condensed consolidated financial statements).

Revenue in the equipment segment decreased by $13,000, or 1%, to $970,000 for the six-month period ended June 30, 2025 from $983,000 for the same period of the prior year, principally due to lower equipment deliveries in our China operations, partially offset by higher ARCS® cloud SaaS revenues in our US business.

Gross Profit

Gross profit for the six months ended June 30, 2025 and 2024 was $23,155,000, or 59% of revenue, and $23,068,000, or 59% of revenue, respectively, representing an increase of $87,000, or less than 1% year-over-year. On a segment basis, gross profit in the IT segment decreased $312,000, or 4%; gross profit in the professional sales service segment increased $428,000, or 3%; and gross profit in the equipment segment decreased $29,000, or 4%.

IT segment gross profit for the six months ended June 30, 2025 was $8,463,000, or 40% of the segment revenue, compared to $8,775,000, or 42% of the segment revenue for the six months ended June 30, 2024. The year-over-year decrease of $312,000, or 4%, was primarily due to lower gross margin as a result of product mix change reflecting higher network service revenues and lower healthcare IT revenues, as well as due to higher costs in both businesses.

Professional sales service segment gross profit was $13,980,000, or 80% of segment revenue, for the six months ended June 30, 2025 as compared to $13,552,000, or 79% of the segment revenue, for the six months ended June 30, 2024, reflecting an increase of $428,000, or 3%. The increase in absolute dollars was primarily due to higher commission revenue and lower blended cost of commission rates. Cost of commissions in the professional sales service segment of $3,469,000 and $3,685,000, for the six months ended June 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 condensed consolidated balance sheets until the related commission revenue is recognized.

Equipment segment gross profit decreased to $712,000, or 73% of segment revenues, for the first half of 2025 compared to $741,000, or 75% of segment revenues, for the same half of 2024. The $29,000, or 4%, decrease in gross profit was primarily the result of lower revenue and margins in our China operations, partially offset by higher ARCS® cloud margins in our US operations.

Operating Loss

Operating loss for the six months ended June 30, 2025 and 2024 was $1,639,000 and $473,000, respectively, representing an increase in loss of $1,166,000, or 247%, due primarily to higher SG&A costs, partially offset by lower transaction costs associated with the Achari Business Combination Agreement. On a segment basis, the IT segment recorded an operating loss of $1,388,000 in the first half of 2025 as compared to an operating loss of $593,000 in the same period of 2024; the professional sales service segment recorded operating income of $984,000 in the first half of 2025 as compared to operating income of $1,651,000 in the same period of 2024; and the equipment segment recorded an operating loss of $410,000 in the first half of 2025 as compared to an operating loss of $585,000 in the same period of 2024.

Operating loss in the IT segment was $1,388,000 for the six-month period ended June 30, 2025 as compared to an operating loss of $593,000 in the same period of 2024, due primarily to lower gross profit and higher SG&A costs. The professional sales service segment reported operating income of $984,000 in the first half of 2025, a decrease of $667,000 from operating income of $1,651,000 in the six-month period ended June 30, 2024, due to higher SG&A costs, partially offset by higher gross profit. The equipment segment reported an operating loss of $410,000 in the first half of 2025, compared to an operating loss of $585,000 in the first half 2024, an improvement of $175,000 due mainly to lower SG&A and R&D costs.

SG&A costs for the six months ended June 30, 2025 and 2024 were $24,449,000 and $22,907,000, respectively, representing an increase of $1,542,000, or 7% year-over-year. On a segment basis, SG&A costs in the IT segment increased by $517,000 in the first half of 2025 from the same half of the prior year due to higher personnel costs partially offset by lower third-party commission costs; SG&A costs in the professional sales service segment increased by $1,094,000 due mainly to additional sales headcount and compensation cost in the diagnostic imaging sector; and SG&A costs in the equipment segment decreased by $188,000 due mainly to lower personnel costs in our China operations. Corporate costs not allocated to segments decreased $121,000 due mainly to lower business combination transaction costs, partially offset by higher investor relations costs.

Research and development (“R&D”) expenses were $345,000, or 1% of revenues, for the first half of 2025, a decrease of $51,000, or 13%, from $396,000, or 1% of revenues, for the first half of 2024. The decrease is primarily attributable to lower software development expenses in the equipment segment.

Business combination transaction costs reflect accounting, advisory, and other fees associated with the Achari Business Combination Agreement.

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 (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-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 loss to Adjusted EBITDA is set forth below:

(in thousands)

Adjusted EBITDA decreased by $1,304,000 to ($1,369,000) in the six-month period ended June 30, 2025 from ($65,000) in the same period ended June 30, 2024. The decrease was primarily attributable to higher net loss and lower depreciation and amortization in the six months ended June 30, 2025.

Interest and Other Income (Expense)

Interest and other income (expense) for the six months ended June 30, 2025 was $447,000 as compared to $579,000 for the corresponding period of 2024. The decrease in interest and other income was due primarily to lower interest income on money market and short-term investment balances due to lower interest rates.

Income Tax Expense

We recorded income tax expense of $80,000 and $124,000 for the six-month periods ended June 30, 2025 and 2024, respectively. The decrease arose mainly from lower state tax expense.

Net Loss

Net loss for the six months ended June 30, 2025 was $1,272,000 as compared to $18,000 for the six months ended June 30, 2024, representing an increase in loss of $1,254,000. Loss per share of ($0.01) and ($0.00) was recorded in the six-month periods ended June 30, 2025 and 2024, respectively. The principal cause of the increase in net loss was higher operating loss and lower interest income, partially offset by lower income tax expense in the six months ended June 30, 2025.

Liquidity and Capital Resources

Cash and Cash Flow

We have financed our operations from working capital during the six months ended June 30, 2025. At June 30, 2025, we had cash and cash equivalents of $32,560,000 and working capital of $16,951,000, compared to cash and cash equivalents of $26,271,000 and working capital of $16,465,000 at December 31, 2024.

Cash provided by operating activities was $6,229,000, which consisted of net loss after adjustments to reconcile net loss to net cash of ($684,000) and cash provided by operating assets and liabilities of $6,913,000, during the six months ended June 30, 2025, compared to cash provided by operating activities of $1,718,000 for the same period in 2024. The changes in the account balances primarily reflect a decrease in accounts and other receivables of $8,068,000 and an increase in deferred revenue of $3,218,000, partially offset by decreases in accrued commissions of $1,868,000 and accrued expenses of $1,997,000.

Cash used in investing activities during the six-month period ended June 30, 2025 was $867,000 for the purchase of equipment and software.

Cash provided by financing activities during the six-month period ended June 30, 2025 was $966,000 in proceeds from the issue of notes payable, partially offset by $29,000 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.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures reporting as promulgated under the Exchange Act is defined as controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is 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 June 30, 2025 and have concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2025.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the Company’s fiscal quarter ended June 30, 2025 that have materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.