VASO 10-K & 10-Q changes, risk factors and insider trading

AchievingMaintaining profitable operations operations is dependent on several factors.

Our growth depends in part on the growth of the IT and healthcare markets whichthat 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, booked, 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.

We currently maintain product liability insurance at $6,000,000 per occurrence and in the aggregate.insurance. Our product liability insurance may not be adequate.adequate and is subject to exclusions from coverage. 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.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward looking statements. See “Forward Looking Statements” and “Risk Factors” in Item 1 (Business) to review certain conditions that we believe could cause results to differ materially from those contemplated by the forward-looking statements.

VasoTechnology (IT Segment)

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”). ItVasoTechnology currentlyconsisted consistsduring 2025 of a managed network and security service service division (NetWolves) and a healthcare IT application VAR (value added reseller) division (VasoHealthcare IT). ItsOn November 19, 2025, the Company sold all of the stock of VasoHealthcare IT to Nano-X Imaging Ltd. VasoTechnology’s current offering includes:

VasoHealthcare has built a a team of over 80 highly90 experienced sales professionals and a management team who utilize highly focused sales management and analytic tools to manage the complete sales process and to increase market penetration.

VasoMedical (Equipment Segment)

Results of Operations – For the Years Ended December 31, 20242025 and 20232024 Total revenues increased by by $5,743,000,$2,329,000, or 7.1%,2.7%, to $89,096,000 in the year ended December 31, 2025, from $86,767,000 in the year ended December 31, 2024, from $81,024,000 in the year ended December 31, 2023.2024. We reported reported net income of $951,000$1,569,000 and $4,805,000$951,000 for the years ended December 31, 20242025 and 2023,2024, respectively, aan decreaseincrease of $618,000, $3,854,000.or 65.0%. The decrease increase in net income was primarily due to higher operatingincome expensestax benefit and the gain on sale of VHC-IT in 2024, partially offset by higher gross profit. 2025. Our net income was $0.01 per basic and diluted common share for both of the yearyears ended December 31, 2024,2025 and $0.03 per basic and diluted common share, for the year ended December 31, 2023.2024.

Revenue in the IT segment segment was $42,954,000$42,465,000 for the year ended December 31, 20242025 as compared to $40,371,000$42,954,000 for the prior year, ana increasedecrease of $2,583,000, $489,000, or 6.4%, 1.1%, of which $2,684,000$1,421,000 was attributable to a decrease in healthcare IT revenues mainly due to the sale of the VHC-IT business unit in November 2025, partially offset by an increase of $932,000 in managed network services revenue offset by a decrease of $101,000 in healthcare IT revenues.NetWolves.

Commission revenues in the the professional sales service segment increased by $3,515,000,$2,856,000, or 9.3%,6.9%, to $44,191,000 in the year ended December 31, 2025, as compared to $41,335,000 in the year ended December 31, 2024, as compared to $37,820,000 in the year ended December 31, 2023.2024. The increase was primarily due to a higher blended commission rate for GEHC equipment delivered in 20242025 as well as a higher volume of GEHC equipment delivered in 2024, particularly from the ultrasound program started in 2023.2025. As discussed in Note B to the financial statements, the Company defers recognition of commission revenue until the underlying equipment is delivered. As of December 31, 2024,2025, the Company recorded on its consolidated balance sheet deferred commission revenue of $34,893,000$38,595,000 for this segment segment (of which $17,821,000$19,577,000 was long-term), an increase of $2,699,000,$3,612,000, or 8.4%,10.3%, compared to $32,194,000$34,983,000 of deferred commission revenue at December 31, 20232024 (of which $16,314,000$17,821,000 was long-term). The increase in deferred revenue was due principally to booked orders exceeding equipment deliveries in 2024.2025.

Revenue in our equipment segment decreased 12.5%$38,000, or 1.5%, to $2,440,000 for the year ended December 31, 2025 from $2,478,000 for the year ended December 31, 2024 from $2,833,000 for the year ended December 31, 2023,2024, as a result of a $236,000,$274,000, or 58.9%,13.3%, decrease in our US operations due to lower ARCS®-cloud software-as-a-service revenues, and lower equipment sales in our China operations due to lower deliveriesdeliveries, andpartially theoffset negativeby effecta of$236,000, foreignor exchange rate fluctuations35.9%, increase in 2024.our US operations due to higher ARCS®-cloud software-as-a-service revenues.

The Company recorded gross profit of $52,050,000,$54,672,000, or 60.0%61.4% of revenue, for the year ended December 31, 2024,2025, compared to $50,593,000,$52,050,000, or 62.4%60.0% of revenue, for the year ended December 31, 2023.2024. The increase of $1,457,000,$2,622,000, or 2.9%,5.0%, was due to a $1,875,000$2,950,000 increase in the professional sales service segment due to higher revenue; a $54,000$172,000 decrease in the IT segment due primarily to lower gross marginrevenue; and a $364,000$156,000 decrease in the equipment segment, mainly as a result of lower revenues and lower gross margin.

IT segment gross profit decreased slightly by $54,000$172,000 to $17,605,000,$17,433,000, or 41.0%41.1% of segment revenues, for the year ended December 31, 2024,2025, as compared to $17,659,000,$17,605,000, or 43.7% 41.0% of segment revenues in the prior year, a decrease of $54,000.year. This decrease was due to $267,000$935,000 lower gross profit from the healthcare IT business resulting from lower revenue and lower gross margin, partially offset by $213,000$763,000 higher gross profit from the managed network service business resulting from fromboth higher revenue butand lowerhigher gross margin.

Professional sales service service segment gross profit was $32,674,000,$35,624,000, or 79.0%80.6% of the segment revenues, for the year ended December 31, 2024,2025, an increase of $2,950,000, $1,875,000, or 6.1%,9.0%, from segment gross profit of $30,799,000,$32,674,000, or 81.4%79.0% of the segment revenue, for the year ended December 31, 2023. 2024. The increase in gross profit was due primarily to the increase in the segment revenue as a result of both a higher blended commission rate in 2024 and higher equipment delivery volume.volume in 2025. Cost of commissions increaseddecreased by $1,640,000,$94,000, or 23.4%,1.1%, to $8,661,000$8,567,000 for the year ended December 31, 2024,2025, as compared to cost of commissions of $7,021,000$8,661,000 in 2023.2024. The increasedecrease was due primarily to the increasea change in therevenue segmentmix revenue inof 2024 as well as the highervarious commission rate of the ultrasound program.tiers. Cost of commissions reflects commission expense associated with recognized commission revenues. Commission expense associated with deferred revenue is recorded as deferred commission expense until the related commission revenue is earned.

Operating (Loss) Income

Operating income was $285,000 for the year ended December 31, 2024 compared to operating income of $4,195,000 for the year ended December 31, 2023, a decrease of $3,910,000, or 93%. The decrease was primarily attributable to a $1,416,000 increase in corporate expenses associated with the proposed Achari business combination and a $1,294,000 increase in operating loss in the IT segment year over year,loss increased from a loss of $466,000 for the year ended December 31, 2023 to a loss of $1,760,000 for the year ended December 31, 2024,2024 to $6,559,000 for the year ended December 31, 2025, an increase of $4,799,000, or 272.7%, due primarily to highera selling,$4,639,000 generalcharge for impairment of goodwill and administrative (SG&A)lower costs.gross profit. Operating income in the professional sales service segment decreased by $367,000$224,000, or 3.3%, from $7,195,000 for the year ended December 31, 2023 to $6,828,000 for the year ended December 31, 2024,2024 to $6,604,000 for the year ended December 31, 2025, due mainly to higher operatingselling, expensesgeneral, relatingand toadministrative (“SG&A”) costs in the diagnostic ultrasound salesimaging program,business, partially offset by higher gross profit. Operating loss in the equipment segment increased by $833,000,$47,000, or 3.7%, from a loss of $451,000 $1,284,000 in the prior year to a loss of $1,254,000$1,331,000 for the year ended December 31, 2024,2025, resulting mainly from lower gross profit and higher SG&A costs.profit.

Selling, general and administrative expenses for the years ended December 31, 20242025 and 20232024 were $52,196,000, or 58.6% of revenues, and $48,984,000, or 56.5% of revenues, and $45,078,000, or 55.6% of revenues, respectively, reflecting an increase of $3,906,000$3,212,000 or 8.7%.6.6%. The increase in SG&A expenditures in the year ended December 31, 2024 2025 resulted primarily from a $2,242,000$3,175,000 increase in the professional sales service segment attributable mainly to higher sales personnel-related and travelIT costs,costs. aSG&A $1,121,000also increaseincreased by $57,000 and $36,000 in the IT segmentand duecorporate tosegments, higher personnelrespectively, and traveldecreased costs,by and a $352,000 increase $47,000 in the equipment segment due to higher allowance for credit loss on related party receivables.segment.

Research and development (R&D) expenses of $851,000,$728,000, or 1% of revenues, for the year ended December 31, 20242025 increaseddecreased by $96,000,$123,000, or 13%,15%, from $755,000,$851,000, or 1% of revenues, for the year ended December 31, 2023.2024. The increasedecrease was primarily attributable to higherlower software development costs in our China operations in 2024.2025.

Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered a substitute for operatingnet 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.

Adjusted EBITDA decreased by $4,093,000,$2,549,000, to $(1,548,000) in the year ended December 31, 2025, from $1,001,000 in the year ended December 31, 2024, from $5,094,000 in the year ended December 31, 2023.2024. The decrease was primarily attributable to lowerhigher netincome income,tax lowerbenefit, depreciationpartially andoffset amortization andby higher net interest income as when compared to the prior year. Net income decreased increased primarily due to higher operating expenses and higher income tax expensebenefit and the gain on sale of VHC-IT in 2024, partially offset by higher revenue and gross profit.2025.

Other income (expense), net for the years ended December 31, 20242025 and 2023,2024, was $992,000$1,585,000 and $710,000,$992,000, respectively, an increase of $282,000.$593,000. The increase was due primarily to $236,000the $827,000 gain on sale of VHC-IT, partially offset by $161,000 higher interestloss andon otherinvestment incomein arisingEECP fromGlobal higherin money market and US Treasury bill balances during 2024.2025.

During the year ended December 31, 2024,2025, we recorded income tax expensebenefit of $326,000,$2,875,000, as compared to income tax expense of $100,000$326,000 in the year ended December 31, 2023.2024. The Company utilized $5,878,000$4,609,000 and $5,857,000$5,878,000 in net operating loss carryforwards for the years ended December 31, 20242025 and 2023,2024, respectively. The increase in income tax expensebenefit in 20242025 arose primarily from higherthe staterelease incomeof tax.the remaining deferred tax asset valuation allowance. The Company had net operating loss carryforwards of approximately $19,000,000$14,500,000 at December 31, 2024.2025.

Cash provided by operating activities was $3,281,000$9,273,000 during the year ended December 31, 2024,2025, which consisted of net income after non-cash adjustments of $3,478,000$4,443,000 and changes in operating assets and liabilities of $(197,000).$4,830,000. The changes in the account balances primarily reflect increases in deferred revenue of $2,694,000 and accounts payable of $1,511,000,$3,700,000 and increases in accrued commissions and accrued liabilities totaling $1,753,000$1,456,000; partially offsetting these changes were increases in accounts and other receivablesassets of $5,065,000, inventories of $574,000, other assets of $524,000$777,000 and prepaid expense and other current assets of $475,000.$380,000, and decreases in accrued commissions of $541,000.

Cash used in financinginvesting activities during the year ended December 31, 20242025 was $89,000,$725,000, consisting of $81,000$925,000 in paymentspurchases of notesequipment and financesoftware, leasesoffset andby $8,000 $200,000 in shares withheldproceeds forfrom paymentsale of payroll taxes.VHC-IT.

The primary underlying uncertainty in evaluating the realizability of our deferred tax assets, which are primarily net operating losses, is the need to accurately project taxable income. The Company generated net operating losses in the years ended December 31, 2017, 2018 and 2019. From 2020 to 2022, this trend reversed and the Company generated increasingly higher taxable income, primarily as a result of the professional sales services segment’s growth in orders, revenue, and operating results. As a result of this trend, which we expect to continue, and the extension, through December 31, 2026, of the GEHC Agreement which underlies the performance of the professional sales segment, the Company reviewed positive and negative evidence, including improved historical operating results and the likelihood of such results continuing, and also reviewed its expected taxable income for future periods based on the positive trend in operating results and the extension of the GEHC Agreement to the end of 2026, and concluded that it is more likely than not that approximately $5.4 million of tax benefits related to net operating loss carryforwards will be utilized in the future tax years of 2023 to 2026 and, therefore, reduced its valuation allowance during the year ended December 31, 2022 in accordance with ASC 740. AsIn ofDecember 2025, the Company extended the GEHC Agreement an additional four years through December 31, 2024,2030 and concluded that is more likely than not that the Companyremaining continues tax benefits related to projectnet sufficientoperating loss carryforwards will be utilized in the future taxabletax incomeyears requiringof no related change2027 to its2030, valuationand, allowance.therefore, In addition,that the Companyremaining expectsapproximately to$3,000,000 continue providing ain valuation allowance oncould thebe remaining future tax benefits until it can sustain a level of profitability that demonstrates its ability to utilize the remaining assets, or other significant positive evidence arises that suggests its ability to utilize the remaining assets.released.

When performing the quantitative quantitative assessment to calculate the fair value of a reporting unit, we consider both comparative market multiples as well as estimated discounted cash flows for the reporting unit. The significant estimates and assumptions include, but are not limited to, revenue growth rates, operating margins, and future economic and market conditions. The discount rates are based upon industry weighted average cost of capital ranges. As a supplement, we conduct additional sensitivity analysis to assess the risk for potential impairment based upon changes in the key assumptions such as the discount rate, expected long-term growth rate, and cash flow projections. Based upon the completion of our annual test as of December 31, 2024,2025, we determined that there was no impairment of goodwill in the FGE reporting unit, and that the applicable reporting units’its estimated fair valuesvalue were substantiallywas in excess of theirits carrying amounts.amount. The carrying amount of the Netwolves reporting unit was determined to exceed its fair value, and an impairment charge of $4,639,000 was recorded for the year ended December 31, 2025 in the Consolidated Statements of Operations and Comprehensive Income.

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 andpredict, many of which are outside of the Company’s control,control. and actualActual results may differ materially materially from this forward-looking information and therefore, should not be unduly relied upon. Among the factors that could cause actual results results to differ materially are the following: variability in the timing and volume of product deliveries by third parties, and customer acceptance of those products, affects our commission revenues and our realization of deferred revenue; risks associated with converting deferred revenue and contracted orders into recognized revenue, including delays, cancellations or modifications of customer orders; the effect of business and economic conditions, including the possibility of a downturn or disruptions in the U.S. economy; the impact of USU.S. tariff policies; the effect of the dramatic changes taking place in IT and healthcare, including the use of artificial intelligencehealthcare; 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.

Vaso Corporation (“Vaso”) was incorporated in Delaware in July 1987. WePrior to the two divestitures described below, we principally operateoperated in three distinct business segments in the healthcare and information technology industries. We managemanaged and evaluateevaluated our operations, and reportreported our financial results, through these three business segments:segments.

Results of Operations – For the Three Months Ended MarchJune 31,30, 2026 and 2025

Total revenue for the three months ended MarchJune 31,30, 2026 and 2025 was $19,356,000$11,187,000 and $19,462,000,$10,331,000, respectively, representing a decreasean increase of $106,000,$856,000, or less than 1%8% year-over-year. On a segment basis, revenue in the IT, professional sales serviceservices, and equipment segments (decreased)/increased $530,000($1,058,000), $1,750,000, and $118,000, respectively,$164,000, while revenue in the IT segment decreased $754,000.respectively.

Commission revenues in the professional sales service segment were $9,235,000$10,494,000 in the firstsecond quarter of 2026, an increase of $530,000,$1,750,000, or 6%,20%, as compared to $8,705,000$8,744,000 in the same quarter of 2025. The increase in commission revenues was due primarily to both higher deliveries by GEHC of the diagnostic imaging productsequipment, previously booked and a higher blended commission rate applicable to such deliveries, partially offset by bothdecreased lowerdeliveries of ultrasound productproducts, deliveriesby GEHC in the second quarter of 2026, as compared to the second quarter of 2025, and aby lower blended commission rate applicable to such deliveries.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 for such equipment.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 MarchJune 31,30, 2026, $39,520,000$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 sheets,sheet, of which $20,878,000$20,350,000 was long-term. As of March 31, 2025, $35,404,000 in deferred commission revenue was recorded in the Company’s condensed consolidated balance sheets, of which $18,246,000 was long-term. The increase in deferred revenue wasis principally due to higher value of new orders booked than ordersof the delivered equipment during the twelve-month12-month period (see Note M to the condensed consolidated period.financial statements).

Revenue in the equipment segment increased by $118,000,$164,000, or 27%,31%, to $560,000$693,000 for the three-month period ended MarchJune 31,30, 2026 from $442,000 $529,000 for the same period of the prior year, principallydue dueprimarily to higher equipment deliveries of products in our China operations.

Gross profit for the three months ended MarchJune 31,30, 2026 and 2025 was $11,576,000,$8,889,000, or 60%79% of revenue, and $11,358,000,$7,941,000, or 58%77% of revenue, respectively, representing an increase of $218,000,$948,000, or 2%,12% year-over-year. On a segment basis, gross profit in the IT segment decreased $469,000, while professional sales service segment increasedand $328,000, orequipment 5%, whilesegment gross profit inincreased theby IT$1,385,000, or 20%; and equipment segments decreased $83,000, or 2%, and $27,000, $32,000, or 8%, respectively.

Professional sales service segment gross profit was $7,222,000,$8,470,000, or 78%81% of segment revenue, for the three months ended MarchJune 31,30, 2026 as compared to $6,894,000,$7,085,000, or 79%81% of the segment revenue, for the three months ended MarchJune 31,30, 2025, reflecting an increase of $328,000, $1,385,000, or 5%.20%. The increase in absolute dollars was primarily due to higher revenuescommission partiallyrevenue, offsetas bywell higheras to lower blended cost of commissions.commission rates. Cost of commissions in the professional sales service segment of $2,013,000 $2,024,000 and $1,811,000$1,659,000, for the three months ended MarchJune 31, 30, 2026 and 2025, respectively, reflected commission expense associated with recognized commission revenues. Cost of commissions increased primarily due to a higher commission cost structure associated with ultrasound product revenues.

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

Equipment segment gross profit wasincreased $299,000,to $419,000, or 53%60% of segment revenues, for the firstsecond quarter of 2026 compared to $326,000,$387,000, or 74%73% of segment revenues, for the same quarter of 2025. The $27,000,$32,000, or 8%, decreaseincrease in gross profit was mainly the result of higher ARCS®-cloud software costs in the US market and higher product obsolescence costsrevenue in our China operations.operations, partially offset by lower SaaS margins in the US.

Operating loss for the three six months ended MarchJune 31,30, 2026 and 2025 was $1,330,000 $80,000 and $1,218,000,$519,000, respectively, anrepresenting increasea decrease in loss of $112,000,$439,000, or 85%, due primarily to higher selling, general,gross and administrative (“SG&A”) expenses,profit, partially offset by higher grossSG&A profit.costs. On a segment basis, the professional sales service segment recorded an operating loss of $39,000 in the first quarter of 2026, as compared to operating income of $347,000 for the same period of 2025; the IT segment recorded an operating loss of $310,000$0 and $52,000 in the first quarterhalf 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 an operating lossincome of $798,000$800,000 in the same period of 2025; and the equipment segment recorded an operating loss of $360,000 $595,000 in the first quarter half of 2026 as compared to an operating loss of $246,000$442,000 in the same period of 2025.

Operating loss in the IT segment was $310,000 for the three-month period ended March 31, 2026, a decrease in loss of $488,000 from an operating loss of $798,000 in the same period of 2025, due mainly to lower SG&A costs, partially offset by lower gross profit. The professional sales service segment reported an operating lossincome of $39,000 $1,346,000 in the three-monthfirst periodhalf endedof March2026, 31,an 2026increase asof compared$546,000 tofrom operating income of $347,000$800,000 in the same six-month period ofended June 30, 2025, a decrease in operating income of $386,000, due to higher SG&Agross costs,profit, partially offset by higher grossSG&A profit. costs. The equipment segment reported an operating loss of $360,000 $595,000 in the first quarterhalf of 2026, compared to an operating loss of $246,000$442,000 in the first quarter ofhalf 2025, an increase in operating loss of $114,000,$153,000 due primarily mainly to higher SG&A and R&D costs.

SG&A costs for the three six months ended MarchJune 31,30, 2026 and 2025 were $12,723,000 $16,095,000 and $12,398,000,$15,751,000, respectively, representing an increase of $325,000,$344,000, or 3%,2% year-over-year. On a segment basis, SG&A costs in the IT segment decreasedwere by$0 $571,000and $937,000 in the first quarterhalf of 2026 fromand the2025, same quarter of the prior year due primarily to the divestiture of VHC-IT partially offset by higher personnel costsrespectively; SG&A costs in the professional sales service segment increased $714,000by $1,167,000 due mainly to higher personnel andcost travelin coststhe diagnostic imaging sector; and SG&A costs in the equipment segment increased $82,000 by $108,000 due mainly to higher personnel costs.costs in our China operations. Corporate costs not allocated to segments increased by $100,000, to $621,000 in the three months ended March 31, 2026 from $521,000 for the same period in 2025,$6,000 due mainly to higher consultinglegal and accounting costs, partially offset by lower investor relations costs.

Research and development (“R&D”) expenses were $183,000, $395,000, or 1%2% of revenues, for the first quarterhalf of 2026, an increase of $5,000,$50,000, or 3%,15%, from $178,000,$345,000, or 1%2% of revenues, revenues, for the first quarterhalf of 2025. The increase is primarily attributable to higher productpersonnel and software development expensescosts in the equipment segment.

We utilize Adjusted EBITDA in evaluating our performance internally, and this non-GAAPnon-U.S. GAAP financial measure is frequently used by securities analysts, investors and and other interested parties in the evaluation of companies in the Company’s industry. Management believes that this non-GAAPnon-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 income (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-GAAPnon-U.S. GAAP financial measure might might not be comparable to similarly-titled measures of other companies limiting its usefulness as a comparative measure.

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

Adjusted EBITDA from continuing operations increased by $43,000,$563,000 to $90,000 in the six-month period ended June 30, 2026 from ($1,072,000$473,000) in the quartersame period ended MarchJune 31, 2026 from ($1,115,000) in the quarter ended March 31,30, 2025. The increase was primarily mainly attributable to lower net loss and higher depreciation and amortization,amortization partially offset by higherand income tax benefit.expense in the six months ended June 30, 2026.

Interest and Other Income (Expense), Net

OtherInterest and other income (expense), net for the threesix months ended MarchJune 31,30, 2026 was $255,000$455,000 as compared to $183,000$432,000 for the corresponding period of 2025. The increase in interest and other income (expense) was due primarily to transitionhigher servicesinterest providedincome toon Nano-Xmoney in connection with the divestiture of the former VHC-IT businessmarket and decreasedshort-term lossTreasury onbill investmentbalances indue EECPto higher Global.invested amounts, partially offset by lower interest rates.

Income Tax Benefit (Expense)

For the three months ended March 31, 2026, weWe recorded income tax benefit of $188,000 as compared to income tax expense of $40,000$261,000 and $56,000 for the correspondingsix-month periodperiods ofended 2025.June 30, 2026 and 2025, respectively. The increase was duearose mainly tofrom higherlower deferred deferred tax benefit.assets.

Net loss for the threesix months ended June 30, 2026 was $343,000 as compared to $1,272,000 for the six months ended MarchJune 31, 2026 was $887,000 as compared to $1,075,000 for the three months ended March 31,30, 2025, representing a decrease in loss of $188,000. $929,000. Loss per share of ($0.00) and ($0.01) was $0.01 recorded in both of the three-monthsix-month periods ended MarchJune 31,30, 2026 and 2025.2025, respectively. The principal cause of the decrease in net loss was thelower increaseoperating inloss from both continuing and discontinued operations, partially offset by higher income tax benefitexpense andin grossthe profit,six partiallymonths offsetended byJune higher30, SG&A costs.2026.

We have financed our operations from working capital.capital during the six months ended June 30, 2026. At MarchJune 31,30, 2026, we had cash and cash equivalents of $21,973,000$38,291,000 and working capital of $20,581,000,$22,323,000, compared to cash and cash equivalents of $35,050,000$34,081,000 and working capital of $21,714,000 at December 31, 2025.

Cash usedprovided by operating activities during the three months ended March 31, 2026 was $12,625,000,$4,819,000, which consisted of net loss after adjustments to reconcile net loss to net cash of $740,000$500,000 and cash usedprovided by by operating assets and liabilities of $11,885,000,$4,319,000, during the six months ended June 30, 2026, compared to cash usedprovided by operating activities of $566,000$6,229,000 for the same period in 2025. The changes in the account balances primarily reflect a an increasedecrease in accounts and other receivables of $5,654,000$7,238,000 and decreasesan increase in deferred revenue of $2,919,000, partially offset by decreases in accrued commissions of $1,400,000 and accrued expenses and other liabilities of $1,692,000 and $4,292,000, respectively, partially offset by an increase in deferred revenue of $925,000.$4,158,000.

Cash used byin investing activities during the three-monthsix-month period ended MarchJune 31,30, 2026 was $459,000$963,000 for the purchase of equipment and software.