UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

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

For the quarterly period ended March 31, 2025

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

For the transition period from to

Commission File Number: 001-36529

CareCloud, Inc.

(Exact name of registrant as specified in its charter)

Delaware

22-3832302

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

7 Clyde Road

Somerset, New Jersey

08873

(Address of principal executive offices)

(Zip Code)

(732) 873-5133

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

CCLD

Nasdaq Global Market

8.75% Series B Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per share

CCLDO

Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

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

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

At April 30, 2025, the registrant had 42,321,129 shares of common stock, par value $0.001 per share, outstanding.

INDEX

		Page
Forward-Looking Statements		2

PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets at March 31, 2025 and December 31, 2024	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2025 and 2024	5
	Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2025 and 2024	6
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	36

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
Signatures		39

Forward-Looking Statements

Certain statements that we make from time to time, including statements contained in this Quarterly Report on Form 10-Q, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “shall,” “should,” “could,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “seeks,” “estimates,” “forecasts,” “predicts,” “possible,” “potential,” “target,” or “continue” or the negative of these terms or other comparable terminology. Our operations involve risks and uncertainties, many of which are outside of our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements reflecting management’s expectations for future financial performance and operating expenditures (including our ability to continue as a going concern, to raise additional capital and to succeed in our future operations), expected growth, profitability and business outlook, increased sales and marketing expenses, and the expected results from the integration of our acquisitions.

Forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties, and other factors that may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. These factors include, among other things, the unknown risks and uncertainties that we believe could cause actual results to differ from these forward-looking statements as set forth under the heading “Risk Factors” in our Annual Report on Form 10-K/A filed with the SEC on April 3, 2025. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements, including without limitation, risks and uncertainties relating to:

	●	our ability to manage our growth, including acquiring, partnering with, and effectively integrating acquired businesses into our infrastructure and avoiding legal exposure and liabilities associated with acquired companies and assets;

	●	our ability to retain our clients and revenue levels, including effectively migrating new clients and maintaining or growing the revenue levels of our new and existing clients;

	●	our ability to maintain operations in Pakistan, Azad Jammu and Kashmir, and Sri Lanka (together, the “Offshore Offices”) in a manner that continues to enable us to offer competitively priced products and services;

	●	our ability to keep pace with a rapidly changing healthcare industry;

	●	our ability to consistently achieve and maintain compliance with a myriad of federal, state, foreign, local, payor and industry requirements, regulations, rules, laws and contracts;

	●	our ability to maintain and protect the privacy of confidential and protected Company, client and patient information;

	●	our ability to develop new technologies, upgrade and adapt legacy and acquired technologies to work with evolving industry standards and third-party software platforms and technologies, and protect and enforce all of these and other intellectual property rights;

	●	our ability to attract and retain key officers and employees, and the continued involvement of Mahmud Haq as Executive Chairman and A. Hadi Chaudhry and Stephen Snyder as Co-Chief Executive Officers, all of which are critical to our ongoing operations and growing our business;

	●	our ability to realize the expected cost savings and benefits from our restructuring activities and structural cost reductions;

	●	our ability to comply with covenants contained in our credit agreement with our senior secured lender, Silicon Valley Bank, a division of First Citizens Bank, and other future debt facilities;

	●	our ability to continue to pay our monthly dividends which were suspended in December 2023 and resumed in February 2025 to the holders of our Series A and Series B preferred stock;

	●	our ability to incorporate AI into our products faster and more successfully than our competitors, protecting the privacy of medical records and cybersecurity threats;

	●	our ability to compete with other companies developing products and selling services competitive with ours, and who may have greater resources and name recognition than we have;

	●	our ability to effectively integrate, manage and keep our information systems secure and operational in the event of a cyber-attack;

	●	our ability to respond to the uncertainty resulting from pandemics, epidemics or other public health emergencies and the impact they may have on our operations, the demand for our services, our projected results of operations, financial performance or other financial metrics or any of the foregoing risks and economic activity in general;

	●	our ability to keep and increase market acceptance of our products and services;

	●	changes in domestic and foreign business, market, financial, political and legal conditions; and

	●	other factors disclosed in this Quarterly Report on Form 10-Q or our other filings with the Securities and Exchange Commission (the “SEC”).

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations, beliefs and views as of the date of this Quarterly Report on Form 10-Q concerning future developments and their potential effects on our business. Although we believe that the expectations reflected in the forward-looking statements contained in this Quarterly Report on Form 10-Q are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We anticipate that subsequent events and developments may cause our assessments to change. Except as required by law, we are under no duty to update or revise any of such forward-looking statements, whether as a result of new information, future events, or otherwise, after the date of this Quarterly Report on Form 10-Q.

You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we currently expect. The forward-looking statements contained herein should not be relied upon as representing our assessments as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CARECLOUD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

($ in thousands, except share and per share amounts)

	March 31,			December 31,
	2025			2024
	(Unaudited)
ASSETS
Current assets:
Cash	$	6,805		$	5,145
Accounts receivable - net		13,887			12,774
Contract asset		4,457			4,334
Inventory		609			574
Current assets - related party		16			16
Prepaid expenses and other current assets		2,843			1,957
Total current assets		28,617			24,800
Property and equipment - net		5,323			5,290
Operating lease right-of-use assets		3,097			3,133
Intangible assets - net		16,877			18,698
Goodwill		19,186			19,186
Other assets		456			507
TOTAL ASSETS	$	73,556		$	71,614
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,951		$	4,565
Accrued compensation		2,865			1,817
Accrued expenses		5,002			4,951
Operating lease liability (current portion)		1,355			1,287
Deferred revenue (current portion)		1,297			1,212
Notes payable (current portion)		133			310
Contingent consideration (current portion)		47			-
Dividend payable		1,299			5,438
Total current liabilities		16,949			19,580
Notes payable		23			26
Contingent consideration		60			-
Operating lease liability		1,776			1,847
Deferred revenue		571			387
Total liabilities		19,379			21,840
COMMITMENTS AND CONTINGENCIES (NOTE 8)		-			-
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.001 par value - authorized 7,000,000 shares. Series A, issued and outstanding 984,530 and 4,526,231 shares at March 31, 2025 and December 31, 2024, respectively. Series B, issued and outstanding 1,511,372 shares at March 31, 2025 and December 31, 2024.		2			6
Common stock, $0.001 par value - authorized 85,000,000 shares. Issued 43,061,928 and 16,997,035 shares at March 31, 2025 and December 31, 2024, respectively. Outstanding 42,321,129 and 16,256,236 shares at March 31, 2025 and December 31, 2024, respectively		43			17
Additional paid-in capital		123,537			121,046
Accumulated deficit		(64,682	)		(66,630	)
Accumulated other comprehensive loss		(4,061	)		(4,003	)
Less: 740,799 common shares held in treasury, at cost at March 31, 2025 and December 31, 2024		(662	)		(662	)
Total shareholders’ equity		54,177			49,774
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	73,556		$	71,614

See notes to condensed consolidated financial statements.

CARECLOUD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

($ in thousands, except share and per share amounts)

	2025			2024*
	Three Months Ended
	March 31,
	2025			2024*
NET REVENUE	$	27,632		$	25,962
OPERATING EXPENSES:
Direct operating costs		15,464			15,177
Selling and marketing		1,131			1,770
General and administrative		4,332			3,721
Research and development		1,235			913
Depreciation and amortization		3,337			3,930
Restructuring costs		114			322
Total operating expenses		25,613			25,833
OPERATING INCOME		2,019			129
OTHER:
Interest income		42			27
Interest expense		(58	)		(365	)
Other (expense) income - net		(14	)		7
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES		1,989			(202	)
Income tax provision		41			39
NET INCOME (LOSS)	$	1,948		$	(241	)

Preferred stock dividend		2,811			1,312
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(863	)	$	(1,553	)

Net loss per common share: basic and diluted	$	(0.04	)	$	(0.10	)
Weighted-average common shares used to compute basic and diluted loss per share		23,813,943			16,014,309

See notes to condensed consolidated financial statements.

*	Restated to include the preferred stock dividends earned, but not declared, during the three months ended March 31, 2024 (see Note 17).

CARECLOUD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

($ in thousands)

	2025			2024
	Three Months Ended
	March 31,
	2025			2024
NET INCOME (LOSS)	$	1,948		$	(241	)
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment (a)		(58	)		28
COMPREHENSIVE INCOME (LOSS)	$	1,890		$	(213	)

(a)

No tax effect has been recorded as the Company recorded a valuation allowance against the tax benefit from its foreign currency translation adjustments.

See notes to condensed consolidated financial statements.

CARECLOUD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

($ in thousands, except for number of shares)

	Shares			Amount			Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Stock			Equity
	Preferred Stock Series A						Preferred Stock Series B				Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Treasury (Common)			Total Shareholders’
	Shares			Amount			Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Stock			Equity
Balance - January 1, 2025		4,526,231		$	5			1,511,372	$	1		16,997,035	$	17	$	121,046		$	(66,630	)	$	(4,003	)	$	(662	)	$	49,774
Net income		-			-			-		-		-		-		-			1,948			-			-			1,948
Foreign currency translation adjustment		-			-			-		-		-		-		-			-			(58	)		-			(58	)
Conversion of preferred stock and accrued dividends to common stock		(3,541,701	)		(4	)		-		-		25,981,248		26		2,413			-			-			-			2,435
Issuance of stock under the equity incentive plan		-			-			-		-		83,645		-		-			-			-			-			-
Stock-based compensation, net of cash settlements		-			-			-		-		-		-		104			-			-			-			104
Preferred stock dividends		-			-			-		-		-		-		(26	)		-			-			-			(26	)
Balance - March 31, 2025		984,530		$	1			1,511,372	$	1		43,061,928	$	43	$	123,537		$	(64,682	)	$	(4,061	)	$	(662	)	$	54,177

Balance - January 1, 2024		4,526,231		$	5			1,468,792	$	1		16,620,891	$	17	$	120,706		$	(74,481	)	$	(3,869	)	$	(662	)	$	41,717
Balance		4,526,231		$	5			1,468,792	$	1		16,620,891	$	17	$	120,706		$	(74,481	)	$	(3,869	)	$	(662	)	$	41,717
Net loss		-			-			-		-		-		-		-			(241	)		-			-			(241	)
Net income (loss)		-			-			-		-		-		-		-			(241	)		-			-			(241	)
Foreign currency translation adjustment		-			-			-		-		-		-		-			-			28			-			28
Issuance of stock under the equity incentive plan		-			-			14,000		-		238,400		-		-			-			-			-			-
Stock-based compensation, net of cash settlements		-			-			-		-		-		-		(79	)		-			-			-			(79	)
Preferred stock dividends		-			-			-		-		-		-		(5	)		-			-			-			(5	)
Balance - March 31, 2024		4,526,231		$	5			1,482,792	$	1		16,859,291	$	17	$	120,622		$	(74,722	)	$	(3,841	)	$	(662	)	$	41,420
Balance		4,526,231		$	5			1,482,792	$	1		16,859,291	$	17	$	120,622		$	(74,722	)	$	(3,841	)	$	(662	)	$	41,420

For the three months ended March 31, 2025, the Company declared four months of dividends and paid two months of dividends on the Preferred Shares.

No dividends were declared or paid during the three months ended March 31, 2024.

See notes to condensed consolidated financial statements.

CARECLOUD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

($ in thousands)

	2025			2024
OPERATING ACTIVITIES:
Net income (loss)	$	1,948		$	(241	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		3,407			4,020
Lease amortization		480			509
Deferred revenue		269			58
Provision for expected credit losses		70			37
Foreign exchange gain		(1	)		(11	)
Interest accretion		107			168
Stock-based compensation expense (benefit)		108			(708	)
Changes in operating assets and liabilities:
Accounts receivable		(1,183	)		(111	)
Contract asset		(105	)		(361	)
Inventory		(35	)		(15	)
Other assets		(908	)		-
Accounts payable and other liabilities		956			721
Net cash provided by operating activities		5,113			4,066
INVESTING ACTIVITIES:
Purchases of property and equipment		(624	)		(298	)
Capitalized software and other intangible assets		(846	)		(1,570	)
Initial payment for acquisition		(40	)		-
Net cash used in investing activities		(1,510	)		(1,868	)
FINANCING ACTIVITIES:
Preferred stock dividends paid		(1,730	)		-
Settlement of tax withholding obligations on stock issued to employees		(21	)		(151	)
Repayments of notes payable		(181	)		(223	)
Repayment of line of credit		-			(1,000	)
Net cash used in financing activities		(1,932	)		(1,374	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(11	)		(17	)
NET INCREASE IN CASH		1,660			807
CASH - Beginning of the period		5,145			3,331
CASH - End of the period	$	6,805		$	4,138
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of preferred stock and accrued dividends to common stock	$	2,435		$	-
Dividends declared, not paid	$	1,299		$	5
Purchase of prepaid insurance with assumption of note	$	-		$	96
Reclass of deposits for property and equipment placed in service	$	-		$	296
SUPPLEMENTAL INFORMATION - Cash paid during the period for:
Income taxes	$	15		$	6
Interest	$	18		$	295

See notes to condensed consolidated financial statements.

CARECLOUD, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2025

AND 2024 (UNAUDITED)

1. ORGANIZATION AND BUSINESS

CareCloud, Inc., (together with its consolidated subsidiaries, “CareCloud,” the “Company,” “we,” “us” and/or “our”) is a leading provider of technology-enabled services and solutions that redefine the healthcare revenue cycle. We provide technology-enabled revenue cycle management and a full suite of proprietary cloud-based solutions to healthcare providers, from small practices to enterprise medical groups, hospitals, and health systems throughout the United States. Healthcare organizations today operate in highly complex and regulated environments. Our suite of technology-enabled solutions helps our clients increase financial and operational performance, streamline clinical workflows, and improve the patient experience.

Our portfolio of proprietary software and business services includes: technology-enabled business solutions that maximize revenue cycle management and create efficiencies through platform agnostic AI-driven applications; cloud-based software that helps providers manage their practice and patient engagement while leveraging analytics to improve provider performance; digital health services to address value-based care and enable the delivery of remote patient care; healthcare IT professional services & staffing to address physician burnout, staffing shortages and leverage consulting expertise to transition into the next generation of healthcare; and, medical practice management services to assist medical providers with operating models and the tools needed to run their practice. Our high-value business services, such as revenue cycle management, are often paired with our cloud-based software, premiere healthcare consulting and implementation services, and on-demand workforce staffing capabilities for high-performance medical groups and health systems nationwide.

CareCloud has its corporate office in Somerset, New Jersey and maintains client support teams throughout the U.S., and offshore offices in Pakistan and Azad Jammu and Kashmir, a region administered by Pakistan (the “Pakistan Offices”), and in Sri Lanka.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 8-03. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the Company’s financial position as of March 31, 2025, the results of operations for the three months ended March 31, 2025 and 2024 and cash flows for the three months ended March 31, 2025 and 2024. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2024, which are included in the Company’s Annual Report on Form 10-K/A filed with the SEC on April 3, 2025.

Significant Accounting Policies — During the three months ended March 31, 2025, there were no changes to the Company’s significant accounting policies from its disclosures in the Annual Report on Form 10-K/A for the year ended December 31, 2024, filed with the SEC on April 3, 2025.

Recent Accounting Pronouncements — From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) and are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently adopted and recently issued accounting pronouncements will not have a material impact on our condensed consolidated financial position, results of operations and cash flows.

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements – Issue 2. The amendments in this update require that leasehold improvements associated with common control leases be: (1) amortized by the lessee over the useful life of the leasehold improvements to the common control group as long as the lessee controls the use of the underlying asset through a lease and (2) accounted for as a transfer between entities under common control through an adjustment to equity if, and when, the lessee no longer controls the use of the underlying asset. The amendments in this update are effective for fiscal years beginning after December 15, 2023. There was no impact on the condensed consolidated financial statements as a result of this standard.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This update amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification (the “Codification”). The new guidance is intended to align U.S. GAAP requirements with those of the SEC and to facilitate the application of U.S. GAAP for all entities. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. If by June 30, 2027 the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the associated amendment will be removed from the Codification and will not become effective.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Disclosures. The amendments in this update improve segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The impact was only to the financial statement disclosures, which have been adopted by the Company.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The amendments in this update enhance the transparency and decision usefulness of income tax disclosures primarily related to rate reconciliation and income taxes paid information. The update also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company does not expect this update to have a material impact on the condensed consolidated financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements – Amendments to Remove References to the Concepts Statements. This update contains amendments to the Codification that remove references to various FASB Concepts Statements. These Codification updates are for technical corrections such as conforming amendments, clarifications to guidance, simplifications to wording or the structure of guidance and other minor improvements. The resulting amendments are referred to as Codification improvements. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect this update to have a material impact on the condensed consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40). This update contains amendments that require disclosure, in the notes to financial statements, of specified information about certain costs and expenses. The amendments in this update are effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The expected impact would only be to the financial statement disclosures.

In January 2025, the FASB issued ASU 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This update clarifies the effective date of ASU 2024-03. Public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The expected impact would only be to the financial statement disclosures.

3. PREPAID EXPENSES AND OTHER CURRENT ASSETs

Prepaid expenses and other current assets as of March 31, 2025 and December 31, 2024 consist of the following:

	March 31, 2025		December 31, 2024
	($ in thousands)
Prepayments to vendors	$	1,459	$	1,099
Prepaid credit card		601		-
Prepaid insurance		399		494
Prepaid commissions		217		243
Other		167		121
	$	2,843	$	1,957

4. GOODWILL AND INTANGIBLE ASSETS-NET

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. At March 31, 2025 and December 31, 2024, approximately $90,000 of goodwill was allocated to the Medical Practice Management segment and the balance was allocated to the Healthcare IT segment. During the three months ended March 31, 2025, the Company completed an acquisition which did not result in additional goodwill. As a result of the acquisition, the Company recorded $129,000 of customer relationships and approximately $107,000 of contingent consideration.

The following is the summary of the carrying amount of goodwill for the three months ended March 31, 2025 and the year ended December 31, 2024:

	Three Months Ended		Year Ended
	March 31, 2025		December 31, 2024
	($ in thousands)
Beginning gross balance	$	19,186	$	19,186
Additions		-		-
Ending gross balance	$	19,186	$	19,186

Intangible assets – net as of March 31, 2025 and December 31, 2024 consist of the following:

SCHEDULE OF INTANGIBLE ASSETS

	March 31, 2025		December 31, 2024
	($ in thousands)
Contracts and relationships acquired	$	47,726	$	47,597
Capitalized software		35,913		35,108
Non-compete agreements		1,236		1,236
Other intangible assets		8,417		8,417
Total intangible assets		93,292		92,358
Less: Accumulated amortization		76,415		73,660
Intangible assets - net	$	16,877	$	18,698

Capitalized software represents payroll and development costs incurred for internally developed software. Other intangible assets primarily represent purchased intangibles. Amortization expense for the three months ended March 31, 2025 and 2024 was approximately $2.8 million and $3.4 million, respectively. The weighted-average amortization period is approximately two years.

As of March 31, 2025, future amortization is scheduled to be expensed as follows:

Years ending December 31,	($ in thousands)
2025 (nine months)	$	7,747
2026		6,221
2027		2,056
2028		403
2029		300
Thereafter		150
Total	$	16,877

5. NET LOSS PER COMMON SHARE

The following table reconciles the weighted-average shares outstanding for basic and diluted net loss per share for the three months ended March 31, 2025 and 2024:

	2025			2024*
	Three Months Ended March 31,
	2025			2024*
	($ in thousands, except share and per share amounts)
Basic and Diluted:
Net loss attributable to common shareholders	$	(863	)	$	(1,553	)
Weighted-average common shares used to compute basic and diluted loss per share		23,813,943			16,014,309
Net loss attributable to common shareholders per share - basic and diluted	$	(0.04	)	$	(0.10	)

*	Restated to include the preferred stock dividends earned, but not declared, during the three months ended March 31, 2024 (see Note 17).

The net loss attributable to common shareholders includes the preferred stock dividend amounts earned and declared for the three months ended March 31, 2025 and the preferred stock dividend amounts earned, but not declared, for the three months ended March 31, 2024 of approximately $2.8 million and $1.3 million, respectively. The dividend payable at March 31, 2025 and December 31, 2024 in the condensed consolidated balance sheets represents two and four months, respectively, of dividends declared, but not paid.

At March 31, 2025 and 2024, the 154,200 and 192,125 unvested equity restricted stock units (“RSUs”) respectively, as discussed in Note 13, have been excluded from the above calculations as they were anti-dilutive.

6. ACCRUED EXPENSES AND DEBT

Accrued expenses as of March 31, 2025 and December 31, 2024 consist of the following:

SCHEDULE OF ACCRUED EXPENSES

	March 31, 2025		December 31, 2024
	($ in thousands)
Accrued expenses	$	3,271	$	3,528
Payable to managed practices		1,385		1,116
Taxes and other		346		307
Total	$	5,002	$	4,951

Bank Debt —The Company has a revolving line of credit with Silicon Valley Bank, a division of First Citizens Bank & Trust Company (“SVB”). The Company’s credit facility is a secured revolving line of credit where borrowings are based on a formula of 200% of repeatable revenue adjusted by an annualized attrition rate as defined in the credit agreement. During February 2023, the line of credit was increased to $25 million and the term was extended for two additional years maturing on October 12, 2025. The financial covenants were also slightly modified for 2023 and subsequent years. Effective August 31, 2023, the credit facility agreement was amended whereby the interest rate was temporarily increased from the prime rate plus 1.5% to the prime rate plus 2.0% and the requirement for the minimum liquidity ratio was slightly reduced. The amendments expired March 31, 2024 and the credit facility reverted to its previous terms. During October 2024, the credit line was reduced to $10 million at the Company’s request. The current unused borrowing base is $10 million at March 31, 2025.

As of March 31, 2025 and December 31, 2024, there were no borrowings under the credit facility. Interest on the revolving line of credit was charged at the prime rate plus 2.0% for the first quarter of 2024, but decreased to the prime rate plus 1.5% on April 1, 2024. There is also a fee of one-half of 1% annually for the unused portion of the credit line. The debt is secured by all of the Company’s domestic assets and 65% of the shares in its offshore subsidiaries. Future acquisitions are subject to approval by SVB. The cost of the unused line of credit, which is included in interest expense, was approximately $13,000 for the three months ended March 31, 2025. Interest expense on the line of credit was approximately $289,000, for the three months ended March 31, 2024.

The SVB credit agreement contains various covenants and conditions governing the revolving line of credit including an annual fee of $110,000. These covenants include a minimum level of adjusted EBITDA and a minimum liquidity ratio. At March 31, 2025 and December 31, 2024, the Company was in compliance with all covenants. Due to the October 2024 modification, the anniversary fee was reduced to $44,000.

The Company maintains cash balances at SVB in excess of the FDIC insurance coverage limits. The Company performs periodic evaluations of the relative credit standing of this financial institution to ensure its credit worthiness. As of March 31, 2025 and December 31, 2024, the Company held cash of approximately $790,000 and $119,000, respectively, in the name of its subsidiaries at banks in Pakistan and Sri Lanka. The banking systems in these countries do not provide deposit insurance coverage. The Company has not experienced any losses on its cash accounts.

7. LEASES

We determine if an arrangement is a lease at inception. We have operating leases for office and temporary living space as well as for some office equipment. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liability and non-current operating lease liability in our condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024. The Company does not have any finance leases.

As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rates, which are derived from information available at the lease commencement date, in determining the present value of lease payments. We give consideration to our bank financing arrangements, geographical location and collateralization of assets when calculating our incremental borrowing rates. We review our incremental borrowing rate on a quarterly basis.

Our lease terms include options to extend the lease when we believe that we may want the right to exercise that option. Leases with a term of less than 12 months are not recorded in the condensed consolidated balance sheets. Our lease agreements do not contain any residual value guarantees. For real estate leases, we account for the lease and non-lease components as a single lease component. Some leases include escalation clauses and termination options that are factored in the determination of the lease payments when appropriate. If a lease is modified after the effective date, the operating lease ROU asset and liability are re-measured using the current incremental borrowing rate.

Lease expense is included in direct operating costs, general and administrative expense, selling and marketing expense and research and development expense in the condensed consolidated statements of operations based on the nature of the expense. Our lease terms are determined taking into account lease renewal options, the Company’s anticipated operating plans and leases that are on a month-to-month basis. The Company also has some related party leases – see Note 9.

The components of lease expense were as follows:

SCHEDULE OF LEASE EXPENSE

	2025		2024
	Three Months Ended March 31,
	2025		2024
	($ in thousands)
Operating lease cost	$	576	$	637
Short-term lease cost		5		4
Variable lease cost		7		5
Total - net lease cost	$	588	$	646

Short-term lease cost represents leases that were not capitalized as the lease term as of the later of January 1, 2025 or the beginning of the lease was less than 12 months. Variable lease costs include utilities, real estate taxes and common area maintenance costs.

Supplemental balance sheet information related to leases is as follows:

	March 31, 2025			December 31, 2024
	($ in thousands)
Operating leases:
Operating lease ROU assets, net	$	3,097		$	3,133

Current operating lease liabilities	$	1,355		$	1,287
Non-current operating lease liabilities		1,776			1,847
Total operating lease liabilities	$	3,131		$	3,134

Operating leases:
ROU assets	$	3,579		$	5,125
Asset lease expense		(480	)		(1,994	)
Foreign exchange (loss)/gain		(2	)		2
ROU assets, net	$	3,097		$	3,133
Operating lease right-of-use assets	$	3,097		$	3,133

Weighted average remaining lease term (in years):
Operating leases		5.0			5.0
Weighted average discount rate:
Operating leases		13.8	%		14.2	%
Weighted average discount rate operating leases		13.8	%		14.2	%

Supplemental cash flow and other information related to leases is as follows:

	2025		2024
	Three Months Ended March 31,
	2025		2024
	($ in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	561	$	668

ROU assets obtained in exchange for lease liabilities:
Operating leases, excluding terminations	$	446	$	249

Maturities of lease liabilities are as follows:

Operating leases - Years ending December 31,	($ in thousands)
2025 (nine months)	$	1,351
2026		808
2027		599
2028		398
2029		195
Thereafter		1,253
Total lease payments		4,604
Less: imputed interest		(1,473	)
Total lease obligations		3,131
Less: current obligations		1,355
Long-term lease obligations	$	1,776

The Company leases certain apartments which are subleased to others. The sublease agreements are currently on a month-to-month basis and are considered operating leases. For the three months ended March 31, 2025 and 2024, the Company received approximately $10,000 and $28,000, respectively, in sublease income.

8. COMMITMENTS AND CONTINGENCIES

Legal Proceedings — On December 22, 2023, an arbitrator rendered a decision in favor of Ramapo Anesthesiologists, PC (“Ramapo”) and granted in part and denied in part certain claims brought against Origin Healthcare Solutions, LLC; Meridian Medical Management, Inc.; and the Company for alleged breach of contract and other allegations. Ramapo was awarded mitigation related costs of $117,000. The payment for this award was made during the first quarter of 2024. The Company’s portion of the settlement was approximately $32,000 and the insurance company paid the balance. The Company’s portion was accrued at December 31, 2023.

A former customer filed a complaint against the Company in New Jersey State Court to recover damages claimed to have been caused by the mishandling of their account. Plaintiff alleged at least approximately $750,000 in damages which was disputed by the Company. The parties participated in a one-day court-ordered, non-binding arbitration. At that time, the arbitrator awarded Plaintiff $288,750 on its contract claims, and awarded the Company $21,698 on its cross-claim for unpaid fees. Plaintiff filed to reject this award. The Company previously filed a partial motion for summary judgment on the alleged punitive damages, but the court denied that motion finding there is an issue of fact as to whether those can be awarded at trial. The Company filed an offer of judgment for $200,000 during April 2024 which was accepted and paid in July.

In connection with a prior acquisition, the seller had alleged that the Company owed approximately $800,000 in transition related costs to them. The parties agreed to settle the claim for approximately $316,000, which was paid in September 2024.

A former customer had a dispute with the Company that was based on services before and after the account was acquired in an acquisition and filed a complaint in Massachusetts State Court, Essex County in February 2018. Under the terms of the purchase agreement, the Company’s liability, if any, was solely and expressly limited to damages related to its handling of the account at issue. The parties participated in formal mediation and at that time, Plaintiff’s starting settlement demand was over $2 million. The mediation was not successful. The Company made an offer of $100,000 in December 2024 to settle the suit, which was accepted. The settlement amount was recorded in accrued expenses at December 31, 2024 in the condensed consolidated balance sheet. A settlement agreement with mutual releases was signed by the parties in January 2025 and payment was made in February 2025.

From time to time, we may become involved in other legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, consolidated results of operations, financial position or cash flows of the Company.

SEC Form 10-Q filed by CareCloud Inc.