CareCloud (NASDAQ: CCLD) outlines AI growth, dilution and preferred stock risks
Rhea-AI Filing Summary
CareCloud, Inc. files its annual report describing its technology-enabled revenue cycle management, cloud software and expanding generative AI solutions for U.S. healthcare providers. The company relies heavily on offshore operations in Pakistan and Sri Lanka, where roughly 3,300 staff support its cost advantage.
As of June 30, 2025, non‑affiliate common equity had an aggregate market value of about $85.1 million, and at March 6, 2026 there were 42,492,949 common shares outstanding. The filing highlights extensive business, cybersecurity, regulatory and macro risks, including past suspension and later resumption of preferred dividends, ongoing arrears, and dilution from a March 2025 conversion of most Series A preferred into common stock.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark one)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended
or
| 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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) | ||
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| (Address of principal executive offices) |
|
(Zip Code) |
(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 | ||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
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.
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).
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 ☐ | |
| 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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As
of June 30, 2025, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately
$
At March 6, 2026, the registrant had shares of common stock, par value $ per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Table of Contents
| Forward-Looking Statements | 3 |
| Summary of Risk Factors | 4 |
| PART I | 7 |
| Item 1. Business | 7 |
| Item 1A. Risk Factors | 16 |
| Item 1B. Unresolved Staff Comments | 39 |
| Item 1C. Cybersecurity | 39 |
| Item 2. Properties | 40 |
| Item 3. Legal Proceedings | 41 |
| Item 4. Mine Safety Disclosures | 41 |
| PART II | 42 |
| Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 42 |
| Item 6. [Reserved] | 42 |
| Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 42 |
| Item 7A. Quantitative and Qualitative Disclosures about Market Risk | 57 |
| Item 8. Financial Statements and Supplementary Data | 57 |
| Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 57 |
| Item 9A. Controls and Procedures | 57 |
| Item 9B. Other Information | 58 |
| Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 58 |
| PART III | 59 |
| Item 10. Directors, Executive Officers and Corporate Governance | 59 |
| Item 11. Executive Compensation | 59 |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 59 |
| Item 13. Certain Relationships and Related Transactions, and Director Independence | 59 |
| Item 14. Principal Accountant Fees and Services | 59 |
| PART IV | 60 |
| Item 15. Exhibits and Financial Statement Schedules | 60 |
| Signatures | 68 |
| 2 |
Forward-Looking Statements
Certain statements that we make from time to time, including statements contained in this Annual Report on Form 10-K, 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 Annual Report on Form 10-K 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 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 Annual Report on Form 10-K 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” and elsewhere in this Annual Report on Form 10-K. 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 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 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 effectively integrate, manage and keep our information systems secure and operational in the event of a cyber-attack; | |
| ● | our ability to manage our growth, including acquiring, partnering with, and effectively integrating the recent acquisitions of MAP App, Medsphere Systems Corporation, RevNu Medical Management and other acquired businesses into our infrastructure and avoiding legal exposure and liabilities associated with our acquisitions; | |
| ● | 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 keep pace with a rapidly changing healthcare industry, including the use of artificial intelligence (“AI”); | |
| ● | 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, Stephen Snyder as Chief Executive Officer and A. Hadi Chaudhry as Chief Strategy Officer, 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, Provident Bank, and other future debt facilities; |
| 3 |
| ● | 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 (together the “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 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 Annual Report on Form 10-K or our other filings with the Securities and Exchange Commission (the “SEC”). |
Although we believe that the expectations reflected in the forward-looking statements contained in this Annual Report on Form 10-K are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. You should read this Annual Report on Form 10-K 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. 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 Annual Report on Form 10-K.
Summary of Risk Factors
The following is a summary of the principal risks and uncertainties that could materially adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of each risk factor contained in “Risk Factors” in Part 1, Item 1A below.
Risks Related to our Business
| ● | The continued success of our business model is heavily dependent upon our offshore operations, and any disruption to those operations will adversely affect us. |
| ● | Our offshore operations expose us to additional business and financial risks which could adversely affect us and subject us to civil and criminal liability. |
| ● | Our proprietary software or service delivery platform may not operate properly, which could damage our reputation, give rise to claims against us, or divert application of our resources from other purposes, any of which could harm our business and operating results. |
| ● | Systems failures, cyberattacks or other events and resulting interruptions in the availability of or degradation in the performance of our websites, applications, products or services could harm our business. |
| ● | Data privacy, identity protection and information security compliance may require significant resources and present certain risks. |
| ● | We use and plan to expand our use of artificial intelligence, and challenges associated with the development, deployment and regulation of AI technologies could adversely affect our business, reputation and results of operations. |
| ● | We may not be successful in our artificial intelligence initiatives, which could adversely affect our business, reputation, or financial results. |
| ● | We operate in a highly competitive industry, and our competitors may be able to compete more efficiently or evolve more rapidly than we do, which could have a material adverse effect on our business, revenue, growth rates and market share. |
| ● | If we are unable to successfully introduce new products or services or fail to keep pace with advances in technology, we would not be able to maintain our customers or grow our business, which will have a material adverse effect on our business. |
| ● | Changes in the healthcare industry could affect the demand for our services and may result in a decrease in our revenues and market share. |
| 4 |
| ● | If providers do not purchase our products and services or delay in choosing our products or services, we may not be able to grow our business. |
| ● | If the revenues of our customers decrease, or if our customers cancel or elect not to renew their contracts, our revenue will decrease. |
| ● | As a result of our variable sales and implementation cycles, we may be unable to recognize revenue from prospective customers on a timely basis and we may not be able to offset expenditures. |
| ● | We are required to collect sales and use taxes on certain products and services we sell in certain jurisdictions. We may be subject to liability for past sales and incur additional related costs and expenses, and our future sales may decrease. |
| ● | If we lose the services of Mahmud Haq as Executive Chairman, Stephen Snyder as Chief Executive Officer, A. Hadi Chaudhry as Chief Strategy Officer or other members of our management team, or if we are unable to attract, hire, integrate and retain other necessary employees, our business would be harmed. |
| ● | We may be unable to adequately establish, protect or enforce our patents, trade secrets and other intellectual property rights and we may incur significant costs in enforcing our intellectual property rights. |
| ● | Claims by others that we infringe or may infringe on their intellectual property could force us to incur significant costs or revise the way we conduct our business. |
| ● | Current and future litigation against us could be costly and time-consuming to defend and could result in additional liabilities. |
| ● | If our security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as insecure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities. |
| ● | Our products and services are required to meet the interoperability standards, which could require us to incur substantial additional development costs or result in a decrease in revenue. |
| ● | Disruptions in internet or telecommunication service or damage to our data centers could adversely affect our business by reducing our customers’ confidence in the reliability of our services and products. |
| ● | We may be subject to liability for the content we provide to our customers and their patients. |
| ● | We are subject to the effects of payer and provider conduct that we cannot control and that could damage our reputation with customers and result in liability claims that increase our expenses. |
| ● | Failure by our clients to obtain proper permissions and waivers may result in claims against us or may limit or prevent our use of data, which could harm our business. |
| ● | Any deficiencies in our financial reporting or internal controls could adversely affect our business and the trading price of our securities. |
| ● | We maintain our cash at domestic and foreign financial institutions. Balances held domestically may exceed federally insured limits. Foreign banking institutions do not provide bank deposit insurance. |
| ● | Our goodwill was subject to impairment in 2023 and may be subject to further impairment in the future, which could have a material adverse effect on our results of operations, financial condition, or future operating results. |
| ● | We are a party to several related-party agreements with our founder and Executive Chairman, Mahmud Haq, which have significant contractual obligations. These agreements are reviewed by our Audit Committee on an annual basis. |
| ● | We depend on key information systems and third-party service providers. |
| ● | Rapid technological change in the telehealth industry presents us with significant risks and challenges. |
| ● | Our business, financial condition, results of operations and growth may be adversely affected by pandemics, epidemics or other public health emergencies, such as COVID-19. |
| ● | We may be adversely affected by global climate change or market responses to such change. |
Risks Related to Macroeconomics Conditions
| ● | Our operations and performance depend significantly on global and regional economic conditions and adverse economic conditions can materially adversely affect our business, results of operations and financial condition. |
| ● | Our managed medical practices and customers could face supply chain issues that would disrupt their ability to service patients and therefore impact our revenue. |
| ● | Volatility in currency exchange rates may adversely affect our financial condition, results of operations and cash flows. |
Risks Related to Our Acquisition Strategy
| ● | If we do not manage our acquisitions effectively, our revenue, business and operating results may be harmed. |
| ● | We may be unable to implement our strategy of acquiring additional companies. |
| ● | At the current prices of our common stock, we may be unable to execute accretive acquisitions. |
| ● | We may be unable to retain customers following their acquisition, which may result in a decrease in our revenues and operating results. |
| ● | Acquisitions may subject us to liability with regard to the creditors, customers, and shareholders of the sellers. |
| ● | Future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of indebtedness and increased amortization expense. |
| 5 |
Regulatory Risks
| ● | If a breach of our measures protecting personal data covered by HIPAA or the HITECH Act occurs, we may incur significant liabilities. |
| ● | Actual or perceived failures to comply with healthcare, data protection, privacy, security and fraud and abuse laws and regulations could materially adversely affect our business, results of operations and financial condition. |
| ● | The healthcare industry is heavily regulated. Our failure to comply with regulatory requirements could create liability for us, result in adverse publicity and negatively affect our business. |
| ● | If we do not maintain the certification of our EHR solutions pursuant to the HITECH Act and Cures Act, our business, financial condition and results of operations will be adversely affected. |
| ● | If we or our customers fail to comply with federal and state laws governing submission of false or fraudulent claims to government healthcare programs and financial relationships among healthcare providers, we or our customers may be subject to civil and criminal penalties or loss of eligibility to participate in government healthcare programs. |
| ● | Potential healthcare reform and new regulatory requirements placed on our products and services could increase our costs, delay or prevent our introduction of new products or services, and impair the function or value of our existing products and services. |
| ● | Additional regulation of the disclosure of medical information outside the United States may adversely affect our operations and may increase our costs. |
| ● | Our services present the potential for embezzlement, identity theft, or other similar illegal behavior by our employees. |
Risks Related to Ownership of Shares of Our Common Stock
| ● | The conversion of the majority of the Series A Preferred Stock into common stock in March 2025 (the “Conversion”) increased the total number of outstanding shares, potentially diluting the value of existing common shareholders’ equity. |
| ● | Series A Preferred Stock shareholders that converted their shares gained full voting rights upon conversion of their preferred shares into common stock. |
| ● | The conversion of the Series A Preferred Stock, and any subsequent conversions, may be perceived negatively by the market. |
| ● | The Company’s potential for future issuances of common stock following the Conversion could be limited. |
| ● | Our revenues, operating results and cash flows may fluctuate in future periods and we may fail to meet investor expectations, which may cause the price of our common stock to decline. |
| ● | Healthcare reform may have a material adverse effect on the Company’s financial condition and results of operations. |
| ● | Future sales of shares of our common stock could depress the market price of our common stock. |
| ● | As of December 31, 2025, Mahmud Haq controlled 12% of our outstanding shares of common stock, which limits investors from influencing significant corporate decisions. |
| ● | Provisions of Delaware law, of our amended and restated charter and amended and restated bylaws may make a takeover more difficult, which could cause our common stock price to decline. |
| ● | Any issuance of additional preferred stock in the future may dilute the rights of our existing stockholders. |
| ● | We do not intend to pay cash dividends on our common stock. |
| ● | Complying with the laws and regulations affecting public companies will increase our costs and the demands on management and could harm our operating results. |
| ● | We are a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors. |
Risks Related to Ownership of Shares of Our Preferred Stock
| ● | In December 2023 we suspended the payment of the dividends on the Preferred Stock. The Company resumed paying monthly dividends in February 2025, paying one month of the arrearage each month for the rest of the year. The Company has also announced that starting with the February 2026 dividend payment, it will start paying double dividends monthly on the Series B Preferred Stock to reduce the dividends in arrears. We may not be able to continue to pay dividends on the Preferred Stock if we fall out of compliance with our loan covenants and are prohibited by our bank lender from paying dividends or if we have insufficient cash to make dividend payments. |
| ● | Our Series A and Series B Preferred Stock rank junior to all of our indebtedness and other liabilities. |
| ● | We may issue additional shares of Series B Preferred Stock and additional series of preferred stock that rank on parity with the Preferred Stock as to dividend rights, rights upon liquidation or voting rights. |
| ● | Market interest rates may materially and adversely affect the value of the Series B Preferred Stock. |
| ● | Holders of the Series B Preferred Stock may be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to “qualified dividend income.” |
| ● | Our Series B Preferred Stock has not been rated. |
| ● | The market price of our Series B Preferred Stock is variable and is substantially affected by various factors. |
| ● | A holder of Preferred Stock has extremely limited voting rights. |
| ● | The Series B Preferred Stock is not convertible and investors will not realize a corresponding upside if the price of the common stock increases. |
| ● | Although payment of the suspended dividends resumed in February 2025 and continued throughout the year, there are still dividends in arrears and we may be unable to raise additional capital without incurring excessive dilution. |
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PART I
Item 1. Business
Overview
CareCloud, Inc., (together with its consolidated subsidiaries, “CareCloud,” the “Company,” “we,” “us” and/or “our”) is a leading provider of technology-enabled services and generative AI solutions that redefine the healthcare revenue cycle management process. 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 and certain other locations. 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.
Our technology-enabled business solutions can be categorized as follows:
| ● | Technology-enabled revenue cycle management: |
| ○ | Revenue Cycle Management (“RCM”) services including end-to-end medical billing, eligibility, analytics, and related services, all of which can be provided utilizing our technology platform and robotic process automation tools or leveraging a third-party system; | |
| ○ | Medical coding and credentialing services to improve provider collections, back-end cost containment, and drive total revenue realization for our healthcare clients; and | |
| ○ | Healthcare claims clearinghouse which enables our clients to electronically scrub and submit claims and process payments from insurance companies. |
| ● | Cloud-based software: |
| ○ | Electronic Health Records (“EHR”), which are easy to use and sometimes integrated with our business services, and enable our healthcare provider clients to deliver better patient care, streamline their clinical workflows, decrease documentation errors, and potentially qualify for government incentives for both inpatient and outpatient services; | |
| ○ | Practice Management (“PM”) software and related capabilities, which support our clients’ day-to-day business operations within the enterprise-level facilities outpatient service areas and financial workflows, including automated insurance eligibility software, a robust billing and claims rules engine, and other automated tools designed to maximize reimbursement; | |
| ○ | RCM Cloud, a highly configurable inpatient revenue cycle management software solution that focuses on up front financial accountability, real-time insurance eligibility checking, robust billing, integrated claims resolution, denial management, collection management, and dynamic work queues designed to maximize timely reimbursement; | |
| ○ | HealthLine, which is a medical supply chain and inventory management system built for healthcare settings that enables real-time tracking of supplies, equipment and consumables across multiple locations such as exam rooms, ambulances and storage closets; | |
| ○ | Marketware offers a comprehensive physician strategy suite designed to support healthcare organizations in optimizing physician relationship management, streamlines recruitment and onboarding processes, and leverages performance analytics. The platform consolidates critical data to enhance referral volume, strengthen provider engagement and drive strategic organizational growth; | |
| ○ | Wellsoft, a solution for provider workflows in emergency departments and urgent care facilities has seamless integration into all major hospital IT systems and ancillary departments providing real-time patient tracking and instant lab orders, drug interaction checking and pharmacy review; | |
| ○ | CareVue is a cloud-based EHR software that enhances clinical workflows for small hospitals and inpatient behavioral health facilities, driving efficiencies across inpatient settings through enhanced charting tools, e-prescribing and medication management and secure clinical communications; |
| 7 |
| ○ | Artificial intelligence (“AI”): |
| ● | CareCloud cirrusAI is designed to serve as a digital healthcare assistant, helping to enhance clinical decision-making, streamline workflows, reduce administrative burdens, optimize revenue management, and promote patient-centered care. The functions include: |
| ● | AI-Powered Clinical Decision Support: CareCloud cirrusAI Guide automates clinical data input, and assists clinicians in workflow tasks, providing real-time, evidence-based recommendations and personalized suggestions via Vertex AI’s generative AI tools for providers to consider. This innovation can lead to enhanced diagnosis accuracy and treatment planning. | |
| ● | AI-Powered Virtual Support Assistant: CareCloud cirrusAI Chat facilitates natural language conversations with practice staff members, offering valuable assistance in navigating CareCloud electronic health records (“EHR”) workflows. This tool streamlines post-training and onboarding for new staff, reducing response times and providing real-time assistance, ultimately saving time. | |
| ● | AI-Driven Appeals: CareCloud cirrusAI Appeals generates customized appeal letters by analyzing patient claim details, the appeal’s reason, and the specific payer involved for healthcare workers to review, edit, and send. This functionality supports CareCloud’s RCM teams in optimizing providers’ RCM and securing proper reimbursement. |
| ● | CareCloud cirrusAI integrates with CareCloud’s EHR solution, talkEHR, making it easily accessible to providers of all sizes. | |
| ● | Stratus AI Desk Agent is an agentic AI phone receptionist designed to modernize and automate patient phone interactions. This tool brings advanced conversational AI directly into the call center workflow, eliminating hold times and reducing manual workload while delivering accurate, around-the-clock phone support. |
| ○ | Patient Experience Management (“PXM”) solutions designed to transform interactions between patients and their clinicians, including smartphone applications that assist patients and healthcare providers in the provision of healthcare services, contactless digital check-in solutions, messaging, and online appointment scheduling tools; | |
| ○ | Business Intelligence (“BI”) and healthcare analytics platforms that allow our clients to derive actionable insights from their vast amount of data; and | |
| ○ | Customized applications, interfaces, and a variety of other technology solutions that support our healthcare clients. |
| ● | Digital health: |
| ○ | Chronic Care Management (“CCM”) is a program that supports care for patients with chronic conditions by certified care managers that operate under the supervision of the patient’s regular physician; | |
| ○ | Remote Patient Monitoring (“RPM”) enables patient data collected outside the clinical setting through remote devices to be fed into their provider’s EHR to enable proactive patient care; and | |
| ○ | Telemedicine solutions which allow healthcare providers to conduct remote patient visits and extend the timely delivery of care to patients unable to travel to a provider’s office. |
| ● | Healthcare IT professional services & staffing: |
| ○ | Professional services consisting of a broad range of consulting services including full software implementations and activation, revenue cycle optimization, data analytic services, and educational training services; | |
| ○ | Strategic advisory services to manage system evaluations and selection, provide interim management, and operational assessments; and | |
| ○ | Workforce augmentation and on-demand staffing to support our clients as they expand their businesses, seek highly trained personnel, or struggle to address staffing shortages. | |
| ○ | Managed services includes inpatient and outpatient IT services, government consulting and product development services; |
| 8 |
| ● | MAP App: |
| ○ | MAP App is an industry-leading tool for benchmarking and measuring revenue cycle management performance, which was developed by the Healthcare Financial Management Association (the “HFMA”) and is used by top hospitals and healthcare organizations nationwide. |
Our medical practice management solutions include:
| ● | Medical practice management: |
| ○ | Medical practice management services are provided to medical practices. In this service model, we provide the medical practice with appropriate facilities, equipment, supplies, support services, nurses and administrative support staff. We also provide management, bill-paying and financial advisory services. |
The modernization of the healthcare industry, along with the increased adoption of value-based care models, is transforming nearly every aspect of a healthcare organization from policy to providers; clinical care to member services, devices to data, and ultimately the quality of the patient’s experience as a healthcare consumer.
Our solutions enable clients to increase financial and operational performance, streamline clinical workflows, get better insight through data, and make better business and clinical decisions, resulting in improvement in patient care and collections while reducing administrative burdens and operating costs.
We create elegant, user-friendly applications that solve many of the challenges facing healthcare organizations. We partner with organizations to develop customized, best-in-class solutions to solve their specific challenges while ensuring they also meet future regulatory and organizational requirements and market demands.
Market Overview
In June 2025, Centers for Medicare & Medicaid Services1 reported that over 2024-2033, the average National Health Expenditures growth of 5.8% is projected to outpace that of average Gross Domestic Product (“GDP”) growth of 4.3% resulting in an increase in the health spending share of GDP from 17.6% in 2023 to 20.3% in 2033.
Additionally, according to Statifacts, the U.S. Healthcare IT industry market was calculated to be approximately $322.59 billion in 2024 and is projected to attain $792.05 billion by 2034, growing at a 9.39% compound annual growth rate (“CAGR”) from 2025 to 2034.2 Its largest sub-segment, RCM, is reported to be nearly $172.2 billion in 2024 and is projected to grow at a 10.1% CAGR through 2030 according to Grand View Research.3 The U.S. EHR market was estimated to be valued at $12.9 billion in 2024 and expected to grow at a CAGR of 2.55% from 2025 to 2030.4 The Telehealth market is estimated to be approximately $42.61 billion in 2024 and expected to grow to $358.96 billion by 2034 with a CAGR of 23.84%.5
Our Market Opportunity
Considering the evolving needs of our clients and the market, we believe we continue to be uniquely positioned to provide tremendous value and support for our clients. We believe there are dynamics at play that are significantly increasing the market need for our products and services. These market dynamics present opportunities for us to innovate and focus on impacting the day-to-day challenges our clients face as they work to provide excellent patient care, all while managing and expanding their businesses.
1 National Health Expenditure Projections 2023-2033
2 U.S. Healthcare IT Market Size, Share, Growth 2025-2034
3 U.S. Revenue Cycle Management Market Size Report, 2030
4 U.S. Electronic Health Records Market | Industry Report 2030
5 U.S. Telehealth Market Size & Share | Industry Report, 2030
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Medical practices and health systems alike are transitioning to increasingly complex reimbursement delivery models. As an example, the industry has been gradually shifting from fee-for-service payments to value-based/clinical outcomes-based care payments. This transition comes in a multitude of forms including reimbursement models associated with quality incentive programs, capitation payments models, bundled payments, and at-risk payer contracts.
There are continuing legislative and regulatory reform efforts, as well as growing compliance requirements mandated by the federal government and other governmental agencies. This ever-evolving regulatory landscape increases the pressure placed on healthcare organizations to stay abreast of these changes and to remain in compliance. The complexities associated with emerging reimbursement models and continued government regulations present opportunities for us as healthcare organizations seek out partners that offer a broad range of software and services to help meet their needs.
Our clients also have to account for the rising cost of health insurance, changes in health benefit plan design, and the impact that these factors have had on the increase in patient consumerism. Patients are seeking lower cost care in response to insurance carriers shifting more of the cost burden onto patients, causing healthcare organizations to reconsider the full patient experience. Healthcare providers now need to think more deeply about patient expectations. This is especially true as COVID-19 has reshaped the sector and accelerated its digital transformation.
Further compounding the burden of rising health insurance cost is the ongoing shift in patient demographics. As the national population ages into Medicare eligibility, the reimbursement received for procedures and services provided to these patients decreases. Medicaid is now the largest insurance product in the country and continues to grow. Reimbursements overall are not increasing at the same rate as costs, driving providers and practices to search for increased efficiencies and savings wherever possible.
Strategic-thinking healthcare organizations across the country are aggressively addressing these new realities and are finding opportunities for growth and expansion. We see medical groups across the country and within all specialties and market segments, growing through consolidation and investing in their businesses at an accelerated pace. This is also leading clients to focus on delivering emerging and disruptive care delivery settings. Much of this change is driving executives and leaders to assess their IT and data strategy and reevaluate their adoption of next generation healthcare solutions. The healthcare industry has seen tremendous change over the last few years, with COVID-19 ushering in a new era of digital health. Our study of the evolving needs of our clients leads us to believe that there will be an increasing need for our services and products and emerging needs for the products and services that we are already developing.
These trends will fuel growth over the next several years. In order for healthcare organizations to continue to succeed, these new realities require robust solutions and careful execution. Legacy tools that once powered these healthcare organizations are insufficient to support their growth and long-term strategies. Our solutions facilitate the transition needed by these organizations to adopt the next generation of healthcare solutions to drive their future growth. Our expansive product and services portfolio enables us to displace competitors and gain market share across a vast array of specialties, care settings and customer segments across the country.
Our Business Strategy
The Company is focused on reducing costs, maintaining profitability and generating positive free cash flow in order to continue paying the Preferred Stock dividends, including those that are in arrears. CareCloud is a market leading provider of technology-enabled and integrated end-to-end Software-as-a-Service (“SaaS”) solutions that help our clients with the business of medicine. Our mission is to redefine the next generation of technology-enabled revenue cycle solutions. To that end, we invest significant resources toward improving our current offerings and building new solutions that help transform our clients’ organizations with next generation technology. We expect to have increased software capabilities and offer additional complementary business services that will address the needs of the ever-changing, dynamic market conditions of the U.S. healthcare space.
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To achieve our objective and mission, we employ the following strategies:
Providing comprehensive next generation RCM solutions to medical practices and hospitals. We believe that healthcare providers are in need of an integrated, end-to-end solution and a flexible service delivery model to manage the different facets of their businesses, from care delivery software, to claim submission, financial reporting, and data analytics.
Enhancing our solutions. We intend to continue to enhance our solutions with new functionality and features leveraging our own teams, partnerships, and acquisitions. We will continue to dedicate resources to research and development to bolster our existing applications and drive new opportunities for innovation on behalf of our clients.
Expanding into new categories/specialties/markets. We are focused on always reassessing the market landscape, seeking new opportunities to meet the needs of the clients in our addressable market with our products and services. This means developing new and exciting technologies, launching new services, entering new specialties that can leverage our solutions and enabling growth for our clients or expanding into adjacent markets that we may not serve today.
Relentlessly driving organic growth to expand our client base. We believe the market for our expansive value proposition is underserved, and we will continue to make investments to create awareness of our brand, optimize our sales and implementation lifecycles, and capture greater market share. We are investing in our sales and marketing activities, partners, and products to expand our client footprint.
Extending our relationships with existing clients. Our CareCloud Wellness offerings have been well-received allowing us to generate additional recurring revenue from existing clients. We intend to increase the number of SaaS subscription licenses and services purchased by our current clients as they use our solutions. We are also focused on converting SaaS clients into higher revenue per client offerings such as revenue cycle management and other business services.
Leveraging significant cost advantages provided by our technology and global workforce. Our unique business model includes our cloud-based software and a cost-effective offshore workforce located in our Offshore Offices. We believe this operating model provides us with significant cost advantages compared to other revenue cycle management companies and it allows us to significantly reduce the operational costs of the companies we acquire.
Developing our partner ecosystem. We offer an integrated partner ecosystem providing healthcare organizations access to a variety of innovative solutions that complement our suite of products and services. Our partner ecosystem is a comprehensive collection of apps, services, specialty solutions, and clinical connections. This is an integral part of our vision to be the premier cloud-based platform for healthcare.
As the market continues to evolve, we may choose to build or partner for some or all of these solutions in order to broaden our product set. In the longer term, we also envision how this will allow for frictionless flow of information and care-coordination capabilities between medical providers and their patients.
Additionally, given the nature of our large data repository, which is ever-growing as each patient encounter is captured, opportunities exist to potentially monetize this data in an identified manner in compliance with applicable privacy and data protection laws to help improve clinical outcomes and other financial metrics.
Our Offerings
Our solutions are designed to systematically drive clinical quality and patient outcomes, streamline staff and provider workflows and reimbursements, as well as support different settings of care and healthcare models. Our product and service strategy is simple: we build products and deliver solutions that meet our clients’ needs.
Through the combination of our continued development of next generation solutions and strategic acquisition strategy, we provide comprehensive products and services tailored for small medical practices, large physician groups and health systems, as well as industry partners. We continue to optimize our technology offerings by integrating them into our application ecosystem and with other industry solutions. The interconnectivity of our solutions will continue driving a consolidation of brands within our product architecture, aimed at improving the awareness and alignment of our products to targeted industry segments.
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Our robust product and service portfolio allows us to be both methodical and nimble across the healthcare organizations and market segments we serve while providing a framework to create solution sets for the market today and more importantly, for what our clients will need tomorrow.
We believe that our fully integrated solutions uniquely address the challenges in the industry. In most cases the standard fee for our complete, integrated, end-to-end solution is based upon a percentage of each client’s healthcare-related revenues, with a monthly minimum fee, plus a nominal one-time setup fee, which is competitively priced.
Research and Development
Our research and development focuses are on enhancing and expanding our service offerings while ensuring all offerings meet regulatory compliance standards. We continually update our software and technology infrastructures, regularly execute releases of new software enhancements, and adapt our offerings to better serve our medical group and health system clients confronting rapid changes in the healthcare market space.
Our agile software development methodology is designed to ensure that each software release is properly designed, built, tested, and released. Our product, engineering, quality assurance, and development operations teams are located both onshore and offshore. We complement our internal efforts with services from third-party technology providers for infrastructure, healthcare ecosystem connectivity needs such as prescriptions, clinical laboratories, or specific application requirements.
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We also employ product management, user experience, and product marketing personnel who work continually on improvements to our products and services design.
Clients
We estimate that as of December 31, 2025, we provided software and services to approximately 45,000 providers (which we define as physicians, nurses, nurse practitioners, therapists, physician assistants and other clinicians that render bills for their services) practicing in approximately 2,900 independent medical practices and hospitals, representing 80 specialties and subspecialties in 50 states allowing for low revenue concentration risk.
In addition, we served approximately 80 clients that are not medical practices, but are primarily service organizations who serve the healthcare community. The foregoing numbers include clients leveraging any of our products or services and are based in part upon estimates where the precise number of practices or providers is unknown.
We service clients ranging from small practices to large groups and health systems. Our clients span from the single doctor independent medical practices to large medical groups, including an enterprise specialty-specific healthcare organization with more than 4,600 providers located across multiple states. We also service large major academic medical institutions, small and large hospitals and health systems with service areas covering millions of patients.
Sales and Marketing
Over the past several years, organic growth has been a Company-wide focus. We have developed sales and marketing capabilities aimed at driving the growth of our client base, including small medical practices, large groups, and health systems. We expect to expand by selling our complete suite of software and services to new clients and up-selling additional solutions into our existing client base. We have a direct sales force including team members focused on specific functional or divisional areas, such as CareCloud Force (workforce augmentation) and medSR (healthcare IT consulting). This direct sales force is supplemented by offshore staff who support our sales and marketing efforts. In addition, our direct sales are augmented through our partner initiatives and marketing campaigns. We continue to leverage and optimize various digital channels to present our solutions, identify national events to demonstrate our integrated capabilities and expand our participation in thought leadership and social communications to connect with the healthcare community.
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Our Growth Levers
We believe that we are in a good position to grow by leveraging a multi-faceted growth strategy.
Organic Growth and Direct Sales
We have organized our sales force into different segments to promote the respective products and services for that segment and best address our clients’ needs and our markets. With this design, our sales team can address a client’s specific needs, whether a new client is seeking our products or services for the first time, or a current client is in need of additional solutions.
Our marketing team operates in support of our sales force and provides specialized demand generation capabilities for sales efforts, product marketing to align solutions and segments, customer communication and upselling initiatives, and drives a national tradeshow strategy to showcase our brand. Our sales approach is consultative in nature for most of our offerings, which generally includes an analysis based on a prospective client’s needs, crafting service proposals, and negotiating contracts that culminate in the commencement of services.
Our go-to-market strategy is designed to meet our customers’ needs. Our vast array of products and services allow us to craft solutions that can meet our customers’ unique needs within a specific product category, client segment, or both.
Growth through Partnerships
In addition to our direct sales force, we maintain business relationships with third parties that utilize, promote, or support our sales or services within specific industries or geographic regions. Some of these partners are customers through CareCloud Force and others are more traditional channel partners who help promote our solutions. We believe we can further accelerate organic growth through industry participants, whereby we utilize them as channel partners to offer integrated solutions to their clients. We have entered into such engagements with industry participants, and developed application interfaces with numerous EHR systems, together with device and lab integration to support these relationships.
Growth through Acquisitions
The Healthcare IT industry is highly fragmented, with many local and regional RCM companies serving small medical practices and hospitals. We believe that the industry continues to be ripe for consolidation and that we can achieve significant growth through acquisitions. We further believe that it is becoming increasingly difficult for traditional RCM companies, together with a variety of other healthcare industry vendors and healthcare IT companies, to meet the growing technology and business service needs of healthcare providers without a significant investment in an information technology infrastructure and the utilization of a talented, cost-efficient global team. Since the Company went public in July 2014, we have completed over 20 transactions, acquiring complementary assets to grow our business. We typically leverage our technology and our cost-effective offshore team to quickly deliver additional value to the newly acquired customer base, while reducing costs. Often, we will incur initial costs associated with the integration of the acquired business with our existing operations, but this early investment is designed to increase customer satisfaction and retention, while laying the foundation for long-term accretion.
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Competition
The market for RCM, practice management, EHR solutions, and related services is highly competitive, and we expect competition to increase in the future. We face competition from other providers of both integrated and stand-alone RCM providers, practice management, and EHR solutions, including competitors who utilize a web-based platform and providers of locally installed software systems.
Many of our competitors have longer operating histories, greater brand recognition and greater financial marketing. We also compete with various regional RCM companies, some of which may continue to consolidate and expand into broader markets. We expect that competition will continue to increase as a result of incentives provided by various governmental initiatives, and consolidation in both the information technology and healthcare industries. Large groups and health systems that have grown through consolidation often realize economies of scale by establishing billing and management offices to perform many of the services we offer themselves. In addition, our competitive edge could be diminished or completely lost if our competition develops similar offshore operations in Pakistan or other countries, such as India and the Philippines, where labor costs are lower than those in the U.S. (although higher than in Pakistan). Pricing pressures could negatively impact our margins, growth rate and market share.
We believe we have a competitive advantage, as we are able to deliver our industry-leading solutions at competitive prices because we leverage a combination of our proprietary software, which automates our workflows and increases efficiency, together with a global team that includes more than 300 experienced health industry experts onshore. These experts are supported by our highly educated and specialized offshore workforce of approximately 3,300 team members at labor costs that we believe are approximately 17% the cost of comparable U.S. employees.
Our unique business model has allowed us to become a leading consolidator in our industry sector, gaining us a reputation for acquiring and positively transforming distressed competitors into an accretive acquisition.
Employees
Including the employees of our subsidiaries, as of December 31, 2025, the Company employed approximately 3,650 people worldwide on a full-time basis. Approximately 72% of our employees are focused on service and client delivery functions, approximately 12% are assigned to research and development, and approximately 1% are engaged in sales and marketing. The balance of the employees is classified as general and administrative, which includes support staff to maintain our offshore offices, a function that many businesses in other geographies might choose to outsource. We also utilize the services of a small number of part-time employees. In addition, all officers of the Company work on a full-time basis. During 2026, we anticipate further reducing our employee count.
Voting Rights of Our Directors, Executive Officers, and Principal Stockholders
As of December 31, 2025, approximately 15% of both the shares of our common stock and voting power of our common stock are held by our directors and executive officers. Therefore, they have the ability to influence the outcome of matters submitted to our stockholders for approval, including the election of our directors, as well as the overall management and direction of our Company.
Corporate Information
We were incorporated in Delaware on September 28, 2001, under the name Medical Transcription Billing, Corp., and legally changed our name to MTBC, Inc. in February 2019. On March 29, 2021, we legally changed the name of the Company to CareCloud, Inc. Our principal executive offices are located at 7 Clyde Road, Somerset, New Jersey 08873, and our telephone number is (732) 873-5133. Our website address is www.CareCloud.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider information on our website to be part of this document.
CareCloud.com, CareCloud, MTBC, A Unique Healthcare IT Company, and other trademarks and service marks of CareCloud appearing in this Annual Report on Form 10-K are the property of the Company. Trade names, trademarks and service marks of other companies appearing in this Annual Report on Form 10-K are the property of their respective holders.
We are a smaller reporting company. As a smaller reporting company, we may take advantage of specified reduced reporting requirements and are relieved of certain other significant requirements that are otherwise generally applicable to public companies. As a smaller reporting company, we have reduced disclosure obligations regarding executive compensation in our Annual Report, periodic reports and proxy statements and provide only two years of audited financial statements in our Annual Report and our periodic reports. For 2025, the Company was required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended. Beginning with this Annual Report on Form 10-K, the Company is now an accelerated filer.
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Where You Can Find More Information
Our website, which we use to communicate important business information, can be accessed at: www.CareCloud.com. We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports available free of charge on or through our website as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Materials we file with or furnish to the SEC may also be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Also, the SEC’s website (www.sec.gov) contains reports, proxy and information statements, and other information that we file electronically with the SEC.
Item 1A. Risk Factors
Risks Related to Our Business
The continued success of our business model is heavily dependent upon our offshore operations, and any disruption to those operations will adversely affect us.
The majority of our operations, including the development and maintenance of our web-based platform, our customer support services and medical billing activities, are performed by our highly educated workforce of approximately 3,300 employees in our Offshore Offices. Approximately 98% of our offshore employees are in our Pakistan Offices and our remaining employees are located at our smaller offshore operation center in Sri Lanka. The performance of our operations in our Pakistan Offices, and our ability to maintain our Offshore Offices, is an essential element of our business model, as the labor costs where our Pakistan Offices are located are substantially lower than the cost of comparable labor in India, the United States and other countries, and allows us to competitively price our products and services. Our competitive advantage will be greatly diminished and may disappear altogether if our operations in our Pakistan Offices are negatively impacted.
In addition, changes in U.S. or foreign sanctions, export controls, or cross-border data transfer requirements could restrict our ability to operate or to deliver services from our offshore locations, increase compliance costs, or require costly migration to alternative delivery models.
Pakistan and Sri Lanka have in the past experienced and could in the future continue to experience periods of political and social unrest, war and acts of terrorism. Our operations in our offshore locations may be negatively impacted by these and a number of other factors, including currency fluctuations, cost of labor and supplies, power grid and infrastructure issues, vandalism, and changes in local law, as well as laws within the United States relating to these countries. Client mandates or preferences for onshore service providers may also adversely impact our business model. Our operations in our Offshore Offices may also be affected by trade restrictions, such as tariffs or other trade controls. If we are unable to continue to leverage the skills and experience of our highly educated workforce, particularly in our Pakistan Offices, we may be unable to provide our products and services at attractive prices, and our business would be materially and negatively impacted or discontinued.
We believe that the labor costs in our Offshore Offices are approximately 15% - 17% of the cost of comparably educated and skilled workers in the U.S. If there were potential disruptions in any of these locations, they could have a negative impact on our business.
Our offshore operations expose us to additional business and financial risks which could adversely affect us and subject us to civil and criminal liability.
The risks and challenges associated with our operations outside the United States include laws and business practices favoring local competitors; compliance with multiple, conflicting and changing governmental laws and regulations, including employment and tax laws and regulations; and fluctuations in foreign currency exchange rates. Foreign operations subject us to numerous stringent U.S. and foreign laws, including the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), and comparable foreign laws and regulations that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. and other business entities for the purpose of obtaining or retaining business. Safeguards we implement to discourage these practices may prove to be less than effective and violations of the FCPA and other laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, including class action lawsuits and enforcement actions from the SEC, Department of Justice and overseas regulators.
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Our proprietary software or service delivery platform may not operate properly, which could damage our reputation, give rise to claims against us, or divert application of our resources from other purposes, any of which could harm our business and operating results.
We may encounter human or technical obstacles that prevent our proprietary or acquired applications from operating properly. If our applications do not function reliably or fail to achieve customer expectations in terms of performance, customers could assert liability claims against us or attempt to cancel their contracts with us. This could damage our reputation and impair our ability to attract or maintain customers.
There are particular risks when we inherit technologies through the companies we acquire. These technologies, often developed by distressed companies, were not created under our direct supervision and control and therefore may not have been developed in accordance with our standards. Such acquired technologies could, and at times do, contain operational deficiencies, defects, glitches or bugs that may not be discovered immediately or otherwise could have been avoided had we built the technology ourselves. Whether technology we develop or technology we acquire, we will need to replace certain components and remediate software defects or bugs from time to time. There can be no assurance that such defects or bugs, or the process of remediating them, will not have a material impact on our business. Our inability to promptly and cost-effectively correct a product defect could result in the Company having to withdraw an important product from market, damage to our reputation, and result in material costs and expenses, any of which could have a material impact on our revenue, margins, and operating results.
Moreover, information services as complex as those we offer have in the past contained, and may in the future develop or contain, undetected defects or errors. We cannot assure you that material performance problems or defects in our products or services will not arise in the future. Errors may result from receipt, entry, or interpretation of patient information or from interface of our services with legacy systems and data that we did not develop and the function of which is outside of our control. Despite testing, defects or errors may arise in our existing or new software or service processes. Because changes in payer requirements and practices are frequent and sometimes difficult to determine except through trial and error, we are continuously discovering defects and errors in our software and service processes compared against these requirements and practices. These defects and errors and any failure by us to identify and address them could result in loss of revenue or market share, liability to customers or others, failure to achieve market acceptance or expansion, diversion of development resources, injury to our reputation, and increased service and maintenance costs. Defects or errors in our software might discourage existing or potential customers from purchasing our products and services. Correction of defects or errors could prove to be impossible or impracticable. The costs incurred in correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results.
In addition, customers relying on our services to collect, manage, and report clinical, business, and administrative data may have a greater sensitivity to service errors and security vulnerabilities than customers of software products in general. We market and sell services that, among other things, provide information to assist healthcare providers in tracking and treating patients. Any operational delay in or failure of our technology or service processes may result in the disruption of patient care and could cause harm to patients and thereby create unforeseen liabilities for our business.
Our customers or their patients may assert claims against us alleging that they suffered damages due to a defect, error, or other failure of our software or service processes. A product liability claim or errors or omissions claim could subject us to significant legal defense costs and adverse publicity, regardless of the merits or eventual outcome of such a claim.
Our physicians rely on our platforms (including the platforms we acquired) to be certified by the Office of the National Coordinator for Health Information Technology (“ONC”). If this certification were to be challenged, we might face liability related to any incentive that the physicians received in reliance upon such certification.
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Systems failures, cyberattacks or other events and resulting interruptions in the availability of or degradation in the performance of our websites, applications, products or services could harm our business.
As cybersecurity attacks continue to evolve and increase, our information systems could also be penetrated or compromised by internal and external parties’ intent on extracting confidential information, disrupting business processes or corrupting information. Our systems may experience service interruptions or degradation due to hardware and software defects or malfunctions, computer denial-of-service and other cyberattacks, human error, earthquakes, hurricanes, floods, fires, natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, such as the conflicts in Ukraine and the Middle East, terrorist attacks, computer viruses, or other events. Our systems are also subject to break-ins, sabotage and intentional acts of vandalism. Some of our systems are not fully redundant and our disaster recovery planning is not sufficient for all eventualities. We have experienced and will likely continue to experience system failures, denial of service attacks and other events or conditions from time to time that interrupt the availability or reduce the speed or functionality of our websites and mobile applications. These events likely will result in loss of revenue. A prolonged interruption in the availability or reduction in the speed or other functionality of our websites and mobile applications could materially harm our business. Frequent or persistent interruptions in our services could cause current or potential users to believe that our systems are unreliable, leading them to switch to our competitors or to avoid our sites, and could permanently harm our reputation and brands. Moreover, to the extent that any system failure or similar event results in damages to our customers or their businesses, these customers could seek significant compensation from us for their losses and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address. These risks could arise from external parties or from acts or omissions of internal or service provider personnel. Such unauthorized access could disrupt our business and could result in the loss of assets, litigation, remediation costs, damage to our reputation and failure to retain or attract customers following such an event, which could adversely affect our business.
Data privacy, identity protection and information security compliance may require significant resources and presents certain risks.
We collect, store, have access to and otherwise process certain confidential or sensitive data, including proprietary business information, patient data, personal data or other information that is subject to privacy and security laws, business information and/or customer imposed controls. Despite our efforts to protect such data, our business and our products may be vulnerable to security incidents, theft, improper use of our products, systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products and operational disruptions. The actual or perceived risk of theft, loss, fraudulent use or misuse of customer, employee or other data as a result of a cybersecurity incident, as well as non-compliance with applicable industry standards or our contractual or other legal obligations or privacy and information security policies regarding such data, could result in costs, fines, litigation or regulatory actions. We could face similar consequences in the future if we, our suppliers, customers or other third parties experience the actual or perceived risk of theft, loss, fraudulent use or misuse of data, including as a result of employee error or malfeasance, or as a result of the imaging, software, security and other products we incorporate into our products. Such an event could lead customers to select the products and services of our competitors. A cybersecurity incident could harm our reputation, cause unfavorable publicity or otherwise adversely affect certain potential customers’ perception of the security and reliability of our services as well as our credibility and reputation, which could result in lost sales.
We operate in an environment in which there are different and potentially conflicting data privacy laws in effect in the various U.S states and foreign jurisdictions in which we operate and we must understand and comply with each law and standard in each of these jurisdictions while ensuring the data is secure. Government enforcement actions can be costly and interrupt the regular operations of our business, and violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial statements.
Some of our contracts do not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. While we maintain general liability insurance coverage and coverage for errors or omissions, such coverage might not be adequate or otherwise protect us from liabilities or damages with respect to claims alleging compromises of customer data, that such coverage will continue to be available to us on acceptable terms or at all, or that such coverage will pay future claims. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business.
We use and plan to expand our use of artificial intelligence, and challenges associated with the development, deployment and regulation of AI technologies could adversely affect our business, reputation and results of operations.
We currently incorporate, and plan to further expand the use of, artificial intelligence (“AI”) technologies across our products, services and internal operations. AI is a rapidly evolving technology and its use presents significant technical, operational, legal, regulatory, compliance, cybersecurity, privacy and reputational risks. AI technologies are probabilistic in nature and may produce inaccurate, incomplete or misleading outputs, reflect or amplify unintended biases, or result in discriminatory or otherwise adverse outcomes. If our AI-enabled products or services are perceived to be deficient, unreliable, biased or otherwise flawed, our reputation, customer relationships, competitive position and business could be materially adversely affected, and customers may delay adoption of, reduce reliance on, or discontinue use of our solutions.
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The use of AI also increases the risk of cybersecurity incidents and unauthorized access to, disclosure of, or misuse of sensitive information, including Protected Health Information (“PHI”) and other personal or proprietary data. Failures in our governance, controls or safeguards relating to AI could result in violations of applicable privacy, security and healthcare laws and regulations, contractual obligations or industry standards, including those applicable to certified health IT products, and could expose us to regulatory enforcement actions, litigation, significant remediation costs, contractual liability and reputational harm.
Our AI initiatives may rely on third-party technologies, tools, data sources or open-source components, over which we have limited control. In addition, the legal and regulatory framework governing AI is rapidly evolving and uncertain. New or existing laws and regulations may increase our compliance costs, require changes to our products or business practices, delay or limit deployment of AI-enabled solutions, or expose us to additional liability. Further, our competitors may adopt AI technologies more quickly or more successfully than we do, and market demand for AI-enabled healthcare solutions remains uncertain. If we are unable to effectively develop, govern and deploy AI technologies, our business, financial condition and results of operations could be materially adversely affected.
We may not be successful in our artificial intelligence initiatives, which could adversely affect our business, reputation, or financial results.
We have made, and expect to continue to make, investments to integrate AI into our products and update our products to enable our customers to use Al for insights, digital experiences, and applications, as well as to use Al to enhance our own engineering and business operations. Such integration and use of AI may become more important in our product offerings and operations over time. Our AI efforts may not be successful and our competitors or other third parties may incorporate AI into their offerings more successfully and efficiently than we do and achieve greater and faster adoption, which could impair our ability to compete effectively and adversely affect our business and financial results. In addition, given the rapidly developing nature of Al, we may fail to adequately adopt and adapt to technological advancements, which may have a negative impact on our product development capabilities and adversely affect our business and financial results.
We operate in a highly competitive industry, and our competitors may be able to compete more efficiently or evolve more rapidly than we do, which could have a material adverse effect on our business, revenue, growth rates and market share.
The market for revenue cycle management and healthcare IT solutions is highly competitive, and we expect competition to increase in the future. We face competition from other providers of both integrated and stand-alone practice management, EHR and RCM solutions, including competitors who utilize a web-based platform and providers of locally installed software systems. Our competitors include larger healthcare IT companies, such as athenahealth, Inc., eClinicalWorks, Greenway Medical Technologies, Inc., NextGen, R1 RCM and Veradigm, all of which may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, regulations or customer needs and requirements. Many of our competitors have longer operating histories, greater brand recognition and greater financial marketing and other resources than us. We also compete with various regional RCM companies, some of which may continue to consolidate and expand into broader markets. We expect that competition will continue to increase as a result of incentives provided by the Health Information Technology for Economic and Clinical Health (“HITECH”) Act, and consolidation in both the information technology and healthcare industries. Competitors may introduce products or services that render our products or services obsolete or less marketable. Even if our products and services are more effective than the offerings of our competitors, current or potential customers might prefer competitive products or services to our products and services. In addition, our competitive edge could be diminished or completely lost if our competition develops similar offshore operations in Pakistan or other countries, such as India and the Philippines, where labor costs are lower than those in the U.S. (although higher than in Pakistan). Pricing pressures could negatively impact our margins, growth rate and market share.
In order to operate more efficiently, control costs and improve profitability, we incurred $154,000 and $606,000 of restructuring costs in 2025 and 2024, respectively, primarily consisting of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements. There can be no assurance that these actions will achieve their intended benefits.
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If we are unable to successfully introduce new products or services or fail to keep pace with advances in technology, we would not be able to maintain our customers or grow our business, which will have a material adverse effect on our business.
Our business depends on our ability to adapt to evolving technologies and industry standards and upgrade existing products and introduce new products and services accordingly. If we cannot adapt to changing technologies and industry standards, including changing requirements of third-party applications and software and meeting the requirements of our customers, our products and services may become obsolete, and our business would suffer significantly. Because both the healthcare industry and the healthcare IT technology market are constantly evolving, our success will depend, in part, on our ability to continue to enhance our existing products and services, develop new technology that addresses the increasingly sophisticated and varied needs of our customers, respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis, educate our customers to adopt these new technologies, and successfully assist them in transitioning to our new products and services. The development of our proprietary technology entails significant technical and business risks. We may not be successful in developing, using, marketing, selling, or maintaining new technologies effectively or adapting our proprietary technology to evolving customer requirements, emerging industry standards or changing third party applications, and, as a result, our business and reputation could materially suffer. We may not be able to introduce new products or services on schedule, or at all, or such products or services may not achieve market acceptance or existing products or services may cease to function properly. A failure by us to timely adapt to ever changing technologies or our failure to regularly upgrade existing or introduce new products or to introduce these products on schedule could cause us to not only lose our current customers but also fail to attract new customers.
Changes in the healthcare industry could affect the demand for our services and may result in a decrease in our revenues and market share.
As the healthcare industry evolves, changes in our customer base may reduce the demand for our services, result in the termination of existing contracts, and make it more difficult to negotiate new contracts on terms that are acceptable to us. For example, the current trend toward consolidation of healthcare providers may cause our existing customer contracts to terminate as independent practices are merged into hospital systems or other healthcare organizations. Such larger healthcare organizations may have their own practice management, and EHR and RCM solutions, reducing demand for our services. If this trend continues, we cannot assure you that we will be able to continue to maintain or expand our customer base, negotiate contracts with acceptable terms, or maintain our current pricing structure, which would result in a decrease in our revenues and market share.
If providers do not purchase our products and services or delay in choosing our products or services, we may not be able to grow our business.
Our business model depends on our ability to sell our products and services. Acceptance of our products and services may require providers to adopt different behavior patterns and new methods of conducting business and exchanging information. Providers may not integrate our products and services into their workflow and may not accept our solutions and services as a replacement for traditional methods of practicing medicine. Providers may also choose to buy our competitors’ products and services instead of ours. Achieving market acceptance for our solutions and services will continue to require substantial sales and marketing efforts and the expenditure of significant financial and other resources to create awareness and demand by providers. If providers fail to broadly accept our products and services, our business, financial condition and results of operations will be adversely affected.
If the revenues of our customers decrease, or if our customers cancel or elect not to renew their contracts, our revenue will decrease.
Under most of our customer contracts, which include RCM, we base our charges on a percentage of the revenue that our customer collects through the use of our services. Many factors may lead to decreases in customer revenue, including:
| ● | reduction of customer revenue as a result of changes to the Patient Protection and Affordable Care Act (“ACA”), other legislation or fluctuations in medical appointments due to future pandemics; |
| ● | a rollback of the expansion of Medicaid or other governmental programs; |
| ● | reduction of customer revenue resulting from increased competition or other changes in the marketplace for physician services; |
| ● | failure of our customers to adopt or maintain effective business practices; |
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| ● | actions by third-party payers of medical claims to reduce reimbursement; |
| ● | government regulations and government or other payer actions or inactions reducing or delaying reimbursement; |
| ● | interruption of customer access to our system; and |
| ● | our failure to provide services in a timely or high-quality manner. |
As a result of our variable sales and implementation cycles, we may be unable to recognize revenue from prospective customers on a timely basis and we may not be able to offset expenditures.
The sales cycle for our services can be variable, typically ranging from two to four months from initial contact with a potential customer to contract execution to six to twelve months to rollout services which require each customer to participate. During the sales cycle, we expend time and resources in an attempt to obtain a customer without recognizing revenue from that customer to offset such expenditures. Our implementation cycle is also variable, typically ranging from two to four months from contract execution to completion of implementation. Each customer’s situation is different, and unanticipated difficulties and delays may arise as a result of a failure by us or by the customer to meet our respective implementation responsibilities or by the customer for failure to disclose material information to meet implementation requirements. During the implementation cycle, we expend substantial time, effort, and financial resources implementing our services without recognizing revenue. Even following implementation, there can be no assurance that we will recognize revenue on a timely basis or at all from our efforts. In addition, cancellation of any implementation after it has begun may involve loss to us of time, effort, and expenses invested in the canceled implementation process, and lost opportunity for implementing paying customers in that same period of time.
We are required to collect sales and use taxes on certain products and services we sell in certain jurisdictions. We may be subject to liability for past sales and incur additional related costs and expenses, and our future sales may decrease.
We may lose sales or incur significant expenses should states be successful in imposing additional state sales and use taxes on our products and services. A successful assertion by one or more states that we should collect sales or other taxes on the sale of our products and services that we are currently not collecting could result in substantial tax liabilities for past sales, decrease our ability to compete with healthcare IT vendors not subject to sales and use taxes, and otherwise harm our business. Each state has different rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that may change over time. We review these rules and regulations periodically and, when we believe that our products or services are subject to sales and use taxes in a particular state, we voluntarily approach state tax authorities in order to determine how to comply with their rules and regulations. We cannot assure you that we will not be subject to sales and use taxes or related penalties for past sales in states where we believe no compliance is necessary.
If the federal government were to impose a tax on services performed abroad, we might be subject to additional liabilities. At this time, there is no way to predict whether this will occur or estimate the impact on our business.
Vendors of products and services like ours are typically held responsible by taxing authorities for the collection and payment of any applicable sales and similar taxes. If one or more taxing authorities determine that taxes should have, but have not, been paid with respect to our products or services, we may be liable for past taxes in addition to taxes going forward. Liability for past taxes may also include very substantial interest and penalty charges. Nevertheless, customers may be reluctant to pay back taxes and may refuse responsibility for interest or penalties associated with those taxes. If we are required to collect and pay back taxes and the associated interest and penalties, and if our customers fail or refuse to reimburse us for all or a portion of these amounts, we will have incurred unplanned expenses that may be substantial. Moreover, imposition of such taxes on our products and services going forward will effectively increase the cost of those products and services to our customers and may adversely affect our ability to retain existing customers or to gain new customers in the states in which such taxes are imposed.
We may also become subject to tax audits or similar procedures in states where we already pay sales and use taxes. The incurrence of additional accounting and legal costs and related expenses in connection with, and the assessment of, taxes, interest, and penalties as a result of audits, litigation, or otherwise could be materially adverse to our current and future results of operations and financial condition.
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If we lose the services of Mahmud Haq as Executive Chairman, Stephen Snyder as Chief Executive Officer, A. Hadi Chaudhry as Chief Strategy Officer, or other members of our management team, or if we are unable to attract, hire, integrate and retain other necessary employees, our business would be harmed.
Our future success depends in part on our ability to attract, hire, integrate and retain the members of our management team and other qualified personnel. In particular, we are dependent on the services of Mahmud Haq, our founder, principal stockholder and Executive Chairman, Stephen Snyder as Chief Executive Officer and A. Hadi Chaudhry as Chief Strategy Officer. Mr. Haq is instrumental in managing our offshore operations in our Pakistan Offices and coordinating those operations with our U.S. activities. The loss of Mr. Haq, who would be particularly difficult to replace, could negatively impact our ability to effectively manage our cost-effective workforce in our Pakistan Offices, which enables us to provide our products and solutions at attractive prices. Our future success also depends on the continued contributions of our other executive officers and certain key employees, each of whom may be difficult to replace, and upon our ability to attract and retain additional management personnel. Competition for such personnel is intense, and we compete for qualified personnel with other employers. We may face difficulty identifying and hiring qualified personnel at compensation levels consistent with our existing compensation and salary structure. If we fail to retain our employees, we could incur significant expenses in hiring, integrating and training their replacements, and the quality of our services and our ability to serve our customers could diminish, resulting in a material adverse effect on our business.
We may be unable to adequately establish, protect or enforce our patents, trade secrets and other intellectual property rights and we may incur significant costs in enforcing our intellectual property rights.
Our patents, trademarks, trade secrets, copyrights, and other intellectual property rights are important assets to us. Various events outside of our control pose a threat to our intellectual property rights, as well as to our products, services, and technologies. For instance, any of our current or future intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Any of our pending or future patent applications, whether or not being currently challenged, may not be issued with the scope of the claims we seek, if at all.
Our success depends in part upon our ability to establish, protect and enforce our patents, trade secrets and other intellectual property and proprietary rights. If we fail to establish, protect or enforce these rights, we may lose customers and important advantages in the market in which we compete. We rely on a combination of patent, trademark, copyright and trade secret law and contractual obligations to protect our key intellectual property rights, all of which provide only limited protection. Our intellectual property rights may not be sufficient to help us maintain our position in the market and our competitive advantages.
Trade secrets may not be protectable if not properly kept confidential. We strive to enter into non-disclosure agreements with our employees, customers, contractors and business partners to limit access to and disclosure of our proprietary information. However, the steps we have taken may not be sufficient to prevent unauthorized use of our customer information, technology, and adequate remedies may not be available in the event of unauthorized use or disclosure of our trade secrets and proprietary information. Our ability to protect the trade secrets of our acquired companies from disclosure by the former employees of these acquired entities may be limited by law in the jurisdiction in which the acquired company and/or former employee resides, and/or where the disclosure occurred, and this leaves us vulnerable to the solicitation of the customers we acquire by former employees of the acquired business that join our competitors.
Accordingly, despite our efforts, we may be unable to prevent third parties from using our intellectual property for their competitive advantage. Any such use could have a material adverse effect on our business, results of operations and financial condition. Monitoring unauthorized uses of and enforcing our intellectual property rights can be difficult and costly. Legal intellectual property actions are inherently uncertain and may not be successful, and may require a substantial amount of resources and divert our management’s attention.
We have taken efforts to protect our proprietary rights, including a combination of license agreements, confidentiality policies and procedures, confidentiality provisions in employment agreements, confidentiality agreements with third parties, and technical security measures, as well as our reliance on copyright, patent, trademark, trade secret and unfair competition laws. These efforts may not be sufficient or effective. For example, the secrecy of our trade secrets or other confidential information could be compromised by our employees or by third parties, which could cause us to lose the competitive advantage resulting from those trade secrets or confidential information. Unauthorized third parties may try to copy or reverse engineer portions of our products or otherwise infringe upon, misappropriate or use our intellectual property. We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. We may also conclude that, in some instances, the benefits of protecting our intellectual property rights may be outweighed by the expense.
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In addition, our platforms incorporate “open source” software components that are licensed to us under various public domain licenses. Open source license terms are often ambiguous, and there is little or no legal precedent governing the interpretation of many of the terms of certain of these licenses. Therefore, the potential impact of such terms on our business is somewhat unknown. Further, some enterprises may be reluctant or unwilling to use cloud-based services, because they have concerns regarding the risks associated with the security and reliability, among other things, of the technology delivery model associated with these services. If enterprises do not perceive the benefits of our services, then the market for these services may not expand as much or develop as quickly as we expect, either of which would adversely affect our business, financial condition, or operating results.
Legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain and still evolving. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and effective intellectual property protection may not be available in every country in which our products and services are distributed.
Any impairment of our intellectual property rights, or our failure to protect our intellectual property rights adequately, could give our competitors access to our technology and could materially and adversely impact our business and operating results. Any increase in the unauthorized use of our intellectual property could also divert the efforts of our technical and management personnel and result in significant additional expense to us, which could materially and adversely impact our operating results. Finally, we may be required to spend significant resources to monitor and protect our intellectual property rights, including with respect to legal proceedings, which could result in substantial costs and diversion of resources and could materially and adversely impact our business, financial condition and operating results.
Claims by others that we infringe or may infringe on their intellectual property could force us to incur significant costs or revise the way we conduct our business.
Our competitors protect their proprietary rights by means of patents, trade secrets, copyrights, trademarks and other intellectual property. We have not conducted an independent review of patents and other intellectual property issued to third parties, who may have patents or patent applications relating to our proprietary technology. We may receive letters from third parties alleging, or inquiring about, possible infringement, misappropriation or violation of their intellectual property rights. Any party asserting that we infringe, misappropriate or violate proprietary rights may force us to defend ourselves, and potentially our customers, against the alleged claim. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and/or invalidation of our proprietary rights or interruption or cessation of our operations. Any such claims or lawsuit could:
| ● | be time-consuming and expensive to defend, whether meritorious or not; | |
| ● | require us to stop providing products or services that use the technology that allegedly infringes the other party’s intellectual property; | |
| ● | divert the attention of our technical and managerial resources; | |
| ● | require us to enter into royalty or licensing agreements with third-parties, which may not be available on terms that we deem acceptable; | |
| ● | prevent us from operating all or a portion of our business or force us to redesign our products, services or technology platforms, which could be difficult and expensive and may make the performance or value of our product or service offerings less attractive; | |
| ● | subject us to significant liability for damages or result in significant settlement payments; and/or | |
| ● | require us to indemnify our customers. |
Furthermore, during the course of litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. Disclosure of our confidential information and our involvement in intellectual property litigation could materially adversely affect our business. Some of our competitors may be able to sustain the costs of intellectual property litigation more effectively than we can because they have substantially greater resources. In addition, any litigation could significantly harm our relationships with current and prospective customers. Any of the foregoing could disrupt our business and have a material adverse effect on our business, operating results and financial condition.
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In addition, contentions by a third party such as a vendor or partner that we may pose a threat to their intellectual property can disrupt our ability to work with such party and/or our customers who rely upon that third party’s product or services. Withdrawal of participation by key vendors or partners would cause a disruption of services to our clients and a loss of customers, which could negatively affect our business and financial performance.
Current and future litigation against us could be costly and time-consuming to defend and could result in additional liabilities.
We may from time to time be subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by current and former clients in connection with commercial disputes and employment claims made by our current or former employees. Claims may also be asserted by or on behalf of a variety of other parties, including government agencies, patients of our physician clients, stockholders, the sellers of the businesses that we acquire, or the creditors of the businesses we acquire. Any litigation involving us may result in substantial costs and may divert management’s attention and resources, which may seriously harm our business, overall financial condition, and operating results. Insurance may not cover existing or future claims, be sufficient to fully compensate us for one or more of such claims, or continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, thereby reducing our operating results and leading analysts or potential investors to reduce their expectations of our performance resulting in a reduction in the trading price of our stock.
If our security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as insecure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities.
Our services involve the web-based storage and transmission of customers’ proprietary information and patient information, including health, financial, payment and other personal or confidential information. We rely on proprietary and commercially available systems, software, tools and monitoring, as well as other processes, to provide security for processing, transmission and storage of such information. Because of the sensitivity of this information and due to requirements under applicable laws and regulations, the effectiveness of our security efforts is very important. We maintain servers, which store customers’ data, in the U.S. and offshore. Servers that store patient health records are stored in the U.S. We also process, transmit and store some data of our customers on servers and networks that are owned and controlled by third-party contractors in India and elsewhere. Increasingly, threat actors are targeting the healthcare industry with ransomware and other malicious software. If our security measures are breached or fail as a result of third-party action, acts of terror, social unrest, employee error, malfeasance or for any other reasons, someone may be able to obtain unauthorized access to customer or patient data. Improper activities by third parties, advances in computer and software capabilities and encryption technology, new tools and discoveries and other events or developments may facilitate or result in a compromise or breach of our security systems. Our security measures may not be effective in preventing unauthorized access to the customer and patient data stored on our servers. If a breach of our security occurs, we could face damages for contract breach, penalties for violation of applicable laws or regulations, possible lawsuits by individuals affected by the breach and significant remediation costs and efforts to prevent future occurrences. In addition, whether there is an actual or a perceived breach of our security, the market perception of the effectiveness of our security measures could be harmed and we could lose current or potential customers.
Our products and services are required to meet the interoperability standards, which could require us to incur substantial additional development costs or result in a decrease in revenue.
Our customers and the industry leaders enacting regulatory requirements are concerned with and often require that our products and services be interoperable with other third-party healthcare information technology suppliers. Although our products comply with the latest ONC standards and provide seamless and secure access, use and sharing of electronic health records, market forces or regulatory authorities could create software interoperability standards that would apply to our solutions, and if our products and services are not consistent with those standards, we could be forced to incur substantial development costs. There currently exists a comprehensive set of criteria for the functionality, interoperability and security of various software modules in the healthcare information technology industry. However, those standards are subject to continuous modification and refinement. Maintaining compliance with industry interoperability standards and related requirements could result in larger than expected software development expenses and administrative expenses in order to conform to these requirements. These standards and specifications, once finalized, will be subject to interpretation by the entities designated to certify such technology. We will incur increased development costs in delivering solutions if we need to change or enhance our products and services to be in compliance with these varying and evolving standards. If our products and services are not consistent with these evolving standards, our market position and sales could be impaired and we may have to invest significantly in changes to our solutions.
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Disruptions in internet or telecommunication service or damage to our data centers could adversely affect our business by reducing our customers’ confidence in the reliability of our services and products.
Our information technologies and systems are vulnerable to damage or interruption from various causes, including acts of God and other natural disasters, war and acts of terrorism and power losses, computer systems failures, internet and telecommunications or data network failures, operator error, losses of and corruption of data and similar events. Our customers’ data, including patient health records, reside on our own servers located in the U.S., and our Offshore Offices. Although we conduct business continuity planning to protect against fires, floods, other natural disasters and general business interruptions to mitigate the adverse effects of a disruption, relocation or change in operating environment at our data centers, the situations we plan for and the amount of insurance coverage we maintain may not be adequate in any particular case. In addition, the occurrence of any of these events could result in interruptions, delays or cessations in service to our customers. Any of these events could impair or prohibit our ability to provide our services, reduce the attractiveness of our services to current or potential customers and adversely impact our financial condition and results of operations.
In addition, despite the implementation of security measures, our infrastructure, data centers, or systems that we interface with or utilize, including the internet and related systems, may be vulnerable to physical break-ins, hackers, improper employee or contractor access, computer viruses, programming errors, denial-of-service attacks or other attacks by third-parties seeking to disrupt operations or misappropriate information or similar physical or electronic breaches of security. Any of these can cause system failure, including network, software or hardware failure, which can result in service disruptions. As a result, we may be required to expend significant capital and other resources to protect against security breaches and hackers or to alleviate problems caused by such breaches.
We may be subject to liability for the content we provide to our customers and their patients.
We provide content for use by healthcare providers in treating patients. This content includes, among other things, patient education materials, coding and drug databases developed by third parties, and prepopulated templates providers can use to document visits and record patient health information. If content in the third-party databases we use is incorrect or incomplete, adverse consequences, including death, may give rise to product liability and other claims against us. A court or government agency may take the position that our delivery of health information directly, including through licensed practitioners, or delivery of information by a third-party site that a consumer accesses through our solutions, exposes us to personal injury liability, or other liability for wrongful delivery or handling of healthcare services or erroneous health information. Our liability insurance coverage may not be adequate or continue to be available on acceptable terms, if at all. A claim brought against us that is uninsured or under-insured could harm our business. Even unsuccessful claims could result in substantial costs and diversion of management resources.
We are subject to the effect of payer and provider conduct that we cannot control and that could damage our reputation with customers and result in liability claims that increase our expenses.
We offer electronic claims submission services for which we rely on content from customers, payers, and others. While we have implemented features and safeguards designed to maximize the accuracy and completeness of claims content, these features and safeguards may not be sufficient to prevent inaccurate claims data from being submitted to payers. Should inaccurate claims data be submitted to payers, we may experience poor operational results and be subject to liability claims, which could damage our reputation with customers and result in liability claims that increase our expenses.
Failure by our clients to obtain proper permissions and waivers may result in claims against us or may limit or prevent our use of data, which could harm our business.
Our clients are obligated by applicable law to provide necessary notices and to obtain necessary permission waivers for use and disclosure of the information that we receive. If they do not obtain necessary permissions and waivers, then our use and disclosure of information that we receive from them or on their behalf may be limited or prohibited by state or federal privacy laws or other laws. This could impair our functions, processes, and databases that reflect, contain, or are based upon such data and may prevent use of such data. In addition, this could interfere with or prevent creation or use of rules, and analyses or limit other data-driven activities that benefit us. Moreover, we may be subject to claims or liability for use or disclosure of information by reason of lack of valid notice, permission, or waiver. These claims or liabilities could subject us to unexpected costs and adversely affect our operating results.
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Any deficiencies in our financial reporting or internal controls could adversely affect our business and the trading price of our securities.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting.
In the future, if we have a material weakness in our internal control over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. In addition, our internal control over financial reporting would not prevent or detect all errors and fraud. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
If there are material weaknesses or failures in our ability to meet any of the requirements related to the maintenance and reporting of our internal controls, investors may lose confidence in the accuracy and completeness of our financial reports, which in turn could cause the price of our common stock and preferred stock to decline. Moreover, effective internal controls are necessary to produce reliable financial reports and to prevent fraud. If we have deficiencies in our internal controls, it may negatively impact our business, results of operations and reputation. In addition, we could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business.
We maintain our cash at domestic and foreign financial institutions. Balances held domestically may exceed federally insured limits. Foreign banking institutions do not provide bank deposit insurance.
The financial markets recently have encountered volatility associated with concerns about the balance sheets of domestic banks, especially small and regional banks who may have significant losses associated with investments that make it difficult to fund demands to withdraw deposits and other liquidity needs. Although the federal government has announced measures to assist these banks and protect depositors, some banks have already been impacted and others may be materially and adversely impacted. Our business is dependent on bank relationships and we are proactively monitoring the financial health of such bank relationships. Continued strain on the banking system may adversely impact our business, financial condition and results of operations. Foreign banking institutions do not provide insurance against balances held there.
Our goodwill was subject to impairment in 2023 and may be subject to further impairment in the future, which could have a material adverse effect on our results of operations, financial condition, or future operating results.
We perform an annual goodwill impairment test on October 31st of each year, or more frequently if indicators for potential impairment exist. As a result of the 2023 annual goodwill impairment test, we recorded impairment charges of approximately $2 million at that time. Indicators that were considered included significant changes in performance relative to expected operating results, significant negative industry or economic trends, or a significant decline in our stock price and/or market capitalization or enterprise value for a sustained period of time. While we believe the assumptions used in determining whether there was an impairment and the amount of any resulting impairment were reasonable and commensurate with the views of a market participant, changes in key assumptions in the future, including increasing the discount rate, lowering forecast for revenue and operating margin, selection of guideline public companies or lowering the long-term growth rate, could result in additional charges; similarly, one or more changes in these assumptions in future periods due to changes in circumstances could result in additional future impairments. During December 2023, the Company had an additional triggering event as a result of the suspension of the payment of the dividends on the Preferred Stock. As a result of a December 2023 triggering event, the Company recorded additional impairment charges of approximately $40 million. We cannot predict if or when a future goodwill impairment may occur. Any additional goodwill impairments could have material adverse effects on our operating results, net assets, or our cost of, or access to, capital, which could harm our business. For the year ended December 31, 2025, no additional goodwill impairment was recorded. See Note 4, Goodwill and Intangible Assets - Net, to our consolidated financial statements in this Annual Report on Form 10-K for more details.
We are a party to several related-party agreements with our founder and Executive Chairman, Mahmud Haq, which have significant contractual obligations. These agreements are reviewed by our Audit Committee on an annual basis.
Since inception, we have entered into several related-party transactions with our founder and Executive Chairman, Mahmud Haq, which subject us to significant contractual obligations. We believe these transactions reflect terms comparable to those that would be available from third parties. Our independent audit committee has reviewed these arrangements and continues to do so on an annual basis. Although we have procedures in place to identify related party transactions, it is possible that such transactions could occur without being contemporaneously identified, reviewed and approved by the Audit Committee.
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We depend on key information systems and third-party service providers.
We depend on key information systems to accurately and efficiently transact our business, provide information to management and prepare financial reports. These systems and services are vulnerable to interruptions or other failures resulting from, among other things, natural disasters, terrorist attacks, software, equipment or telecommunications failures, processing errors, computer viruses, other security issues or supplier defaults. Security, backup and disaster recovery measures may not be adequate or implemented properly to avoid such disruptions or failures. Any disruption or failure of these systems or services could cause substantial errors, processing inefficiencies, security breaches, inability to use the systems or process transactions, loss of customers or other business disruptions, all of which could negatively affect our business and financial performance.
Rapid technological change in the telehealth industry presents us with significant risks and challenges.
The telehealth market is characterized by rapid technological change, changing consumer requirements, short product lifecycles and evolving industry standards. Our success will depend on our ability to enhance our solution with next-generation technologies and to develop or to acquire and market new services to access new consumer populations. There is no guarantee that we will possess the resources, either financial or personnel, for the research, design and development of new applications or services, or that we will be able to utilize these resources successfully and avoid technological or market obsolescence. Further, there can be no assurance that technological advances by one or more of our competitors or future competitors will not result in our present or future applications and services becoming uncompetitive or obsolete.
Our business, financial condition, results of operations and growth may be adversely affected by pandemics, epidemics or other public health emergencies, such as COVID-19.
We are subject to risks related to a public health crisis such as a global pandemic similar to the coronavirus (COVID-19). Numerous governmental jurisdictions, including the State of New Jersey where we maintain our principal executive offices, and those in which many of our U.S. and international offices are based, may impose “shelter-in-place” orders, quarantines, executive orders and similar government orders and restrictions for their residents to control the spread of public health emergencies. Such orders or restrictions, and the perception that such orders or restrictions could occur, could result in business closures, work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, among other effects, thereby negatively impacting our customers, employees, and offices, among others.
A recession or prolonged economic contraction as a result of health emergencies could harm the business and results of operations of our enterprise customers, resulting in potential business closures, layoffs of employees and a significant increase in unemployment in the United States and elsewhere. The occurrence of any such events may lead to reduced income for customers and reduced size of workforces, which could reduce our revenue and harm our business, financial condition and results of operations.
The prolonged impact of these public health emergencies is highly uncertain and unpredictable, depending upon the severity and duration of the emergency and the effectiveness of actions taken globally to contain or mitigate its effects. Future financial impact cannot be estimated reasonably at this time, but may materially adversely affect our business, results of operations and financial condition.
We may be adversely affected by global climate change or market responses to such change.
The long-term effects of climate change are difficult to predict and may be widespread. The impacts may include physical risks (such as severe rains and flooding as a result of climate change that has been experienced in Pakistan), social and human effects (such as population dislocations or harm to health and well-being), and other adverse effects. The effects could impair, for example, the availability and cost of certain products and energy (including utilities), which in turn may impact our ability to procure goods or services required for the operation of our business at the quantities and levels we require. We may bear losses incurred as a result of, for example, physical damage to, or destruction of, our facilities (such as our operation centers), and business interruption due to weather events that may be attributable to climate change. These events and impacts could materially adversely affect our business operations, financial position, or results of operation.
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Risks Related to Macroeconomics Conditions
Our operations and performance depend significantly on global and regional economic conditions and adverse economic conditions can materially adversely affect our business, results of operations and financial conditions.
Adverse macroeconomic conditions, including slow growth or recession, high unemployment, inflation, tariffs, tighter credit, higher interest rates, labor shortages, and currency fluctuations, can adversely impact consumer confidence and spending and materially adversely affect demand for our customers’ services. In addition, healthcare spending can be materially adversely affected in response to changes in fiscal and monetary policy, financial market volatility, declines in income or asset values and other economic factors.
Adverse economic conditions can also lead to increased credit and collectability risk on our trade receivables, the failure of financial institutions and reduced liquidity. These and other impacts can materially adversely affect our business, results of operations, financial condition, cash flows and the price of our common and preferred stock.
Our managed medical practices and customers could face supply chain issues that would disrupt their ability to service patients and therefore impact our revenue.
Medical product shortages can represent a significant threat across the landscape of public health and health care delivery by undermining the ability to provide timely and high-quality care to patients. This has been clear in the context of the COVID-19 pandemic. If our managed medical practices and customers have supply chain issues and cannot receive the medications, vaccines and other required medical supplies, this can impact their ability to properly serve patients and thus our revenue would be negatively impacted.
Volatility in currency exchange rates may adversely affect our financial condition, results of operations and cash flows.
Our international operations provide support for the U.S. operations. We are exposed to the effects (both positive and negative) that fluctuating exchange rates have on translating the financial statements of our international operations, most of which are denominated in local currencies, into the U.S. dollar. Fluctuations in exchange rates may affect reported operating results in our international operations. As a result, fluctuating exchange rates may adversely impact our results of operations and cash flows.
Risks Related to Our Acquisition Strategy
If we do not manage our acquisitions effectively, our revenue, business and operating results may be harmed.
Our future acquisitions may require greater than anticipated investment of operational and financial resources as we seek to migrate customers of these companies to our solutions. Acquisitions also require the integration of different software and services, assimilation of new employees, diversion of management and IT resources, and increases in administrative costs. Acquisitions may also require additional costs associated with any debt or equity financings undertaken to pay for such acquisitions. We cannot assure you that any acquisition we undertake will be successful. Future growth will also place additional demands on our customer support, sales, and marketing resources, and may require us to hire and train additional employees. We will need to expand and upgrade our systems and infrastructure to accommodate our growth. The failure to manage our growth effectively will materially and adversely affect our business.
We may be unable to implement our strategy of acquiring additional companies.
We have no unconditional commitments with respect to any acquisition as of the date of this Annual Report on Form 10-K. Although we expect that one or more acquisition opportunities will become available in the future, we may not be able to acquire additional companies at all or on terms favorable to us. We will likely need additional financing for such acquisitions, but there is no assurance that we will be able to borrow funds or raise capital through the issuance of our equity on favorable terms. Certain of our larger, better capitalized competitors may seek to acquire some of the companies we may be interested in. Competition for acquisitions would likely increase acquisition prices and result in us having fewer acquisition opportunities.
Depending on the type of business we acquire (e.g., RCM, practice management, EHR, etc.), we may have varying cost saving and/or cross-selling opportunities with the acquired business. However, there is no assurance that we will achieve anticipated cost savings and cross-selling on our acquisitions, and failure to do so may mean we overpaid for such acquisitions.
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In completing any future acquisitions, we will rely upon the representations, warranties and indemnities made by the sellers with respect to each acquisition as well as our own due diligence investigation. We cannot be assured that such representations and warranties will be true and correct or that our due diligence will uncover all materially adverse facts relating to the operations and financial condition of the acquired companies or their customers. Nor can we be assured that any available insurance will cover all such losses. To the extent that we are required to pay for obligations of an acquired company, or if material misrepresentations exist, we may not realize the expected benefit from such acquisition and we will have overpaid in cash and/or stock for the value received in that acquisition.
At the current price of our common stock, we may be unable to execute accretive acquisitions.
At times we have used our common stock to pay in part for acquisitions. Due to the lower market price of the common stock, we may not be able to use this security to execute future acquisitions.
We may be unable to retain customers following their acquisition, which may result in a decrease in our revenues and operating results.
Customers of the businesses we acquire often have the right to terminate their service contracts for any reason at any time upon notice of 90 days or less. These customers may elect to terminate their contracts as a result of our acquisition or choose not to renew their contracts upon expiration. Legal and practical limitations on our ability to enforce non-competition and non-solicitation provisions against customer representatives and sales personnel that leave the businesses we acquire to join competitors may result in the loss of customers. In the past, our failure to retain acquired customers has at times resulted in decreases in our revenues. Our inability to retain customers of businesses we acquire could adversely affect our ability to benefit from those acquisitions and to grow our future revenues and operating income.
Acquisitions may subject us to liability with regard to the creditors, customers, and shareholders of the sellers.
While we attempt to limit our exposure to the liabilities associated with the businesses we acquire, we cannot guarantee that we will be successful in avoiding all material liability. Regardless of how we structure the acquisition, whether as an asset purchase, stock purchase, merger or other business combination, creditors, customers, vendors, governmental agencies and other parties at times seek to hold us accountable for unpaid debts, breach of contract claims, regulatory violations and other liabilities that relate to the business we acquired. Disaffected shareholders of the businesses we acquire have also attempted to interfere with our business acquisitions or brought claims against us. We attempt to minimize all of these risks through thorough due diligence, negotiating indemnities and holdbacks, obtaining relevant representations from sellers, procuring insurance coverage and leveraging experienced professionals when appropriate.
Future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of indebtedness and increased amortization expense.
Future acquisitions may result in dilutive issuances of equity securities, the incurrence of debt, the assumption of known and unknown liabilities, the write-off of software development costs and the amortization of expenses related to intangible assets, all of which could have an adverse effect on our business, financial condition and results of operations.
Regulatory Risks
If a breach of our measures protecting personal data covered by HIPAA or the HITECH Act occurs, we may incur significant liabilities.
The Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”), and the regulations that have been issued under it contain substantial restrictions and requirements with respect to the use, collection, storage and disclosure of individuals’ protected health information. Under HIPAA, covered entities must establish administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of electronic protected health information maintained or transmitted by them or by others on their behalf. In February 2009, HIPAA was amended by the HITECH Act to add provisions that impose certain of HIPAA’s privacy and security requirements directly upon business associates of covered entities. Under HIPAA and the HITECH Act, our customers are covered entities and we are a business associate of our customers as a result of our contractual obligations to perform certain services for those customers. The HITECH Act transferred enforcement authority of the security rule from CMS to the Office for Civil Rights of HHS, thereby consolidating authority over the privacy and security rules under a single office within HHS. Further, HITECH empowered state attorneys’ general to enforce HIPAA.
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The HITECH Act heightened enforcement of privacy and security rules, indicating that the imposition of penalties will be more common in the future and such penalties will be more severe. For example, the HITECH Act requires that the HHS fully investigate all complaints if a preliminary investigation of the facts indicates a possible violation due to “willful neglect” and imposes penalties if such neglect is found. Further, where our liability as a business associate to our customers was previously merely contractual in nature, the HITECH Act now treats the breach of duty under an agreement by a business associate to carry the same liability as if the covered entity engaged in the breach. In other words, as a business associate, we are now directly responsible for complying with HIPAA. We may find ourselves subject to increased liability as a possible liable party and we may incur increased costs as we perform our obligations to our customers under our agreements with them.
Finally, regulations also require business associates to notify covered entities, who in turn must notify affected individuals and government authorities of data security breaches involving unsecured protected health information. We have performed an assessment of the potential risks and vulnerabilities to the confidentiality, integrity and availability of electronic health information. In response to this risk analysis, we implemented and maintain physical, technical and administrative safeguards intended to protect all personal data and have processes in place to assist us in complying with applicable laws and regulations regarding the protection of this data and properly responding to any security incidents. If we knowingly breach the HITECH Act’s requirements, we could be exposed to criminal liability. A breach of our safeguards and processes could expose us to civil penalties of up to $1.5 million for each incident and the possibility of civil litigation.
Actual or perceived failures to comply with healthcare, data protection, privacy, security and fraud and abuse laws and regulations could materially adversely affect our business, results of operations and financial condition.
The healthcare industry is subject to extensive and evolving federal, state and foreign laws, regulations, standards and contractual obligations, including those governing healthcare operations, data protection, privacy and security, fraud and abuse and the handling of sensitive information. The global data protection and privacy landscape continues to evolve rapidly, and we are or may become subject to additional or more stringent requirements governing the collection, use, disclosure, retention, transfer and security of personal information, including health information. Compliance with these requirements is complex, costly and resource-intensive, and changes in laws, regulations or their interpretation or enforcement may restrict our operations, require modifications to our products or services, increase our costs or expose us to liability.
Any failure, or perceived failure, by us or our third-party service providers to comply with applicable laws, regulations, industry standards, contractual obligations or internal policies could result in regulatory investigations, enforcement actions, civil litigation, contractual liability, fines, penalties, negative publicity or reputational harm, any of which could materially adversely affect our business, financial condition and results of operations. In addition, we are subject to contractual and other obligations relating to privacy, data protection and information security that may be more stringent than applicable legal requirements, which may increase compliance costs, slow sales cycles or limit customer adoption of our products and services.
HIPAA and its implementing regulations impose significant requirements relating to the privacy and security of protected health information (“PHI”). We are subject to HIPAA and related contractual obligations, including obligations to safeguard PHI and to enter into business associate agreements with certain third-party vendors. Any failure by us or our vendors to comply with these obligations could expose us and our customers to significant contractual, civil or regulatory liability. We also process certain de-identified data subject to HIPAA requirements, which requires safeguards to prevent re-identification and compliance obligations if re-identification occurs.
In the ordinary course of our business, we collect, process and store sensitive information, including proprietary business information, intellectual property and personally identifiable information. Any data security incident involving us or our third-party vendors could result in regulatory investigations, reporting obligations, enforcement actions, litigation, fines or penalties under applicable federal and state privacy laws, including the California Consumer Privacy Act (“CCPA”), as well as reputational harm, any of which could materially adversely affect our business, financial condition and results of operations.
In addition, certain federal and state fraud and abuse laws, including anti-kickback and false claims laws, may apply to us indirectly through our relationships with healthcare providers, customers and partners. Violations of these laws can result in substantial civil and criminal penalties, exclusion from government healthcare programs and reputational harm. If we are found to have violated, or facilitated the violation of, such laws, our business, financial condition and results of operations could be materially adversely affected.
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The healthcare industry is heavily regulated. Our failure to comply with regulatory requirements could create liability for us, result in adverse publicity and negatively affect our business.
The healthcare industry is heavily regulated and is constantly evolving due to the changing political, legislative, regulatory landscape and other factors. Many healthcare laws are complex, and their application to specific services and relationships may not be clear. In particular, many existing healthcare laws and regulations, when enacted, did not anticipate or address the services that we provide. Further, healthcare laws differ from state to state and it is difficult to ensure that our business, products and services comply with evolving laws in all states. By way of example, certain federal and state laws forbid billing based on referrals between individuals or entities that have various financial, ownership, or other business relationships with healthcare providers. These laws vary widely from state to state, and one of the federal laws governing these relationships, known as the Stark Law, is very complex in its application. Similarly, many states have laws forbidding physicians from practicing medicine in partnership with non-physicians, such as business corporations, as well as laws or regulations forbidding splitting of physician fees with non-physicians or others. Other federal and state laws restrict assignment of claims for reimbursement from government-funded programs, the manner in which business service companies may handle payments for such claims and the methodology under which business services companies may be compensated for such services.
The 21st Century Cures Act (the “Cures Act”), passed by Congress in 2016, is meant to improve various aspects of the healthcare industry, including interoperability and information blocking. The Cures Act’s interoperability provisions relate to Information Exchange and Certification administered by the ONC. The certification involves complex and specific requirements related to various types of requests for the access, exchange or use of Electronic Health Information. In addition, the information blocking rule aims to resolve concerns that individuals in the healthcare industry intentionally prevent the exchange of information between multiple stakeholders. The Cures Act allows for penalties for stakeholders, including but not limited to, health IT developers and providers who do not comply with same. While we remain committed to efficient exchange of information in the healthcare industry and continue meeting all new certification requirements, failure to comply with these regulatory requirements, could create liability for us, result in adverse publicity and negatively affect our business.
The Office of Inspector General (the “OIG”) of the Department of Health and Human Services (the “HHS”) has a longstanding concern that percentage-based billing arrangements may increase the risk of improper billing practices. In addition, certain states have adopted laws or regulations forbidding splitting of fees with non-physicians which may be interpreted to prevent business service providers, including medical billing providers, from using a percentage-based billing arrangement. The OIG and HHS recommend that medical billing companies develop and implement comprehensive compliance programs to mitigate this risk. While we have developed and implemented a comprehensive billing compliance program that we believe is consistent with these recommendations, our failure to ensure compliance with controlling legal requirements, accurately anticipate the application of these laws and regulations to our business and contracting model, or other failure to comply with regulatory requirements, could create liability for us, result in adverse publicity and negatively affect our business.
The federal Anti-Kickback Statute (the “AKS”) prohibits us from knowingly and willfully soliciting, receiving, offering or providing remuneration in exchange for referrals or recommendations for purposes of selling products or services which are paid for by federal healthcare programs such as Medicare and Medicaid. In addition, a claim including products or services resulting from a violation of the AKS constitutes a violation of the federal False Claims Act (the “FCA”). If we are determined to have violated the FCA, we may be required to pay up to three times the actual damages sustained by the government, plus mandatory civil penalties for each separate false claim. If we are found to be in violation of the FCA, AKS, ACA, or any other applicable state or any federal fraud and abuse laws, whether by our current practices or for the past practices of a company we acquire, we may be subject to substantial civil damages and criminal penalties and fines that could have a material adverse impact on our business.
In addition, federal and state legislatures and agencies periodically consider proposals to revise aspects of the healthcare industry or to revise or create additional statutory and regulatory requirements. For instance, the current administration may make changes to the ACA, the nature and scope of which are presently unknown. Similarly, certain computer software products are regulated as medical devices under the Federal Food, Drug, and Cosmetic Act. While the Food and Drug Administration (the “FDA”) has sometimes chosen to disclaim authority to, or to refrain from actively regulating certain software products which are similar to our products, this area of medical device regulation remains in flux. We expect that the FDA will continue to be active in exploring legal regimes for regulating computer software intended for use in healthcare settings. Any additional regulation can be expected to impose additional overhead costs on us and should we fail to adequately meet these legal obligations, we could face potential regulatory action. Regulatory authorities such as the Centers for Medicare and Medicaid Services may also impose functionality standards with regard to electronic prescribing technologies. If implemented, proposals like these could impact our operations, the use of our services and our ability to market new services, or could create unexpected liabilities for us. We cannot predict what changes to laws or regulations might be made in the future or how those changes could affect our business or our operating costs.
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Further, our ability to provide our telehealth services in each state is dependent upon a state’s treatment of telehealth and emerging technologies (such as digital health services), which are subject to changing political, regulatory and other influences. Many states have laws that limit or restrict the practice of telehealth, such as laws that require a provider to be licensed and/or physically located in the same state where the patient is located. For example, California, Massachusetts, and Oregon, among others, are not members of the Interstate Medical Licensure Compact, which streamlines the process by which physicians licensed in one state are able to practice in other participating states. Failure to comply with these laws could result in denials of reimbursement for services (to the extent such services are billed), recoupments of prior payments, professional discipline for providers or civil or criminal penalties.
If we do not maintain the certification of our EHR solutions pursuant to the HITECH Act and Cures Act, our business, financial condition and results of operations will be adversely affected.
The HITECH Act provides financial incentives for healthcare providers that demonstrate “meaningful use” of an EHR and mandates use of health information technology systems that are certified according to technical standards developed under the supervision of the U.S. Department of Health and Human Services (“HHS”). The HITECH Act also imposes certain requirements upon governmental agencies to use, and requires healthcare providers, health plans, and insurers contracting with such agencies to use, systems that are certified according to such standards. The healthcare IT industry continues to experience changes as a result of new laws, regulations, and changes to healthcare industry standards. For instance, the meaningful use incentive program has since expired and has been consolidated, among other incentive programs, within the Merit-based Incentive Payment System (“MIPS”), which was created as part of the Quality Payment Program (“QPP”), launched by CMS after passage of the Medicare Access and CHIP Reauthorization Act (“MACRA”). MACRA and regulations promulgated by it change the way CMS rewards clinicians in the healthcare industry by rewarding value-based care over volume-based care. MIPS requires substantial reporting mechanisms based on clinical quality measures that highly depend on reporting feature within EHR systems.
The HITECH and Cures Acts (as described in more detail above) contain certification requirements which affect our business because we have invested and continue to invest in conforming our products and services to these standards. HHS has developed certification programs for electronic health records and health information exchanges. Our web-based EHR solutions have been certified as complete EHR systems by ICSA Labs or Drummond Group, non-governmental, independent certifying bodies. We must ensure that our EHR solutions continue to be certified according to applicable HITECH Act and Cures Act technical standards so that our customers qualify for any MIPS/MACRA incentive payments and are not subject to penalties for non-compliance. Failure to maintain this certification under the HITECH Act and Cures Act could jeopardize our relationships with customers who are relying upon us to provide certified software and will make our products and services less attractive to customers than the offerings of other EHR vendors who maintain certification of their products.
If we or our customers fail to comply with federal and state laws governing submission of false or fraudulent claims to government healthcare programs and financial relationships among healthcare providers, we or our customers may be subject to civil and criminal penalties or loss of eligibility to participate in government healthcare programs.
As a participant in the healthcare industry, our operations and relationships, and those of our customers, are regulated by a number of federal, state and local governmental entities. The impact of these regulations can adversely affect us even though we may not be directly regulated by specific healthcare laws and regulations. We must ensure that our products and services can be used by our customers in a manner that complies with those laws and regulations. Inability of our customers to do so could affect the marketability of our products and services or our compliance with our customer contracts, or even expose us to direct liability under the theory that we had assisted our customers in a violation of healthcare laws or regulations. A number of federal and state laws, including anti-kickback restrictions and laws prohibiting the submission of false or fraudulent claims, apply to healthcare providers and others that make, offer, seek or receive referrals or payments for products or services that may be paid for through any federal or state healthcare program and, in some instances, any private program. These laws are complex and their application to our specific services and relationships may not be clear and may be applied to our business in ways that we do not anticipate. Federal and state regulatory and law enforcement authorities have recently increased enforcement activities with respect to Medicare and Medicaid fraud and abuse regulations and other healthcare reimbursement laws and rules. From time to time, participants in the healthcare industry receive inquiries or subpoenas to produce documents in connection with government investigations. We could be required to expend significant time and resources to comply with these requests, and the attention of our management team could be diverted by these efforts. The occurrence of any of these events could give our customers the right to terminate our contracts with us and result in significant harm to our business and financial condition.
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These laws and regulations may change rapidly, and it is frequently unclear how they apply to our business. Any failure of our products or services to comply with these laws and regulations could result in substantial civil or criminal liability and could, among other things, adversely affect demand for our services, invalidate all or portions of some of our contracts with our customers, require us to change or terminate some portions of our business, require us to refund portions of our revenue, cause us to be disqualified from serving customers doing business with government payers, and give our customers the right to terminate our contracts with them, any one of which could have an adverse effect on our business.
Potential healthcare reform and new regulatory requirements placed on our products and services could increase our costs, delay or prevent our introduction of new products or services, and impair the function or value of our existing products and services.
Our products and services may be significantly impacted by healthcare reform initiatives and will be subject to increasing regulatory requirements, either of which could negatively impact our business in a multitude of ways. If substantive healthcare reform or applicable regulatory requirements are adopted, we may have to change or adapt our products and services to comply. Reform or changing regulatory requirements may also render our products or services obsolete or may block us from accomplishing our work or from developing new products or services. This may in turn impose additional costs upon us to adapt to the new operating environment or to further develop or modify our products and services. Such reforms may also make the introduction of new products and service costlier or more time-consuming than we currently anticipate. These changes may also prevent our introduction of new products and services or make the continuation or maintenance of our existing products and services unprofitable or impossible.
Additional regulation of the disclosure of medical information outside the United States may adversely affect our operations and may increase our costs.
Federal or state governmental authorities may impose additional data security standards or additional privacy or other restrictions on the collection, use, transmission, and other disclosures of medical information. Legislation has been proposed at various times at both the federal and the state level that would limit, forbid, or regulate the use or transmission of medical information outside of the United States. Such legislation, if adopted, may render our use of our servers in Offshore Offices for work related to such data impracticable or substantially more expensive. Alternative processing of such information within the United States may involve substantial delay in implementation and increased cost.
Our services present the potential for embezzlement, identity theft, or other similar illegal behavior by our employees.
Among other things, our services from time to time involve handling mail from payers and payments from patients for our customers, and this mail frequently includes original checks and credit card information and occasionally includes currency. Where requested, we deposit payments and process credit card transactions from patients on behalf of customers and then forward these payments to the customers. Even in those cases in which we do not handle original documents or mail, our services also involve the use and disclosure of personal and business information that could be used to impersonate third parties or otherwise gain access to their data or funds. The manner in which we store and use certain financial information is governed by various federal and state laws. If any of our employees takes, converts, or misuses such funds, documents, or data, we could be liable for damages, subject to regulatory actions and penalties, and our business reputation could be damaged or destroyed. In addition, we could be perceived to have facilitated or participated in illegal misappropriation of funds, documents, or data and therefore be subject to civil or criminal liability.
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Risks Related to Ownership of Shares of Our Common Stock
The conversion of the majority of the Series A Preferred Stock into common stock in March 2025 (the “Conversion”) increased the total number of outstanding shares, potentially diluting the value of existing common shareholders’ equity.
The Conversion resulted in the dilution of existing common shareholders’ ownership percentages. This dilution of ownership impacted the voting power, earnings per share and overall control of the Company for common shareholders prior to the Conversion. The Company’s earnings per share calculation was impacted by the additional common shares, offset by the amount of Series A Preferred Stock dividend that is not included in the calculation. The increased number of common shares outstanding also lowered the book value of each common share, which may adversely affect the market price of the Company’s common stock. Moreover, existing common shareholders may experience a reduced ability to influence corporate decisions if their voting power becomes more diluted due to additional conversions.
Series A Preferred Stock shareholders that converted their shares gained full voting rights upon conversion of their preferred shares into common stock.
Preferred shareholders do not have voting rights under the terms of their preferred stock, except under extremely limited circumstances. However, upon conversion of their preferred shares into common stock, these shareholders gained full voting rights, which altered the balance of voting power within the Company. The conversion of a majority of the Series A Preferred Stock shares could result in a situation where a large group of former Series A preferred shareholders collectively gain the ability to influence corporate decisions, including matters related to the election of directors, mergers, acquisitions, and other significant strategic initiatives. This shift in voting power could potentially dilute the influence of existing common shareholders and may lead to changes in the Company’s governance structure.
The Conversion of the Series A Preferred Stock, and any subsequent conversions, may be perceived negatively by the market.
The Conversion and any subsequent conversions could be perceived negatively by the market, potentially leading to a decline in the value of the Company’s common stock. Investors may interpret such conversion as a sign of financial weakness, dilution of ownership, or a shift in the Company’s capital structure that could impact earnings per share or control dynamics. This negative market perception may arise if investors believe the Conversion or any subsequent conversions are being undertaken to address financial challenges, increase liquidity, or meet other strategic objectives that could signal instability or uncertainty. Such market reactions could lead to increased volatility in the Company’s common stock price, reduced investor confidence, and challenges in maintaining or attracting capital in the future.
The Company’s potential for future issuances of common stock following the Conversion could be limited.
The Company may want to issue additional common stock in the future to raise capital for operations, acquisitions, or other strategic initiatives. Such potential for future issuances could be limited after the Conversion and any future conversions.
Our revenues, operating results and cash flows may fluctuate in future periods and we may fail to meet investor expectations, which may cause the price of our common stock to decline.
Variations in our quarterly and year-end operating results are difficult to predict and may fluctuate significantly from period to period. We may fail to meet or exceed the financial projections of the investment community or the financial projections we may provide to the public. If our sales or operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Specific factors that may cause fluctuations in our operating results include:
| ● | demand and pricing for our products and services; |
| ● | the encounter volumes of our customer base; |
| ● | government or commercial healthcare reimbursement policies; |
| ● | physician and patient acceptance of any of our current or future products; |
| ● | introduction of competing products, services or technologies; |
| ● | our operating expenses which fluctuate due to growth of our business; |
| ● | changes in laws or regulations applicable to our products and services; |
| ● | timing and size of any new product or technology acquisitions we may complete; and |
| ● | variable sales cycle and implementation periods for our products and services. |
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Healthcare reform may have a material adverse effect on the Company’s financial condition and results of operations.
Political, economic and regulatory developments have affected fundamental changes in the healthcare industry. In response to perceived increases in healthcare costs in recent years, there have been, and continue to be, proposals by the federal government, state governments, regulators, and third-party payors to control these costs and, more generally, to reform the U.S. health care system. Certain of these proposals could limit the amounts CareCloud will receive for its products and services. The Patient Protection and Affordable Care Act (the “ACA”) substantially changed the way healthcare is financed by both government and private insurers.
The Company cannot predict at this time the full impact of the ACA, or any other legislative changes thereto, other new legislation, the current Administration, agency priorities, rulemaking and healthcare reform measures from U.S. federal or state governments, or third-party payors that may be adopted or implemented in the future on the Company’s financial condition, results of operations and cash flows. Although several legislative initiatives to repeal and replace the ACA have been proposed, and legal challenges to the constitutionality of the ACA or its component parts have been made, the nature and effect of any modification or repeal of, or legislative substitution for, the ACA, or any court decision regarding the ACA’s validity, is uncertain, and the Company cannot predict the effect that any of these events would have on the longer-term viability of the act, or on the Company’s financial condition, results of operations or cash flows. However, any changes that create stricter and more costly compliance obligations or lower reimbursement for the Company’s customers could materially and adversely affect its business, financial condition and results of operations. Future significant changes in the healthcare systems in the United States could also have a negative impact on the demand for the Company’s current and future products.
Future sales of shares of our common stock could depress the market price of our common stock.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. If our shareholders sell, or the market perceives that our shareholders intend to sell substantial amounts of our common stock in the public market, the market price of our common stock could decline significantly.
As of December 31, 2025, Mahmud Haq controlled 12% of our outstanding shares of common stock, limits investors from influencing significant corporate decisions.
As of December 31, 2025, Mahmud Haq, our founder and Executive Chairman, beneficially owned 12% of our outstanding shares of common stock. Although his ownership percentage was diluted due to the Conversion, Mr. Haq continues to exercise a significant level of influence over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation, and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions difficult or impossible without his support, which in turn could reduce the price of our common stock.
Provisions of Delaware law, of our amended and restated charter and amended and restated bylaws may make a takeover more difficult, which could cause our common stock price to decline.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and in the Delaware General Corporation Law (“DGCL”) may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt, which is opposed by management and the Board of Directors. Public stockholders who might desire to participate in such a transaction may not have an opportunity to do so. We have a staggered Board of Directors that makes it difficult for stockholders to change the composition of the Board of Directors in any one year. Further, our amended and restated certificate of incorporation provides for the removal of a director only for cause upon the affirmative vote of the holders of at least 50.1% of the outstanding shares entitled to cast their vote for the election of directors, which may discourage a third party from making a tender offer or otherwise attempting to obtain control of us. These and other anti-takeover provisions could substantially impede the ability of public stockholders to change our management and Board of Directors. Such provisions may also limit the price that investors might be willing to pay for shares of our Preferred Stock in the future.
Any issuance of additional preferred stock in the future may dilute the rights of our existing stockholders.
Our Board of Directors has the authority to issue up to 7,000,000 shares of preferred stock and to determine the price, privileges and other terms of these shares, of which 984,530 shares of Series A Preferred Stock and 1,511,372 of Series B Preferred Stock were outstanding as of December 31, 2025. Our Board of Directors may exercise its authority with respect to the remaining shares of preferred stock without any further approval of common stockholders. The rights of the holders of common stock may be adversely affected by the rights of future holders of preferred stock.
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We do not intend to pay cash dividends on our common stock.
Currently, we do not anticipate paying any cash dividends to holders of our common stock. As a result, capital appreciation, if any, of our common stock will be a shareholder’s sole source of gain.
Complying with the laws and regulations affecting public companies will increase our costs and the demands on management and could harm our operating results.
As a public company, the Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. For the year ended December 31, 2025, we are required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting. The cost of our compliance with Section 404 has increased as we were not required to have this attestation performed for the year ended December 31, 2024. Our compliance with applicable provisions of Section 404 requires that we incur substantial accounting expense and expend significant management time on compliance-related issues and stay in compliance with reporting requirements. Moreover, if we are not able to stay in compliance with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies any deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
Furthermore, investor perceptions of our Company may suffer if deficiencies are found, and this could cause a decline in the market price of our common and preferred stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on internal control from our independent registered public accounting firm.
We are a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.
There are many exemptions available to smaller reporting companies like us that have less than $250 million of worldwide common equity held by non-affiliates. The disclosures we will be required to provide in our SEC filings are still less than they would be if we were not considered a smaller reporting company. Specifically, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings and have certain other decreased disclosure obligations in their SEC filings. Our status as a smaller reporting company may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict if investors will find our common stock less attractive because we will rely on the exemption available to smaller reporting companies. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Risks Related to Ownership of Shares of Our Preferred Stock
In December 2023 we suspended the payment of the dividends on the Preferred Stock. The Company resumed paying monthly dividends in February 2025, paying one month of the arrearage each month for the rest of the year. The Company has also announced that starting with the February 2026 dividend payment, it will start paying double dividends monthly on the Series B Preferred Stock to reduce the dividends in arrears. We may not be able to continue to pay dividends on the Preferred Stock if we fall out of compliance with our loan covenants and are prohibited by our bank lender from paying dividends or if we have insufficient cash to make dividend payments.
Our ability to pay cash dividends on the Preferred Stock requires us to have either net profits or positive net assets (total assets less total liabilities), and to be able to pay our debts as they become due in the usual course of business. We cannot predict with certainty whether we will remain in compliance with the covenants of our senior secured lender Provident, which include, among other things, a minimum trailing 12-month debt service coverage ratio and an EBITDA ratio requirement when we are utilizing our line of credit. If we fall out of compliance, our lender may exercise any of its rights and remedies under the loan agreement.
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Notwithstanding these factors, during December 2023, the Company suspended the dividends on the Preferred Stock. Although the Company resumed payment of the monthly dividends in February 2025, we may not maintain sufficient cash to continue to pay dividends on the Preferred Stock, including the double dividend on the Series B Preferred Stock, and we cannot assure you that our businesses will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make the Preferred Stock dividend payments that are currently due or in arrears and to fund our other liquidity needs. Our ability to pay dividends may again be impaired if any of the risks described in this document, including the documents incorporated by reference herein, were to occur. Also, payment of our dividends depends upon our financial condition, remaining in compliance with our affirmative and negative loan covenants with Provident, which we may be unable to do in the future, and other factors as our Board of Directors may deem relevant from time to time.
Our Series A and Series B Preferred Stock rank junior to all of our indebtedness and other liabilities.
Our Series A Preferred Stock ranks pari passu to our Series B Preferred Stock with respect to the distribution of assets upon our liquidation, dissolution or winding-up of our affairs. In the event of our bankruptcy, liquidation, dissolution or winding-up of our affairs, our assets will be available to pay obligations on the Preferred Stock only after all of our indebtedness and other liabilities have been paid. The rights of holders of the Preferred Stock to participate in the distribution of our assets will rank junior to the prior claims of our current and future creditors and any future series or class of preferred stock we may issue that ranks senior to the Preferred Stock. Also, the Preferred Stock effectively ranks junior to all existing and future indebtedness and to the indebtedness and other liabilities of our existing subsidiaries and any future subsidiaries. Our existing subsidiaries are, and future subsidiaries would be, separate legal entities and have no legal obligation to pay any amounts to us in respect of dividends due on the Preferred Stock. If we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets to pay amounts due on any or all of the Preferred Stock then outstanding. We may in the future incur debt and other obligations that will rank senior to the Preferred Stock. At December 31, 2025, our total liabilities excluding contingent consideration equaled approximately $27.0 million.
Certain of our existing or future debt instruments may restrict the authorization, payment or setting apart of dividends on the Preferred Stock. There can be no assurance that we will remain in compliance with the Provident credit agreement, and if we default, we may be contractually prohibited from paying dividends on the Preferred Stock. Also, future offerings of debt or senior equity securities may adversely affect the market price of the Preferred Stock. If we decide to issue debt or senior equity securities in the future, it is possible that these securities will be governed by an indenture or other instruments containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of the Preferred Stock and may result in dilution to owners of the Preferred Stock. We and, indirectly, our shareholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. The holders of the Preferred Stock will bear the risk of our future offerings, which may reduce the market price of the Preferred Stock and will dilute the value of their holdings.
We may issue additional shares of Series B Preferred Stock and additional series of preferred stock that rank on parity with the Preferred Stock as to dividend rights, rights upon liquidation or voting rights.
We are allowed to issue additional shares of Series B Preferred Stock and additional series of preferred stock that would rank equal to or below the Preferred Stock as to dividend payments and rights upon our liquidation, dissolution or winding up of our affairs pursuant to our amended and restated certificate of incorporation and the certificate of designations relating to the Preferred Stock without any vote of the holders of the Preferred Stock. Upon the affirmative vote of the holders of at least two-thirds of the outstanding shares of Preferred Stock (voting together as a class with all other series of parity preferred stock we may issue upon which like voting rights have been conferred and are exercisable), we are allowed to issue additional series of preferred stock that would rank above the Preferred Stock as to dividend payments and rights upon our liquidation, dissolution or the winding up of our affairs pursuant to our amended and restated certificate of incorporation and the certificate of designations relating to the Preferred Stock. The issuance of additional shares of Series B Preferred Stock and additional series of preferred stock could have the effect of reducing the amounts available to the Preferred Stock upon our liquidation or dissolution or the winding up of our affairs. It also may reduce dividend payments on the Preferred Stock if we do not have sufficient funds to pay dividends on all Preferred Stock outstanding and other classes or series of stock with equal priority with respect to dividends.
Also, although holders of Preferred Stock are entitled to limited voting rights with respect to the circumstances under which the holders of Preferred Stock are entitled to vote, the Preferred Stock votes separately as a class along with all other series of our preferred stock that we may issue upon which like voting rights have been conferred and are exercisable. As a result, the voting rights of holders of Preferred Stock may be significantly diluted, and the holders of such other series of preferred stock that we may issue may be able to control or significantly influence the outcome of any vote.
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Future issuances and sales of senior or pari passu preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for the Preferred Stock and our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us.
Market interest rates may materially and adversely affect the value of the Series B Preferred Stock.
One of the factors that influences the price of the Series B Preferred Stock is the dividend yield on the Series B Preferred Stock (as a percentage of the market price of the Series B Preferred Stock) relative to market interest rates. An increase in market interest rates may lead prospective purchasers of the Series B Preferred Stock to expect a higher dividend yield (and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for dividend payments). Thus, higher market interest rates could cause the market price of the Series B Preferred Stock to materially decrease.
Holders of the Series B Preferred Stock may be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to “qualified dividend income.”
Distributions paid to corporate U.S. holders of the Series B Preferred Stock may be eligible for the dividends-received deduction, and distributions paid to non-corporate U.S. holders of the Series B Preferred Stock may be subject to tax at the preferential tax rates applicable to “qualified dividend income,” if we have current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. We do not currently have such accumulated earnings and profits. Additionally, we may not have sufficient current earnings and profits during future fiscal years for the distributions on the Series B Preferred Stock to qualify as dividends for U.S. federal income tax purposes. If the distributions fail to qualify as dividends, U.S. holders would be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to “qualified dividend income.” If any distributions on the Series B Preferred Stock with respect to any fiscal year are not eligible for the dividends-received deduction or preferential tax rates applicable to “qualified dividend income” because of insufficient current or accumulated earnings and profits, it is possible that the market value of the Series B Preferred Stock might decline.
Our Series B Preferred Stock has not been rated.
We have not sought to obtain a rating for the Series B Preferred Stock. No assurance can be given, however, that one or more rating agencies might not independently determine to issue such a rating or that such a rating, if issued, would not adversely affect the market price of the Series B Preferred Stock. Also, we may elect in the future to obtain a rating for the Series B Preferred Stock, which could adversely affect its market price. Ratings only reflect the views of the rating agency or agencies issuing the ratings and such ratings could be revised downward, placed on a watch list or withdrawn entirely at the discretion of the issuing rating agency if in its judgment circumstances so warrant. Any such downward revision, placing it on a watch list or withdrawal of a rating could have an adverse effect on the market price of the Series B Preferred Stock.
The market price of our Series B Preferred Stock is variable and is substantially affected by various factors.
The market price of our Series B Preferred Stock is subject to wide fluctuations in response to numerous factors. These factors include, but are not limited to, the following:
| ● | suspension of the dividend payments in December 2023 which were not resumed until February 2025; |
| ● | prevailing interest rates, increases in which may have an adverse effect on the market price of the Series B Preferred Stock; |
| ● | trading prices of similar securities; |
| ● | the annual yield from dividends on the Series B Preferred Stock as compared to yields on other financial instruments; |
| ● | general economic and financial market conditions; |
| ● | government action or regulation; |
| ● | our financial condition, performance and prospects of our competitors; |
| ● | changes in financial estimates or recommendations by securities analysts with respect to us or our competitors in our industry; |
| ● | our issuance of additional preferred equity or debt securities; and |
| ● | actual or anticipated variations in quarterly operating results of us and our competitors. |
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A holder of Preferred Stock has extremely limited voting rights.
The voting rights for a holder of Preferred Stock are limited. Our shares of common stock are the only class of our securities that carry full voting rights, and Mahmud Haq, our Executive Chairman, beneficially owned approximately 12% of our outstanding shares of common stock as of December 31, 2025. Accordingly, Mr. Haq exercises a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation, and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of our Company or changes in management, and will make the approval of certain transactions difficult or impossible without his support, which in turn could reduce the price of our Series B Preferred Stock.
Voting rights for holders of the Preferred Stock exist primarily with respect to the ability to elect, voting together with the holders of any other series of our preferred stock having similar voting rights, two additional directors to our Board of Directors, subject to limitations, in the event that eighteen monthly dividends (whether or not consecutive) payable on the Preferred Stock are in arrears, and with respect to voting on amendments to our articles of incorporation or articles of amendment relating to the Preferred Stock that materially and adversely affect the rights of the holders of Preferred Stock or authorize, increase or create additional classes or series of our capital stock that are senior to the Preferred Stock. Other than the limited circumstances and except to the extent required by law, holders of Preferred Stock do not have any other voting rights.
The Series B Preferred Stock is not convertible and investors will not realize a corresponding upside if the price of the common stock increases.
The Series B Preferred Stock is not convertible into common stock and earns dividends at a fixed rate. Accordingly, an increase in the market price of our common stock will not necessarily result in an increase in the market price of our Series B Preferred Stock. The market value of the Series B Preferred Stock may depend more on dividend and interest rates for other preferred stock, commercial paper and other investment alternatives and our actual and perceived ability to pay dividends on, and in the event of dissolution satisfy the liquidation preference with respect to the Series B Preferred Stock.
Although payment of the suspended dividends resumed in February 2025 and continued throughout the year, there are still dividends in arrears and we may be unable to raise additional capital without incurring excessive dilution.
In December 2023, we suspended payment on the Preferred Stock dividends. The Company resumed monthly payment of the dividends in February 2025 by paying one month of arrears during the rest of the year. The dividend arrearage on the converted Series A Preferred Stock was satisfied through the Conversion. At December 31, 2025, there was approximately $6.8 million of dividends in arrears. In addition to incurring excessive dilution, investors may not have an interest in purchasing our securities since the dividend was previously suspended for 14 months.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include internal and external threats, data loss, phishing attacks, distributed denial of service attacks, third party risks, unpatched systems, weak authentications and zero-day vulnerabilities.
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We have implemented incident response and breach management processes which have four overarching and interconnected stages: 1) preparation for a cybersecurity incident, 2) detection and analysis of a security incident, 3) containment, eradication and recovery, and 4) post-incident analysis. Such incident responses are overseen by leaders from our Information Security, Compliance and Legal teams regarding matters of cybersecurity.
Security
events and data incidents are evaluated, ranked by severity and prioritized for response and remediation. Incidents are evaluated to
determine materiality as well as operational and business impact, and reviewed for privacy impact. As of the date of this Annual Report
on Form 10-K,
We also conduct exercises to simulate responses to cybersecurity incidents. Our team of cybersecurity professionals then collaborate with technical and business stakeholders across our business units to further analyze the risk to the Company, and form detection, mitigation and remediation strategies.
As
part of the above processes,
In the third quarter of 2025, we engaged an external vendor to conduct penetration testing and manage the security posture of our public-facing website and application. This added an extra layer of oversight to our external security environment, complementing the efforts of our internal data security team. It also supported our SOC 2 audit readiness and helped us maintain a strong overall security posture.
We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, under the heading “Disruptions in internet or telecommunication service or damage to our data centers could adversely affect our business by reducing our customers’ confidence in the reliability of our services and products” included as part of our risk factor disclosures in Item 1A of this Annual Report on Form 10-K.
Our Vice President of IT Infrastructure is responsible for overseeing the Company’s cybersecurity. He has a bachelor’s degree in computer science and has 18 years of extensive experience spanning diverse IT domains, with a specialized emphasis on Information Security across endpoints, servers, data centers, cloud infrastructure, and enterprise applications. He has been actively overseeing the strategic implementation of cybersecurity in accordance with information security management standards, HIPAA, and SOC 2 policies and procedures throughout the entire organization. This multifaceted responsibility involves managing and ensuring compliance with internationally recognized standards such as the ISO 27001 framework, healthcare regulatory guidelines under HIPAA and other recognized standards.
Cybersecurity
is an important part of our risk management processes and an area of focus for our Board of Directors and management.
Item 2. Properties
Our corporate headquarters are located at 7 Clyde Road, Somerset, New Jersey 08873 where we occupy approximately 2,400 square feet of space under a month-to-month lease. Additionally, at December 31, 2025 we lease approximately 34,000 square feet of office space in 11 locations throughout the U.S., with lease terms that are typically five years or less. We also lease approximately 40,000 square feet for five pediatric offices in the Midwest, with leases that will expire between February 2026 and April 2036.
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We lease approximately 14,000 square feet of land in Islamabad, Pakistan, where we constructed modular buildings used for office space and computer server facilities for two years expiring on September 30, 2026. The Company also leases a total of approximately 254,000 square feet of office space in Pakistan and in Sri Lanka. The lease in Sri Lanka expires in March 2026 and we intend to renew it for an additional year at expiration.
We believe our current facilities are adequate for our current needs and that suitable additional space will be available as and when needed.
Item 3. 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 such an 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 recorded in accrued expenses at December 31, 2023 in the consolidated balance sheet.
In March 2019, 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 2024.
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. A complaint was filed 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 consolidated balance sheet. A settlement agreement with mutual releases was signed by the parties in January 2025 and payment was made in February 2025.
A dispute occurred with a former customer regarding previous services rendered and they filed a complaint in New York Supreme Court, Onondaga County in January 2024. During settlement communications, Plaintiff’s initial settlement demand was over $2.5 million. During ongoing settlement communications, the Company made an offer of $29,000 in March 2025, which was accepted. A settlement agreement with mutual releases was signed by the parties in May 2025 and payment was made in June 2025.
In April 2025, a dispute arose with a current customer utilizing one of the Company’s systems and they filed a complaint in Connecticut Superior Court, Judicial District of Middlesex. The parties agreed to settle the claim for $24,000. This amount was accrued at December 31, 2025 and was paid during January 2026.
From time to time, we may become involved in other legal proceedings arising in the ordinary course of our business. Including the proceedings described above, 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.
Please see “Risk Factor - Acquisitions may subject us to liability with regard to the creditors, customers, and shareholders of the sellers.” in Part 1, Item 1A of this Annual Report on Form 10-K.
Item 4. Mine Safety Disclosures
None.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock has been listed since July 23, 2014 and is trading on the Nasdaq Global Market under the symbol “CCLD”.
Common Stockholders
As of February 19, 2026, there were approximately 10,400 holders of record of our common stock.
Dividends on Common Stock
We have not declared a cash dividend on our common stock since we became public on July 23, 2014, and currently we do not anticipate paying any cash dividends to holders of our common stock in the foreseeable future.
Sales of Unregistered Securities
There were no sales of unregistered equity securities during the year ended December 31, 2025.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
There was no share repurchase activity during the three months ended December 31, 2025.
Securities Authorized for Issuance under the Equity Compensation Plan
As of December 31, 2025, the following table shows the number of securities to be issued upon vesting under the equity compensation plan approved by the Company’s Board of Directors.
Equity Compensation Plan Information
| Plan Category | Number of securities to be issued upon vesting | Number of securities remaining available for future issuance under equity incentive plan (excluding securities to be issued upon vesting) | ||||||
| Equity compensation plan approved by security holders - common shares | 161,400 | 374,683 | ||||||
| Equity compensation plan approved by security holders - preferred shares | 19,199 | 16,000 | ||||||
| Total | 180,599 | 390,683 | ||||||
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of our consolidated financial condition and results of operations for the years ended December 31, 2025 and 2024 and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read together with our Consolidated Financial Statements and related notes beginning on page F-1 of this Annual Report on Form 10-K.
Some of the statements set forth in this section are forward-looking statements relating to our future results of operations. Our actual results may vary from the results anticipated by these statements. Please see “Forward-Looking Statements” on page 3 of this Annual Report on Form 10-K.
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Overview
The Company is a healthcare information technology company that provides technology-enabled business solutions and Software-as-a-Service offerings (“SaaS”), which are often bundled, but are occasionally provided individually, together with related business services to healthcare providers and hospitals throughout the United States. The SaaS component is not material to the overall contract compared to the stand-alone value of RCM. Our integrated SaaS platform includes technology-enabled revenue cycle management (“RCM”), practice management (“PM”), electronic health records (“EHR”), artificial intelligence (“AI”) tools, business intelligence, telehealth, patient experience management (“PXM”) solutions and complementary software tools and business services for high-performance medical groups and health systems.
At a high level, these solutions can be categorized as follows:
| ● | Technology-enabled business solutions, which are sometimes provided as individual offerings and often provided in combination with each other, including: |
| ○ | RCM services which include end-to-end medical billing, eligibility, analytics, and related services, all of which can be provided utilizing our technology platform or through a third-party system; | |
| ○ | AI tools designed to serve as a digital healthcare assistant, helping to enhance clinical decision-making, streamline workflows, reduce administrative burdens, optimize revenue management, and promote patient-centered care; | |
| ○ | EHRs, which are easy to use and sometimes integrated with our business services, and enable our healthcare provider clients to deliver better patient care, streamline their clinical workflows, decrease documentation errors and potentially qualify for government incentives for both inpatient and outpatient services; | |
| ○ | PM software and related capabilities, which support our clients’ day-to-day business operations within the enterprise-level facilities outpatient service areas and financial workflows, including automated insurance eligibility software, contains a robust billing and claims rules engine and other automated tools designed to maximize reimbursement; | |
| ○ | RCM Cloud, a highly configurable inpatient revenue cycle management software solution that focuses on up front financial accountability, real-time insurance eligibility checking, robust billing, integrated claims resolution, denial management, collection management, and dynamic work queues designed maximize timely reimbursements; | |
| ○ | HealthLine, which is a medical supply chain and inventory management system built for healthcare settings enables real-time tracking of supplies, equipment and consumables across multiple locations such as exam rooms, ambulances and storage closets; | |
| ○ | Marketware, which offers a comprehensive physician strategy suite designed to support healthcare organizations in optimizing physician relationship management, streamlining recruitment and onboarding processes, and leveraging performance analytics. The platform consolidates critical data to enhance referral volume, strengthen provider engagement and drive strategic organizational growth; | |
| ○ | Wellsoft, a solution for provider workflows in emergency departments and urgent care facilities has seamless integration into all major hospital IT systems and ancillary departments providing real-time patient tracking and instant lab orders, drug interaction checking and pharmacy review; | |
| ○ | CareVue, a cloud-based EHR software that enhances clinical workflows for small hospitals and inpatient behavioral health facilities, driving efficiencies across inpatient settings through speech-to-text charting, e-prescribing and medication management and secure clinical communications; | |
| ○ | PXM solutions designed to transform interactions between patients and their clinicians, including smartphone applications that assist patients and healthcare providers in the provision of healthcare services, including contactless digital check-in solutions, messaging and online appointment scheduling tools; | |
| ○ | CareCloud Wellness, a digital health solution which includes chronic care management interactions with certified care managers and remote patient monitoring which feeds patient data directly to the EHR (and highlights exceptions); and telehealth solutions which allowing healthcare providers to conduct remote patient visits; | |
| ○ | Business intelligence and healthcare analytics platforms that allow our clients to derive actionable insights from their vast amount of data; | |
| ○ | Healthcare claims clearinghouse which enables our clients to electronically scrub and submit claims and process payments from insurance companies; | |
| ○ | Interoperability and data transformation software to support the complex realities of data exchange with healthcare trading partners, including labs, insurance companies, and other healthcare IT vendors; | |
| ○ | Customized applications, interfaces and a variety of other technology solutions that support our healthcare clients; |
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| ○ | Professional services consisting of application and advisory services, revenue cycle services, data analytic services and educational training services; | |
| ○ | Workforce augmentation and on-demand staffing to support our clients as they expand their businesses, seek highly trained personnel, or struggle with staffing shortages; and | |
| ○ | Managed services which include inpatient and outpatient IT services, government consulting and product development services. |
| ● | MAP App is an industry-leading tool for benchmarking and measuring revenue cycle management performance, which was developed by the HFMA and is used by top hospitals and healthcare organizations nationwide. |
| ● | Medical practice management services are provided to medical practices. In this service model, we provide the medical practice with appropriate facilities, equipment, supplies, support services, nurses and administrative support staff. We also provide management, bill-paying and financial advisory services. We currently provide services to three pediatric practices which comprises the Medical Practice Management segment. |
Our offshore operations together accounted for approximately 17% and 15% of total expenses for the years ended December 31, 2025 and 2024, respectively. A significant portion of those expenses were personnel-related costs (approximately 76% and 75% of foreign costs for the years ended December 31, 2025 and 2024, respectively). Because personnel-related costs are significantly lower in Pakistan and Sri Lanka than in the U.S. and many other offshore locations, we believe our offshore operations give us a competitive advantage over many industry participants. All of the medical billing companies that we have acquired used domestic labor or subcontractors from higher cost locations to provide all or a substantial portion of their services. We are able to achieve significant cost reductions as we shift these labor costs to our offshore operations.
Key Performance Measures
We consider numerous factors in assessing our performance. Key performance measures used by management include adjusted EBITDA, adjusted operating income, adjusted operating margin, adjusted net income and adjusted net income per share. These key performance measures are non-GAAP financial measures, which we believe better enable management and investors to analyze and compare the underlying business results from period to period.
These non-GAAP financial measures should not be considered in isolation, or as a substitute for or superior to, financial measures calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of our business as determined in accordance with GAAP. We compensate for these limitations by analyzing current and future results on a GAAP basis, as well as a non-GAAP basis, and we provide reconciliations from the most directly comparable GAAP financial measures to the non-GAAP financial measures. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.
Adjusted EBITDA, adjusted operating income, adjusted operating margin, adjusted net income and adjusted net income per share provide an alternative view of performance used by management and we believe that an investor’s understanding of our performance is enhanced by disclosing these adjusted performance measures.
Adjusted EBITDA excludes the following amounts which are included in GAAP net income:
| ● | Income tax provision or the cash requirements to pay our taxes; | |
| ● | Net interest expense or the cash requirements necessary to service interest on principal payments on our debt; | |
| ● | Foreign currency losses and other non-operating expenses; | |
| ● | Stock-based compensation expense, which includes cash-settled awards and the related taxes, based on changes in the stock price; | |
| ● | Depreciation and amortization charges; | |
| ● | Integration costs, such as severance amounts paid to employees from acquired businesses and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; and | |
| ● | Lease termination and restructuring costs. |
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Set forth below is a presentation of our adjusted EBITDA for the years ended December 31, 2025 and 2024:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Net revenue | $ | 120,499 | $ | 110,837 | ||||
| GAAP net income | 10,798 | 7,851 | ||||||
| Provision for income taxes | 199 | 160 | ||||||
| Net interest expense | 81 | 812 | ||||||
| Foreign exchange loss / other expense | 284 | 335 | ||||||
| Stock-based compensation expense | 454 | 115 | ||||||
| Depreciation and amortization | 14,960 | 14,142 | ||||||
| Transaction and integration costs | 619 | 46 | ||||||
| Lease termination and restructuring costs | 154 | 596 | ||||||
| Adjusted EBITDA | $ | 27,549 | $ | 24,057 | ||||
Adjusted operating income and adjusted operating margin exclude the following amounts which are included in GAAP operating income:
| ● | Stock-based compensation expense, which includes cash-settled awards and the related taxes, based on changes in the stock price; | |
| ● | Amortization of purchased intangible assets; | |
| ● | Integration costs, such as severance amounts paid to employees from acquired businesses and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; and | |
| ● | Lease termination and restructuring costs. |
Set forth below is a presentation of our adjusted operating income and adjusted operating margin, which represents adjusted operating income as a percentage of net revenue, for the years ended December 31, 2025 and 2024:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Net revenue | $ | 120,499 | $ | 110,837 | ||||
| GAAP net income | 10,798 | 7,851 | ||||||
| Provision for income taxes | 199 | 160 | ||||||
| Net interest expense | 81 | 812 | ||||||
| Other expense - net | 265 | 298 | ||||||
| GAAP operating income | 11,343 | 9,121 | ||||||
| GAAP operating margin | 9.4 | % | 8.2 | % | ||||
| Stock-based compensation expense | 454 | 115 | ||||||
| Amortization of purchased intangible assets | 2,129 | 1,577 | ||||||
| Transaction and integration costs | 619 | 46 | ||||||
| Lease termination and restructuring costs | 154 | 596 | ||||||
| Non-GAAP adjusted operating income | $ | 14,699 | $ | 11,455 | ||||
| Non-GAAP adjusted operating margin | 12.2 | % | 10.3 | % | ||||
Adjusted net income and adjusted net income per share exclude the following amounts which are included in GAAP net income:
| ● | Foreign currency losses and other non-operating expenses; | |
| ● | Stock-based compensation expense, which includes cash-settled awards and the related taxes, based on changes in the stock price; | |
| ● | Amortization of purchased intangible assets; | |
| ● | Integration costs, such as severance amounts paid to employees from acquired businesses and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; and | |
| ● | Lease termination and restructuring costs. |
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No tax effect has been provided in computing non-GAAP adjusted net income and non-GAAP adjusted net income per share as the Company has sufficient carry forward net operating losses to offset the applicable income taxes. The following table shows our reconciliation of GAAP net income to non-GAAP adjusted net income for the years ended December 31, 2025 and 2024:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| GAAP net income | $ | 10,798 | $ | 7,851 | ||||
| Foreign exchange loss / other expense | 284 | 335 | ||||||
| Stock-based compensation expense | 454 | 115 | ||||||
| Amortization of purchased intangible assets | 2,129 | 1,577 | ||||||
| Transaction and integration costs | 619 | 46 | ||||||
| Lease termination and restructuring costs | 154 | 596 | ||||||
| Non-GAAP adjusted net income | $ | 14,438 | $ | 10,520 | ||||
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| GAAP net income (loss) attributable to common shareholders, per share | $ | 0.10 | $ | (0.28 | ) | |||
| Impact of preferred stock dividend | 0.16 | 0.76 | ||||||
| Net income per end-of-period share | 0.26 | 0.48 | ||||||
| Foreign exchange loss / other expense | 0.01 | 0.02 | ||||||
| Stock-based compensation expense | 0.01 | 0.01 | ||||||
| Amortization of purchased intangible assets | 0.05 | 0.10 | ||||||
| Transaction and integration costs | 0.01 | 0.00 | ||||||
| Lease termination and restructuring costs | 0.00 | 0.04 | ||||||
| Non-GAAP adjusted earnings per share | $ | 0.34 | $ | 0.65 | ||||
| End-of-period common shares | 42,437,949 | 16,256,236 | ||||||
For purposes of determining non-GAAP adjusted earnings per share, the Company used the number of common shares outstanding at the end of December 31, 2025 and 2024. Non-GAAP adjusted earnings per share does not take into account dividends on the Preferred Stock. No tax effect has been provided in computing non-GAAP adjusted earnings per share as the Company has sufficient carry forward net operating losses to offset the applicable income taxes.
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Consolidated Statements of Operations Data
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | ||||||||||||||||
| ($ in thousands, except per share data) | ||||||||||||||||||||
| Net revenue | $ | 120,499 | $ | 110,837 | $ | 117,059 | $ | 138,826 | $ | 139,599 | ||||||||||
| Operating expenses: | ||||||||||||||||||||
| Direct operating costs | 64,456 | 60,842 | 70,817 | 84,434 | 86,918 | |||||||||||||||
| Selling and marketing | 4,818 | 6,232 | 9,650 | 9,788 | 8,786 | |||||||||||||||
| General and administrative | 18,386 | 16,123 | 21,464 | 23,820 | 24,273 | |||||||||||||||
| Research and development | 6,382 | 3,781 | 4,736 | 4,401 | 4,408 | |||||||||||||||
| Change in contingent consideration | - | - | - | (3,090 | ) | (2,515 | ) | |||||||||||||
| Depreciation and amortization | 14,960 | 14,142 | 14,402 | 11,725 | 12,195 | |||||||||||||||
| Goodwill impairment charges | - | - | 42,000 | - | - | |||||||||||||||
| Lease terminations, unoccupied lease charges and restructuring costs | 154 | 596 | 1,105 | 1,138 | 2,005 | |||||||||||||||
| Total operating expenses | 109,156 | 101,716 | 164,174 | 132,216 | 136,070 | |||||||||||||||
| Operating income (loss) | 11,343 | 9,121 | (47,115 | ) | 6,610 | 3,529 | ||||||||||||||
| Net interest expense | (81 | ) | (812 | ) | (1,040 | ) | (364 | ) | (440 | ) | ||||||||||
| Other expense - net | (265 | ) | (298 | ) | (883 | ) | (637 | ) | (96 | ) | ||||||||||
| Income (loss) before provision (benefit) for income taxes | 10,997 | 8,011 | (49,038 | ) | 5,609 | 2,993 | ||||||||||||||
| Income tax provision (benefit) | 199 | 160 | (364 | ) | 177 | 157 | ||||||||||||||
| Net income (loss) | $ | 10,798 | $ | 7,851 | $ | (48,674 | ) | $ | 5,432 | $ | 2,836 | |||||||||
| Preferred stock dividend | 6,906 | 12,310 | 15,674 | 15,517 | 14,052 | |||||||||||||||
| Net income (loss) attributable to common shareholders | $ | 3,892 | $ | (4,459 | ) | $ | (64,348 | ) | $ | (10,085 | ) | $ | (11,216 | ) | ||||||
| Weighted average common shares outstanding: basic | 37,792,428 | 16,146,975 | 15,669,472 | 15,109,587 | 14,541,061 | |||||||||||||||
| Net income (loss) per common share: basic | $ | 0.10 | $ | (0.28 | ) | $ | (4.11 | ) | $ | (0.67 | ) | $ | (0.77 | ) | ||||||
Consolidated Balance Sheet Data
| As of December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Cash and restricted cash | $ | 3,617 | $ | 5,145 | $ | 3,331 | $ | 12,299 | $ | 10,340 | ||||||||||
| Working capital - net (1) | 1,315 | 5,220 | (57 | ) | 12,255 | 5,997 | ||||||||||||||
| Total assets | 87,598 | 71,614 | 77,826 | 136,174 | 140,848 | |||||||||||||||
| Total liabilities | 28,092 | 21,840 | 36,109 | 34,485 | 42,917 | |||||||||||||||
| Shareholders’ equity | 59,506 | 49,774 | 41,717 | 101,689 | 97,931 | |||||||||||||||
| (1) | Working capital-net is defined as current assets less current liabilities. |
Other Financial Data
To provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making, we supplement our consolidated financial statements presented on a basis consistent with U.S. generally accepted accounting principles, or GAAP, with adjusted EBITDA, (previously defined), a non-GAAP financial measure of earnings.
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Adjusted EBITDA | $ | 27,549 | $ | 24,057 | $ | 15,429 | $ | 22,248 | $ | 22,119 | ||||||||||
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Quarterly Results of Operations
| December 31, | September 30, | June 30, | March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||||||||||
| 2025 | 2025 | 2025 | 2025 | 2024 | 2024 | 2024 | 2024 | |||||||||||||||||||||||||
| ($ in thousands, except per share data) | ||||||||||||||||||||||||||||||||
| Net revenue | $ | 34,423 | $ | 31,067 | $ | 27,377 | $ | 27,632 | $ | 28,239 | $ | 28,546 | $ | 28,090 | $ | 25,962 | ||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||
| Direct operating costs | 18,288 | 16,224 | 14,480 | 15,464 | 15,003 | 15,420 | 15,242 | 15,177 | ||||||||||||||||||||||||
| Selling and marketing | 1,446 | 1,123 | 1,118 | 1,131 | 1,423 | 1,375 | 1,664 | 1,770 | ||||||||||||||||||||||||
| General and administrative | 4,809 | 4,887 | 4,358 | 4,332 | 3,996 | 4,378 | 4,028 | 3,721 | ||||||||||||||||||||||||
| Research and development | 2,543 | 1,584 | 1,020 | 1,235 | 1,013 | 800 | 1,055 | 913 | ||||||||||||||||||||||||
| Depreciation and amortization | 4,219 | 4,022 | 3,382 | 3,337 | 3,257 | 3,241 | 3,714 | 3,930 | ||||||||||||||||||||||||
| Lease termination and restructuring costs | - | 17 | 23 | 114 | 91 | 67 | 116 | 322 | ||||||||||||||||||||||||
| Total operating expenses | 31,305 | 27,857 | 24,381 | 25,613 | 24,783 | 25,281 | 25,819 | 25,833 | ||||||||||||||||||||||||
| Operating income | 3,118 | 3,210 | 2,996 | 2,019 | 3,456 | 3,265 | 2,271 | 129 | ||||||||||||||||||||||||
| Net interest income (expense) | 4 | (52 | ) | (17 | ) | (16 | ) | (48 | ) | (162 | ) | (264 | ) | (338 | ) | |||||||||||||||||
| Other (expense) income - net | (161 | ) | (55 | ) | (35 | ) | (14 | ) | (71 | ) | 60 | (294 | ) | 7 | ||||||||||||||||||
| Income (loss) before provision for income taxes | 2,961 | 3,103 | 2,944 | 1,989 | 3,337 | 3,163 | 1,713 | (202 | ) | |||||||||||||||||||||||
| Income tax provision | 73 | 43 | 42 | 41 | 41 | 41 | 39 | 39 | ||||||||||||||||||||||||
| Net income (loss) | $ | 2,888 | $ | 3,060 | $ | 2,902 | $ | 1,948 | $ | 3,296 | $ | 3,122 | $ | 1,674 | $ | (241 | ) | |||||||||||||||
| Preferred stock dividend | 1,365 | 1,365 | 1,365 | 2,811 | 3,286 | 3,789 | 3,923 | 1,312 | ||||||||||||||||||||||||
| Net income (loss) attributable to common shareholders | $ | 1,523 | $ | 1,695 | $ | 1,537 | $ | (863 | ) | $ | 10 | $ | (667 | ) | $ | (2,249 | ) | $ | (1,553 | ) | ||||||||||||
| Net income (loss) per common share: | ||||||||||||||||||||||||||||||||
| Basic and diluted | $ | 0.04 | $ | 0.04 | $ | 0.04 | $ | (0.04 | ) | $ | 0.00 | $ | (0.04 | ) | $ | (0.14 | ) | $ | (0.10 | ) | ||||||||||||
| Adjusted EBITDA | $ | 7,692 | $ | 7,733 | $ | 6,529 | $ | 5,595 | $ | 7,141 | $ | 6,840 | $ | 6,389 | $ | 3,687 | ||||||||||||||||
Reconciliation of net income (loss) to adjusted EBITDA
The following table contains a reconciliation of net income (loss) to adjusted EBITDA by year:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | 2022 | 2021 | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Net income (loss) | $ | 10,798 | $ | 7,851 | $ | (48,674 | ) | $ | 5,432 | $ | 2,836 | |||||||||
| Depreciation | 2,511 | 2,043 | 2,001 | 1,952 | 1,927 | |||||||||||||||
| Amortization | 12,449 | 12,099 | 12,401 | 9,773 | 10,268 | |||||||||||||||
| Foreign exchange loss / other expense | 284 | 335 | 918 | 712 | 241 | |||||||||||||||
| Net interest expense | 81 | 812 | 1,040 | 364 | 440 | |||||||||||||||
| Income tax provision (benefit) | 199 | 160 | (364 | ) | 177 | 157 | ||||||||||||||
| Stock-based compensation expense, net of restructuring costs | 454 | 115 | 4,716 | 4,914 | 5,396 | |||||||||||||||
| Transaction and integration costs | 619 | 46 | 286 | 876 | 1,364 | |||||||||||||||
| Goodwill impairment charges | - | - | 42,000 | - | - | |||||||||||||||
| Lease terminations, unoccupied lease charges and restructuring costs | 154 | 596 | 1,105 | 1,138 | 2,005 | |||||||||||||||
| Change in contingent consideration | - | - | - | (3,090 | ) | (2,515 | ) | |||||||||||||
| Adjusted EBITDA | $ | 27,549 | $ | 24,057 | $ | 15,429 | $ | 22,248 | $ | 22,119 | ||||||||||
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The following table contains a reconciliation of net income (loss) to adjusted EBITDA by quarter:
| December 31, | September 30, | June 30, | March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||||||||||||
| 2025 | 2025 | 2025 | 2025 | 2024 | 2024 | 2024 | 2024 | |||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 2,888 | $ | 3,060 | $ | 2,902 | $ | 1,948 | $ | 3,296 | $ | 3,122 | $ | 1,674 | $ | (241 | ) | |||||||||||||||
| Depreciation | 704 | 652 | 594 | 561 | 533 | 504 | 503 | 503 | ||||||||||||||||||||||||
| Amortization | 3,515 | 3,370 | 2,788 | 2,776 | 2,724 | 2,737 | 3,211 | 3,427 | ||||||||||||||||||||||||
| Foreign exchange loss (gain) / other expense | 164 | 60 | 41 | 19 | 91 | (57 | ) | 306 | (5 | ) | ||||||||||||||||||||||
| Net interest (income) expense | (4 | ) | 52 | 17 | 16 | 48 | 162 | 264 | 338 | |||||||||||||||||||||||
| Income tax provision | 73 | 43 | 42 | 41 | 41 | 41 | 39 | 39 | ||||||||||||||||||||||||
| Stock-based compensation expense (benefit), net of restructuring costs | 147 | 88 | 111 | 108 | 306 | 252 | 265 | (708 | ) | |||||||||||||||||||||||
| Transaction and integration costs | 205 | 391 | 11 | 12 | 11 | 12 | 11 | 12 | ||||||||||||||||||||||||
| Lease termination and restructuring costs | - | 17 | 23 | 114 | 91 | 67 | 116 | 322 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 7,692 | $ | 7,733 | $ | 6,529 | $ | 5,595 | $ | 7,141 | $ | 6,840 | $ | 6,389 | $ | 3,687 | ||||||||||||||||
Key Metrics
In addition to the line items in our consolidated financial statements, we regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, make strategic business decisions, and assess market share trends and working capital needs. We believe information on these metrics is useful for investors to understand the underlying trends in our business.
Providers and Practices Served: As of December 31, 2025 and 2024, we provided services to approximately 45,000 and 40,000 providers, respectively, (which we define as physicians, nurses, nurse practitioners, physician assistants and other clinical staff that render bills for their services), representing approximately 2,900 and 2,600 practices, respectively. In addition, we served approximately 80 clients who were not medical practices, but are service organizations who serve the healthcare community. The foregoing numbers include clients leveraging any of our products or services and are based in part upon estimates in cases where the precise number of practices or providers is unknown.
Customer Renewal Rate: Our customer renewal rate measures the percentage of our RCM clients who utilize our technology platform who were a party to a services agreement with us on January 1 of a particular year and continued to operate and be a client on December 31 of the same year. It also includes acquired accounts, if they are a party to a services agreement with the company we acquired and are generating revenue for us, so long as the risk of client loss under the respective purchase agreement has fully shifted to us by January 1 of the particular year. Our renewal rates for 2025 and 2024 were 91% and 95% of the number of practices that renewed, respectively. These renewal percentages are not indicative of the loss of revenue due to non-renewal.
Sources of Revenue
Revenue: We primarily derive our on-going revenues from technology-enabled business solutions, reported in our Healthcare IT segment, which typically includes revenue cycle management and is billed as a percentage of payments collected by our customers. This fee includes the ability to use our EHR, practice management systems and other software as part of the bundled fee. These solutions accounted for approximately 63% and 67% of our revenues during the years ended December 31, 2025 and 2024, respectively. This includes customers utilizing our proprietary product suites, as well as customers from acquisitions of RCM companies which we are servicing utilizing third-party software. Key drivers of our revenue include growth in the number of providers we are servicing, the number of patients served by those providers, and collections by those providers. It also includes SaaS fees, for clients not utilizing revenue cycle management services. When clients utilize our revenue cycle management services, basic SaaS services are included at no additional charge. Revenue is also generated from coding, credentialing, indexing, transcription and other ancillary services.
Our professional services include an extensive set of services including EHR vendor-agnostic optimization and activation, project management, IT transformation, consulting, process improvement, training, education and staffing for large healthcare organizations including health systems and hospitals. Revenue is recorded monthly on either a time and materials or a fixed rate basis for each contract.
We also generate revenue from our printing and mailing, group purchasing services and medical practice management services.
We earned approximately 1% of our revenue from group purchasing services during the years ended December 31, 2025 and 2024. We earned approximately 12% and 13% of our revenue from medical practice management services during the years ended December 31, 2025 and 2024, respectively. This revenue represents fees based on our actual costs plus a percentage of the operating profit and is reported in our Medical Practice Management segment.
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Operating Expenses
Direct Operating Costs. Direct operating costs consist primarily of salaries and benefits related to personnel who provide services to our customers, claims processing costs, costs to operate the three managed practices, including facility lease costs, supplies, insurance and other direct costs related to our services. Costs associated with the implementation of new customers are expensed as incurred. The reported amounts of direct operating costs do not include depreciation and amortization, which are broken out separately in the consolidated statements of operations. Operations in our Offshore Offices together accounted for approximately 14% and 13% of direct operating costs for the years ended December 31, 2025 and 2024, respectively. As we grow, we expect to achieve further economies of scale and to see our direct operating costs decrease as a percentage of revenue.
Selling and Marketing Expense. Selling and marketing expense consists primarily of compensation and benefits, commissions, travel and advertising expenses, which includes onshore and offshore personnel.
General and Administrative Expense. General and administrative expense consists primarily of personnel-related expense for administrative employees, including compensation, benefits, travel, facility lease costs and insurance, software license fees and outside professional fees. Our Offshore Offices accounted for approximately 21% and 22% of general and administrative expenses for the years ended December 31, 2025 and 2024, respectively.
Research and Development Expense. Research and development expense consists primarily of personnel-related costs, software expense and third-party contractor costs.
Depreciation and Amortization Expense. Depreciation expense is charged using the straight-line method over the estimated lives of the assets ranging from three to five years. Amortization expense is charged on either an accelerated or on a straight-line basis over a period of three or four years for most intangible assets acquired in connection with acquisitions including those intangibles related to the group purchasing services. Amortization expense related to the value of our medical practice management clients is amortized on a straight-line basis over a period of twelve years.
Restructuring Costs. Restructuring costs, primarily consist of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements.
Interest and Other Income (Expense). Interest income represents interest earned on temporary cash investments and late fees from customers. Interest expense consists primarily of interest costs related to our line of credit, motor vehicle loans and amortization of deferred financing costs. Other income (expense) results primarily from foreign currency transaction gains (losses).
Income Taxes. In preparing our consolidated financial statements, we estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred income tax assets and liabilities. Although the Company reported GAAP earnings in 2025 and 2024, it has incurred tax losses historically and there is uncertainty regarding future U.S. taxable income, which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against all deferred tax assets as of December 31, 2025 and December 31, 2024. For the global intangible low-taxed income (“GILTI”) tax, companies can either account for the GILTI inclusion in the period in which they are incurred or establish deferred tax liabilities for the expected future taxes associated with GILTI. The Company records the GILTI provisions as they are incurred each period.
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Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expense and related disclosures. We base our estimates, assumptions and judgments on historical experience, current trends and various other factors that we believe to be reasonable under the circumstances. The accounting estimates used in the preparation of our consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. On a regular basis, we review our accounting policies, estimates, assumptions and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results of operations.
Critical accounting policies are those policies used in the preparation of our consolidated financial statements that require management to make difficult, subjective, or complex adjustments, and to make estimates about the effect of matters that are inherently uncertain.
Revenue from Contracts with Customers:
We account for revenue in accordance with ASC 606, Revenue from Contracts with Customers. Our revenue recognition policies require us to make significant judgments and estimates, particularly as it relates to revenue cycle management. Under ASC 606, certain significant accounting estimates, such as payment-to-charge ratios, effective billing rates and the estimated contractual payment periods are required to measure the revenue cycle management revenue. We analyze various factors including, but not limited to, contractual terms and conditions, the credit-worthiness of our customers and our pricing policies. Changes in judgment on any of the above factors could materially impact the timing and amount of revenue recognized in a given period.
Revenue is recognized as the performance obligations are satisfied. We derive revenue from five primary sources: technology-enabled business solutions, professional services, printing and mailing services, group purchasing services and medical practice management services. All of our revenue arrangements are based on contracts with customers. Most of our contracts with customers contain a single performance obligation. For contracts where we provide multiple services such as where we perform multiple ancillary services, each service represents its own performance obligation. Selling or transaction prices are based on the contractual price for the service, which is consistent with the stand-alone selling price.
Technology-enabled business solutions:
Our technology-enabled business solutions include our revenue cycle management and SaaS services. Revenue cycle management services are the recurring process of submitting and following up on claims with health insurance companies in order for the healthcare providers to receive payment for the services they rendered, assisted by our proprietary technology. CareCloud typically invoices customers on a monthly basis based on the actual collections received by its customers and the agreed-upon rate in the sales contract. The services include use of practice management software and related tools (on a SaaS basis), electronic health records (on a SaaS basis), medical billing services and use of mobile health solutions. We consider the services to be one performance obligation since the promises are not distinct in the context of the contract. The performance obligation consists of a series of distinct services that are substantially the same and have the same periodic pattern of transfer to our customers.
In many cases, our clients may terminate their agreements with 90 days’ notice without cause, thereby limiting the term in which we have enforceable rights and obligations, although this time period can vary between clients. Our payment terms are normally net 30 days. Although our contracts typically have stated terms of one or more years, under ASC 606 our contracts are considered month-to-month and accordingly, there is no financing component.
For the majority of our contracts which include revenue cycle management services, the total transaction price is variable because our obligation is to process an unknown quantity of claims, as and when requested by our customers over the contract period. When a contract includes variable consideration, we evaluate the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, we include variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with variable consideration is subsequently resolved. Estimates to determine variable consideration such as payment to charge ratios, effective billing rates, and the estimated contractual payment periods are updated at each reporting date. Revenue is recognized over the performance period using the input method.
Professional services:
Revenues from professional services are recorded as the services are provided as the performance obligations are satisfied over time. Revenue is recorded based on the number of hours incurred and the agreed-upon hourly rate. Invoicing is primarily performed as of the end of each month.
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Printing and mailing services:
The Company provides printing and mailing services for both revenue cycle management customers and a non- revenue cycle management customer, and invoices on a monthly basis based on the number of prints, the agreed-upon rate per print and the postage incurred. The performance obligation is satisfied once the printing and mailing is completed.
Group purchasing services:
The Company provides group purchasing services which enable medical providers to purchase various vaccines directly from selected pharmaceutical companies at a discounted price. Currently, there are approximately 4,000 medical providers who are members of the program. Revenue is recognized as the vaccine shipments are made to the medical providers. Fees from the pharmaceutical companies are paid either quarterly or annually and the Company adjusts its revenue accrual at the time of payment. The Company makes significant judgments regarding the variable consideration which we expect to be entitled to for the group purchasing services which includes the anticipated shipments to the members enrolled in the program, anticipated volumes of purchases made by the members, and the changes in the number of members. The amounts recorded are constrained by estimates of decreases in shipments and loss of members to avoid a significant revenue reversal in the subsequent period. The only performance obligation is to provide the pharmaceutical companies with the medical providers who want to become members in order to purchase vaccines. The performance obligation is satisfied once the medical provider agrees to purchase a specific quantity of vaccines and the medical provider’s information is forwarded to the vaccine suppliers. The Company records a contract asset for revenue earned and not paid as the ultimate payment is conditioned on achieving certain volume thresholds.
Practice management services:
We estimate the amount that will be collected on claims submitted to insurance carriers which is used to determine the compensation to be paid to the owners of the managed practices. These compensation amounts reduce the revenue that the Company recognizes since they are deducted from gross billings. The estimate of the amounts to be received from the insurance claims are updated at each reporting period.
Although we believe that our approach to estimates and judgments is reasonable, actual results could differ, and we may be exposed to increases or decreases in revenue that could be material. Our estimates of variable consideration may prove to be inaccurate, in which case we may have understated or overstated the revenue recognized in an accounting period. The amount of variable consideration recognized to date that remains subject to estimation is included within the contract asset in the consolidated balance sheets.
Goodwill Impairment:
Goodwill is evaluated for impairment annually as of October 31st, referred to as the annual test date. The Company also tests for impairment between annual test dates if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is performed at the reporting-unit level. The Company has determined that its business consists of two operating segments and two reporting units (Healthcare IT and Medical Practice Management). Application of the goodwill impairment test requires judgment including the use of a discounted cash flow approach, the trading price of publicly traded stock and the guideline public company method. These analyses require significant assumptions and judgments. These assumptions and judgments include estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, determination of our weighted average cost of capital and the selection of comparable companies and the interpretation of their data. Future business and economic conditions, as well as differences in actual financial results related to any of the assumptions, could materially impact the consolidated financial statements through impairment of goodwill or intangible assets and acceleration of the amortization period of the purchased intangible assets which are finite-lived assets. No impairment charges were recorded during the years ended December 31, 2025 or 2024.
Business Combinations:
The Company accounts for business combinations under the provisions of ASC 805, Business Combinations, which requires that the acquisition method of accounting be used for all business combinations. Assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values. The fair value amount assigned to intangible assets is based on an exit price from a market participant’s viewpoint, and utilizes data such as discounted cash flow analysis and replacement cost models. Critical estimates in valuing certain intangible assets include, but are not limited to, historical and projected client retention rates, expected future cash inflows and outflows, discount rates, and estimated useful lives of those intangible assets. ASC 805 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred.
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Results of Operations
The following table sets forth our consolidated results of operations as a percentage of total revenue for the years shown.
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Net revenue | 100.0 | % | 100.0 | % | ||||
| Operating expenses: | ||||||||
| Direct operating costs | 53.5 | % | 54.9 | % | ||||
| Selling and marketing | 4.0 | % | 5.6 | % | ||||
| General and administrative | 15.3 | % | 14.5 | % | ||||
| Research and development | 5.3 | % | 3.4 | % | ||||
| Depreciation and amortization | 12.4 | % | 12.8 | % | ||||
| Lease termination and restructuring costs | 0.1 | % | 0.6 | % | ||||
| Total operating expenses | 90.6 | % | 91.8 | % | ||||
| Operating income | 9.4 | % | 8.2 | % | ||||
| Net interest expense | (0.1 | %) | (0.7 | %) | ||||
| Other expense - net | (0.2 | %) | (0.3 | %) | ||||
| Income before provision for income taxes | 9.1 | % | 7.2 | % | ||||
| Income tax provision | 0.2 | % | 0.1 | % | ||||
| Net income | 8.9 | % | 7.1 | % | ||||
Comparison of 2025 and 2024
| Year Ended December 31, | Change | |||||||||||||||
| 2025 | 2024 | Amount | Percent | |||||||||||||
| ($ in thousands) | ||||||||||||||||
| Net revenue | $ | 120,499 | $ | 110,837 | $ | 9,662 | 9 | % | ||||||||
Net revenue. Net revenue of $120.5 million for the year ended December 31, 2025 increased by $9.7 million or 9% from revenue of $110.8 million for the year ended December 31, 2024. Revenue for the years ended December 31, 2025 and 2024 includes $76.9 million and $73.7 million relating to technology-enabled business solutions, $25.4 million and $18.2 million related to professional services and $13.9 million and $14.4 million for medical practice management services, respectively. Our printing and mailing and group purchasing services aggregated $4.3 million and $4.5 million for the year ended December 31, 2025 and 2024, respectively.
During the year ended December 31, 2025 there was approximately $10.5 million of revenue related to the Medsphere acquisition. (Refer to Forward-Looking Statements disclosure on page 3 of this Annual Report on Form 10-K.)
| Year Ended December 31, | Change | |||||||||||||||
| 2025 | 2024 | Amount | Percent | |||||||||||||
| ($ in thousands) | ||||||||||||||||
| Direct operating costs | $ | 64,456 | $ | 60,842 | $ | 3,614 | 6 | % | ||||||||
| Selling and marketing | 4,818 | 6,232 | (1,414 | ) | (23 | %) | ||||||||||
| General and administrative | 18,386 | 16,123 | 2,263 | 14 | % | |||||||||||
| Research and development | 6,382 | 3,781 | 2,601 | 69 | % | |||||||||||
| Depreciation | 2,511 | 2,043 | 468 | 23 | % | |||||||||||
| Amortization | 12,449 | 12,099 | 350 | 3 | % | |||||||||||
| Lease termination and restructuring costs | 154 | 596 | (442 | ) | (74 | %) | ||||||||||
| Total operating expenses | $ | 109,156 | $ | 101,716 | $ | 7,440 | 7 | % | ||||||||
| 53 |
Direct Operating Costs. Direct operating costs of $64.5 million for the year ended December 31, 2025 increased by $3.6 million or 6% from direct operating costs of $60.8 million for the year ended December 31, 2024. Salary costs increased by $1.0 million primarily due to the Medsphere acquisition. Outsourcing and other customer processing costs increased by $2.4 million and consultancy expenses increased by $270,000.
Selling and Marketing Expense. Selling and marketing expense of $4.8 million for the year ended December 31, 2025 decreased by $1.4 million or 23% from selling and marketing expense of $6.2 million for the year ended December 31, 2024. The decrease for the year ended December 31, 2025 was due to lower spending on selling and marketing activities and a reduction in headcount.
General and Administrative Expense. General and administrative expense of $18.4 million for the year ended December 31, 2025 increased by $2.3 million or 14% from general and administrative expense of $16.1 million for the year ended December 31, 2024. Salary costs increased by $2.5 million due to the increase in headcount. Legal and professional fees decreased by $794,000.
Research and Development Expense. Research and development expense of $6.4 million for the year ended December 31, 2025 increased by $2.6 million or 69% from research and development expense of $3.8 million for the year ended December 31, 2024. The increase was due to an increase in the offshore headcount. During the years ended December 31, 2025 and 2024, the Company capitalized approximately $3.2 million and $5.7 million of development costs, respectively, in connection with its internal-use software.
Depreciation Expense. Depreciation expense was $2.5 million for the year ended December 31, 2025 and increased by $468,000 or 23% from depreciation expense of $2.0 million for the year ended December 31, 2024. The increase primarily relates to certain leasehold improvements being capitalized.
Amortization Expense. Amortization expense of $12.4 million for the year ended December 31, 2025 increased by $350,000 or 3% from amortization expense of $12.1 million for the year ended December 31, 2024. The increase in amortization expense was due to the amortization of the intangible assets related to the current years’ acquisitions.
Lease Termination and Restructuring Costs. During the years ended December 31, 2025 and 2024, the Company recorded approximately $154,000 and $606,000 of restructuring costs, respectively. Restructuring costs consists of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements. During the year ended December 31, 2024, there was a gain on a lease termination of approximately $10,000.
| Year Ended December 31, | Change | |||||||||||||||
| 2025 | 2024 | Amount | Percent | |||||||||||||
| ($ in thousands) | ||||||||||||||||
| Interest income | $ | 206 | $ | 88 | $ | 118 | 134 | % | ||||||||
| Interest expense | (287 | ) | (900 | ) | 613 | 68 | % | |||||||||
| Other expense - net | (265 | ) | (298 | ) | 33 | 11 | % | |||||||||
| Income tax provision | 199 | 160 | 39 | 24 | % | |||||||||||
| 54 |
Interest Income. Interest income of $206,000 for the year ended December 31, 2025 increased by $118,000 or 134% from interest income of $88,000 for the year ended December 31, 2024. The interest income represents late fees from customers and interest earned on temporary cash investments, which increased due to higher cash balances being invested.
Interest Expense. Interest expense of $287,000 for the year ended December 31, 2025 decreased by $613,000 or 68% from $900,000 for the year ended December 31, 2024. The decrease in interest expense was due to the decreased use of the line of credit and decreases in the interest rate charged. Interest expense on the line of credit was $152,000 and $649,000 during the years ended December 31, 2025 and 2024, respectively and amortization of deferred financing costs was $44,000 and $127,000 during the years ended December 31, 2025 and 2024, respectively.
Other Expense - net. Other expense - net was $265,000 for the year ended December 31, 2025 compared to other expense - net of $298,000 for the year ended December 31, 2024. Other expense primarily represents foreign currency transaction gains and losses and legal settlements made by the Company. Legal and other settlements recorded during the years ended December 31, 2025 and 2024 were approximately $175,000 and $465,000, respectively. There was a foreign exchange loss of $109,000 and a gain of $130,000 for the years ended December 31, 2025 and 2024, respectively. Transaction gains and losses result from revaluing intercompany accounts which are denominated in U.S. dollars that represent amounts receivable/payable between the entities. Whenever the exchange rate varies, the gains and losses are recorded in the consolidated statements of operations.
Income Tax Provision. There was a $199,000 provision for income taxes for the year ended December 31, 2025 compared to $160,000 for the year ended December 31, 2024.
The income tax expense for the years ended December 31, 2025 and 2024 was $199,000 and $160,000, respectively. There was no deferred tax recorded for the years ended December 31, 2025 and 2024. The provision for 2025 and 2024 primarily relates to state and foreign income taxes. The pre-tax income was $11.0 million and $8.0 million for the years ended December 31, 2025 and 2024, respectively. Although the Company reported GAAP earnings in 2025 and 2024, it has incurred tax losses historically and there is uncertainty regarding future U.S. taxable income, which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance was recorded against all deferred tax assets at December 31, 2025 and 2024. The Company will maintain a full valuation allowance on deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
The Company has recorded goodwill as a result of its acquisitions. Goodwill is generally not amortized for financial reporting purposes. However, goodwill from asset acquisitions is tax deductible and amortized over 15 years for tax purposes. As such, deferred income tax expense and a deferred tax liability arise as a result of the tax-deductibility of this indefinitely lived asset. The resulting deferred tax liability, which is recorded over the amortization period, has an indefinite life.
As of December 31, 2025, the Company has a total federal NOL carry forward of approximately $271 million of which approximately $186 million will expire between 2030 and 2037, and the balance of approximately $85 million has an indefinite life. At December 31, 2025, the Company had federal research and development credit carryforwards of approximately $3.4 million. Out of the total federal NOL carry forward, approximately $237 million is from the CareCloud and Meridian acquisitions and is subject to the federal Section 382 NOL annual usage limitations. The Company has state NOL carry forwards of approximately $214 million, of which $87 million relates to the State of New Jersey. These NOLs expire starting in 2026.
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Liquidity and Capital Resources
During the year ended December 31, 2025, cash flow from operations was $28.6 million and at year-end, the Company had $3.6 million in cash and restricted cash and working capital of $1.3 million. During the year ended December 31, 2024, cash flow from operations was $20.6 million and at year-end, the Company had $5.1 million in cash and working capital of $5.2 million. There were no outstanding bank borrowings at both December 31, 2025 and 2024.
The following table summarizes our cash flows for the years presented.
| Year Ended December 31, | Change | |||||||||||||||
| 2025 | 2024 | Amount | Percent | |||||||||||||
| ($ in thousands) | ||||||||||||||||
| Net cash provided by operating activities | $ | 28,561 | $ | 20,642 | $ | 7,919 | 38 | % | ||||||||
| Net cash used in investing activities | (24,535 | ) | (7,406 | ) | (17,129 | ) | (231 | %) | ||||||||
| Net cash used in financing activities | (5,611 | ) | (11,256 | ) | 5,645 | 50 | % | |||||||||
| Effect of exchange rate changes on cash and restricted cash | 57 | (166 | ) | 223 | 134 | % | ||||||||||
| Net (decrease) increase in cash and restricted cash | $ | (1,528 | ) | $ | 1,814 | $ | (3,342 | ) | 184 | % | ||||||
The income before income taxes was $11.0 million for the year ended December 31, 2025, which included $15.0 million of non-cash depreciation and amortization. The income before income taxes for the year ended December 31, 2024 was $8.0 million, which included $14.1 million of non-cash depreciation and amortization.
We have not been adversely affected by inflation as typically we receive a percentage of the fees our clients collect from our revenue cycle management services. Additionally, our medical practice management contracts are based on our costs plus a percentage of the medical practice’s operating income. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. In the event of inflation, we believe that we will be able to pass on any price increases for fixed rate contracts to our customers, as the prices that we charge are not governed by long-term contracts. The interest rate on our Provident line of credit is based on the secured overnight financing rate which has been declining slightly since the inception of the line of credit.
Operating Activities
Cash provided by operating activities was $28.6 million and $20.6 million during the years ended December 31, 2025 and 2024, respectively. The increase in the net income of $2.9 million included the following changes in non-cash items: an increase in stock-based compensation expense of $339,000 and an increase in depreciation and amortization of $739,000. Revenue increased by $9.7 million for the year ended December 31, 2025 compared to the year ended December 31, 2024. Cash operating expenses increased by $6.6 million for the same period.
Accounts receivable increased by $408,000 and $1.2 million for the years ended December 31, 2025 and 2024, respectively. Accounts payable and other liabilities increased by $1.3 million and decreased by $4.7 million for the years ended December 31, 2025 and 2024, respectively.
Investing Activities
Cash used in investing activities during the year ended December 31, 2025 was $24.5 million, an increase of $17.1 million compared to $7.4 million during the year ended December 31, 2024. This is primarily due to the Company paying $16.5 million for its acquisitions during the year ended December 31, 2025. Capitalized software was $3.2 million and $5.7 million during the years ended December 31, 2025 and 2024, respectively. Purchases of property and equipment were $4.8 million and $1.7 million during the years ended December 31, 2025 and 2024, respectively.
Financing Activities
Cash used by financing activities during the year ended December 31, 2025 was $5.6 million, compared to $11.3 million for the year ended December 31, 2024. Cash used by financing activities during 2025 includes the payment of dividends on the Preferred Stock of $6.3 million and $620,000 of repayments for debt obligations. Cash used by financing activities during 2024 includes the repayment of the credit line of $10 million and $677,000 of repayments for debt obligations. During the year ended December 31, 2025, the Company borrowed approximately $1.5 million to finance the purchase of an aircraft and several vehicles. There was also $24,000 of payments to settle the tax withholding obligations in 2025 compared to $579,000 in 2024. During the year ended December 31, 2025, the Company borrowed approximately $9.3 million on the line of credit primarily to finance the acquisition of Medsphere and which it repaid by the end of the year.
Contractual Obligations and Commitments
We have contractual obligations under our line of credit. We also maintain operating leases for property and certain office equipment. We were in compliance with all SVB and Provident covenants in 2025.
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Off-Balance Sheet Arrangements
As of December 31, 2025, and 2024, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special-purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. During the first quarter of 2020, a New Jersey corporation, talkMD Clinicians, PA (“talkMD”), was formed by the wife of the Executive Chairman, who is a licensed physician, to provide telehealth services. talkMD was determined to be a variable interest entity (“VIE”) for financial reporting purposes because the entity will be controlled by the Company. As of December 31, 2025, talkMD had not yet commenced operations. The Company made arrangements to have the income tax returns prepared for talkMD and advanced the funds for the required taxes. Cumulatively, the Company has paid approximately $6,500 on behalf of talkMD for income taxes. We do not engage in off-balance sheet financing arrangements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by 17 C.F.R. 229.10(f)(1) and are not required to provide information under this item, pursuant to Item 305(e) of Regulation S-K.
Item 8. Financial Statements and Supplementary Data
See “Index to Consolidated Financial Statements” which appears on page F-1 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Co-Chief Executive Officers and Interim Chief Financial Officer, based on the Internal Control-Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2025 as required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures, as of December 31, 2025, our Co-Chief Executive Officers and Interim Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective. Our management, including our Co-Chief Executive Officers and Interim Chief Financial Officer, have concluded that the consolidated financial statements in this Annual Report on Form 10-K fairly present, in all material respects, our consolidated financial condition, results of operations and cash flows for the periods presented in accordance with U.S. generally accepted accounting principles.
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Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.
Management is required to base its assessment on the effectiveness of our internal control over financial reporting on a suitable, recognized control framework. Management has utilized the criteria established in COSO to evaluate the effectiveness of internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Our management has performed its assessment according to the guidelines established by COSO. Management excluded MAP App, Medsphere and RevNu from its assessment of internal controls over financial reporting, our current year acquisitions, as it was not possible to conduct an assessment of the acquired businesses’ internal controls over financial reporting in the period between the commencement date and the date of management’s assessment. During 2025, the net revenue recorded by the Company for MAP App, Medsphere and RevNu was approximately $226,000, $10.5 million and $882,000, respectively and the net assets acquired were approximately $625,000, $16.5 million and $565,000 respectively, including goodwill. Our management concluded that as of December 31, 2025, the Company’s internal control over financial reporting was effective.
Management has performed analysis and procedures in preparing our consolidated financial statements. We have concluded that our consolidated financial statements fairly present, in all material respects, our financial condition, results of operations and cash flows at and for the periods presented.
Because of its inherent limitations, our internal controls over financial reporting provide reasonable, not absolute, assurance that the consolidated financial statements and notes thereto are free of material error. In addition, no internal control structure can provide absolute assurance that all instances of fraud have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Tanner LLP, an independent registered public accounting firm, has audited the consolidated financial statements as of December 31, 2025 and for the year then ended included in this Annual Report on Form 10-K and, as part of their audit, has issued their attestation report, included herein, on the effectiveness of our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
During the fourth quarter of 2025, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
During
the quarter ended December 31, 2025, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act)
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information required by this item will be included in our definitive Proxy Statement for the 2026 Meeting of Shareholders which will be filed within 120 days of the end of our fiscal year ended December 31, 2025 (“2026 Proxy Statement”) and is incorporated herein by reference.
Item 11. Executive Compensation
Information required by this item will be included in the 2026 Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by this item will be included in the 2026 Proxy Statement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by this item will be included in the 2026 Proxy Statement and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Information required by this item will be included in the 2026 Proxy Statement and is incorporated herein by reference.
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PART IV
Item 15. Exhibits and Financial Statement Schedules
| (a) | The following documents are filed as part of this Annual Report on Form 10-K: |
| (1) | Financial Statements |
| (i) | Consolidated Balance Sheets as of December 31, 2025 and 2024 | ||
| (ii) | Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 | ||
| (iii) | Consolidated Statements of Comprehensive Income for the years ended December 31, 2025 and 2024 | ||
| (iv) | Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2025 and 2024 | ||
| (v) | Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 | ||
| (vi) | Notes to Consolidated Financial Statements |
| (2) | Financial Statement Schedules |
There are no Financial Statement Schedules filed as part of this Annual Report on Form 10-K as the required information is not applicable or is included in the Notes to Consolidated Financial Statements.
| (b) | Exhibit Index: |
|
Exhibit Number |
Description | |
| 2.1 | Assignment Agreement dated October 3, 2016, by and between the Company, The Prudential Insurance Company of America, and Prudential Retirement Insurance and Annuity Company (filed as Exhibit 10.1 to the Company’s Form 8-K filed on October 5, 2016, and incorporated herein by reference). | |
| 2.2 | Strict Foreclosure Agreement dated October 3, 2016, by and between MTBC Acquisition, Corp., MediGain, LLC and Millennium Practice Management Associates, LLC (filed as Exhibit 10.2 to the Company’s Form 8-K filed on October 5, 2016, and incorporated herein by reference). | |
| 2.3 | Transition Services Agreement dated October 3, 2016, by and between MTBC Acquisition, Corp., MediGain, LLC and Millennium Practice Management Associates, LLC (filed as Exhibit 10.3 to the Company’s Form 8-K filed on October 5, 2016, and incorporated herein by reference). | |
| 2.4 | First Amendment to Assignment Agreement dated January 3, 2017, by and between the Company, The Prudential Insurance Company of America, and Prudential Retirement Insurance and Annuity Company (filed as Exhibit 2.1 to the Company’s Form 8-K filed on January 6, 2017, and incorporated herein by reference). | |
| 2.5 | Second Amendment to Assignment Agreement dated January 23, 2017, by and between the Company, The Prudential Insurance Company of America, and Prudential Retirement Insurance and Annuity Company (filed as Exhibit 2.1 to the Company’s Form 8-K filed on January 24, 2017, and incorporated herein by reference). | |
| 2.6 | Asset Purchase Agreement dated June 25, 2018, by and between MTBC, and Orion Healthcorp, Inc. (filed as Exhibit 10.1 to the Company’s Form 8-K filed on July 2, 2018, and incorporated herein by reference). | |
| 2.7 | Transition Services Agreement dated June 25, 2018, by and between MTBC, and Orion Healthcorp, Inc. (filed as Exhibit 2.29 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by reference). | |
| 2.8 | Asset Purchase Agreement dated March 27, 2019, by and between MTBC-Med, Inc., and Etransmedia Technology, Inc., et. al. (filed as Exhibit 10.1 to the Company’s Form 8-K filed on March 28, 2019, and incorporated herein by reference). |
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| 2.9 | Amended and Restated Asset Purchase Agreement dated April 3, 2019, by and between MTBC-Med, Inc., and Etransmedia Technology, Inc., et. al. (filed as Exhibit 10.1 to the Company’s Form 8-K filed on April 4, 2019, and incorporated herein by reference). | |
| 2.10 | Agreement and Plan of Merger by and among MTBC, Inc., MTBC Merger Sub, Inc., CareCloud Corporation and Runway Growth Credit Fund Inc., as the Seller’s representative dated January 8, 2020 (filed as Exhibit 2.1 to the Company’s Form 8-K filed on January 8, 2020, and incorporated herein by reference). | |
| 2.11 | Escrow Agreement dated January 8, 2020 by and among MTBC, Inc., Runway Growth Credit Fund., Inc. and TD Bank (filed as Exhibit 10.17 to the Company’s Form 10-K filed on February 28, 2020, and incorporated herein by reference). | |
| 2.12 | Stock Purchase Agreement dated June 16, 2020 by and among MTBC, Inc., Origin Holdings, Inc., Meridian Billing Management Co., Origin Holdings, Inc., and GMM II Holdings, LLC, (filed as Exhibit 2.1 to the Company’s Form 8-K on June 17, 2020, and incorporated herein by reference). | |
| 2.13 | Asset and Stock Purchase Agreement by and among CareCloud Acquisition. Corp., MedMatica Consulting Associates, Inc., and Jerold Howell dated June 1, 2021 (filed as Exhibit 2.1 to the Company’s Form 8-K filed on June 2, 2021, and incorporated herein by reference). | |
| 2.14 | Non-Competition and Non-Solicitation Agreement by and among Santa Rosa Consulting, Inc., SureTest Holdings, LLC, Laura O’Toole, Mark Scruggs, Raleigh Brewer, Thomas Watford, and CareCloud Acquisition, Corp., dated June 1, 2021 (filed as Exhibit 2.2 to the Company’s Form 8-K filed on June 2, 2021, and incorporated herein by reference). | |
| 2.15 | Transition Services Agreement by and among CareCloud Acquisition, Corp., MedMatica Consulting Associates, Inc., and Jerold Howell, dated June 1, 2021 (filed as Exhibit 2.3 to the Company’s Form 8-K filed on June 2, 2021 and incorporated herein by reference). | |
| 2.16 | Asset Purchase Agreement between Medsphere Systems Corporation (“Medsphere”) and CareCloud Holdings, Inc. (“Holdings”) dated as of August 22, 2025 (filed as Exhibit 2.1 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). | |
| 2.17 | Transition Services Agreement between Medsphere and Holdings dated as of August 22, 2025 (filed as Exhibit 2.2 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). | |
| 2.18 | Security Agreement by the Company and its subsidiaries in favor of Wells Fargo Bank N.A. (“Wells Fargo”) dated as of August 22, 2025 (filed as Exhibit 2.3 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). | |
| 2.19 | Patent Security Agreement by Holdings and CareCloud Health, Inc. in favor of Wells Fargo dated as of August 22, 2025 (filed as Exhibit 2.4 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). | |
| 2.20 | Copyright Security Agreement by Holdings in favor of Wells Fargo dated as of August 22, 2025 (filed as Exhibit 2.5 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). | |
| 2.21 | Trademark Security Agreement by the Company and Holdings in favor of Wells Fargo dated as of August 22, 2025 (filed as Exhibit 2.6 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). | |
| 2.22 | Deferred Payment Agreement by and among Wells Fargo, Holdings, the Company and its other subsidiaries dated as of August 22, 2025 (filed as Exhibit 2.7 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). | |
| 2.23 | Guaranty by and among Wells Fargo as Lender and Holdings as Issuer dated as of August 22, 2025 (filed as Exhibit 2.8 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). |
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| 2.24 | Bill of Sale by and between Medsphere and Holdings dated as of August 22, 2025 (filed as Exhibit 2.9 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). | |
| 2.25 | Power of Attorney by and between Medsphere and Holdings dated as of August 22, 2025 (filed as Exhibit 2.10 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). | |
| 2.26 | Intellectual Property Assignment Agreement by and between Medsphere and Holdings dated as of August 22, 2025 (filed as Exhibit 2.11 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). | |
| 2.27 | Assignment and Assumption Agreement between Medsphere and Holdings dated as of August 22, 2025 (filed as Exhibit 2.12 to the Company’s Form 8-K filed on August 25, 2025, and incorporated herein by reference). | |
| 3.1 | Amended and Restated Certificate of Incorporation of the Company dated April 4, 2014 (filed as Exhibit 3.1 to the Company’s Form S-1 filed on September 25, 2018 and incorporated herein by reference). | |
| 3.2 |
Certificate of Amendment of Certificate of Incorporation of the Company dated June 28, 2016 (filed as Exhibit 3.2 to the Company’s Form S-1 filed on September 25, 2018 and incorporated herein by reference). | |
| 3.3 | Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company dated June 18, 2018 (filed as Exhibit 3.6 to the Company’s Form S-1 filed on September 25, 2018 and incorporated herein by reference). | |
| 3.4 |
Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company dated February 6, 2019 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on February 7, 2019 and incorporated herein by reference). | |
| 3.5 |
Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company dated June 25, 2019 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on June 25, 2019 and incorporated herein by reference). | |
| 3.6 |
Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company dated February 26, 2021 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on March 29, 2021 and incorporated herein by reference). | |
| 3.7 |
Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company dated June 16, 2022 (filed as Exhibit 3.6 to the Company’s Form 8-K/A filed on June 17, 2022 and incorporated herein by reference). | |
| 3.8 | Certificate of Correction to Certificate of Amendment to Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Company’s Form 8-K/A filed June 17, 2022 and incorporated herein by reference). |
| 3.9 | Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company dated February 5, 2025 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on February 7, 2025 and incorporated herein by reference). | |
| 3.10 | Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated July 6, 2016 (filed as Exhibit 3.3 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by reference). | |
| 3.11 | First Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated September 15, 2017 (filed as Exhibit 3.4 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by reference). | |
| 3.12 | Second Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated March 23, 2018 (filed as Exhibit 3.5 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by reference). |
| 62 |
| 3.13 | Third Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated September 25, 2018 (filed as Exhibit 3.7 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by reference). | |
| 3.14 | Fourth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated January 9, 2020 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on January 28, 2020, and incorporated herein by reference). | |
| 3.15 | Fifth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated May 19, 2020 (filed as Exhibit 3.2 to the Company’s Form 8-K filed on May 21, 2020, and incorporated herein by reference). | |
| 3.16 | Sixth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated July 9, 2020 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on July 9, 2020, and incorporated herein by reference). | |
| 3.17 | Seventh Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock (filed as exhibit 3.1 to the Company’s Form 8-K filed January 31, 2022 and incorporated herein by reference). | |
| 3.18 | Certificate of Correction to Eighth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock (filed as Exhibit 3.2 to the Company’s Form 8-K/A filed June 17, 2022 and incorporated herein by reference). | |
| 3.19 | Eighth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated June 15, 2022 (filed as Exhibit 3.4 to the Company’s Form 8-K/A filed June 17, 2022 and incorporated herein by reference). | |
| 3.20 | Ninth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated September 11, 2024 (filed as Exhibit 3.1 to the Company’s Form 8-K filed September 16, 2024 and incorporated herein by reference). | |
| 3.21 | Certificate of Designations, Preferences and Rights of 8.75% Series B Cumulative Redeemable Perpetual Preferred Stock (filed as exhibit 3.2 to the Company’s Form 8-K filed January 31, 2022 and incorporated herein by reference). | |
| 3.22 | Certificate of Correction to First Amendment to Certificate of Designations, Preferences and Rights of 8.75% Series B Cumulative Redeemable Perpetual Preferred Stock (filed as Exhibit 3.3 to the Company’s Form 8-K/A filed June 17, 2022 and incorporated herein by reference). |
| 3.23 | First Amendment to Certificate of Designations, Preferences and Rights of 8.75% Series B Cumulative Redeemable Perpetual Preferred Stock dated June 15, 2022 (filed as Exhibit 3.5 to the Company’s Form 8-K/A filed June 17, 2022 and incorporated herein by reference). | |
| 3.24 | Amended and Restated By-laws of the Company (filed as Exhibit 3.2 to the Company’s Amendment No. 1 to Form S-1 filed on April 7, 2014, and incorporated herein by reference). | |
| 4.1 | Form of common stock certificate of the Company (filed as Exhibit 4.1 to Amendment No. 2 to the Company’s Form S-1 filed on May 7, 2014, and incorporated herein by reference). | |
| 4.2 | Form of stock certificate of the 11% Series A Cumulative Redeemable Perpetual Preferred Stock (filed as Exhibit 4.2 to Amendment No. 2 to the Company’s Form S-1 on October 19, 2015, and incorporated herein by reference). | |
| 4.3 | Form of stock certificate of the 8.75% Series B Cumulative Redeemable Perpetual Preferred Stock (filed as Exhibit 4.3 to the Company’s Form 8-A on January 31, 2022 and incorporated herein by reference). |
| 63 |
| 4.4 | Warrant to Purchase Stock dated as of October 13, 2017 issued by the Company to Silicon Valley Bank (filed as Exhibit 10.2 to the Company’s Form 8-K filed on October 16, 2017, and incorporated herein by reference). | |
| 4.5 | Warrant to Purchase Stock issued by the Company on September 20, 2018 to Silicon Valley Bank (filed as Exhibit 10.2 to the Company’s Form 8-K filed on September 20, 2018, and incorporated herein by reference). | |
| 4.6 | Warrant to Purchase Stock issued by the Company on January 8, 2020 to Runway Growth Credit Fund Inc. (filed as Exhibit 4.5 to the Company’s Form 10-K filed on February 28, 2020, and incorporated herein by reference). | |
| 4.7 | Warrant to Purchase Stock issued by the Company on January 8, 2020 to Runway Growth Credit Fund Inc. (filed as Exhibit 4.6 to the Company’s Form 10-K filed on February 28, 2020, and incorporated herein by reference). | |
| 4.8 | Form of Warrant to Purchase Stock issued by the Company on June 16, 2020 with respect to the Meridian transaction (filed as Exhibit 4.7 to the Company’s Form S-1 filed on August 20, 2020, and incorporated herein by reference). | |
| 4.9 | Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 4.9 to the Company’s Form 10-K filed on March 2, 2023, and incorporated herein by reference). | |
| 10.1 | Form of Indemnification Agreement between the Company and each of its directors and executive officers (filed as Exhibit 10.1 to Amendment No. 2 to the Company’s Form S-1 filed on May 7, 2014, and incorporated herein by reference). | |
| 10.2 * | Amended and Restated Equity Incentive Plan of the Company (filed as Appendix B to the Company’s Proxy Statement on Schedule 14A filed on February 10, 2017, and incorporated herein by reference). | |
| 10.3 * | First Amendment to the Amended and Restated Equity Incentive Plan of the Company (filed as Exhibit 10.16 to the Company’s Form 10-Q filed on August 8, 2018, and incorporated herein by reference). | |
| 10.4* | Second Amendment to MTBC, Inc. Amended and Restated Equity Incentive Plan (filed as Exhibit 3.1 to the Company’s Form 8-K filed on May 21, 2020, and incorporated herein by reference). | |
| 10.5 * | Form of Restricted Stock Unit Agreement under Amended and Restated Equity Incentive Plan (filed as Exhibit 10.3 to Amendment No. 1 to the Company’s Form S-1 filed on April 7, 2014, and incorporated herein by reference). | |
| 10.6 * | Third Amendment to Amended and Restated Equity Incentive Plan (filed as Exhibit 3.1 to the Company’s Form 8-K filed on June 9, 2022, and incorporated herein by reference). | |
| 10.7 * | Form of Restricted Stock Award Agreement under the Amended and Restated Equity Incentive Plan (filed as Exhibit 10.12 to the Company’s Form 10-K filed on March 24, 2016, and incorporated herein by reference). |
| 10.8 | Lease between Company and Mahmud Haq with respect to offices located at 7 Clyde Road, Somerset, NJ 08873 (filed as Exhibit 10.4 to the Company’s Form S-1 filed on December 20, 2013, and incorporated herein by reference). | |
| 10.9 * | Employment Agreement between the Company and Mahmud Haq dated as of May 1, 2018 (filed as Exhibit 10.1 to the Company’s Form 8-K filed on May 7, 2018, and incorporated herein by reference). | |
| 10.10 * | Employment Agreement between the Company and A. Hadi Chaudhry dated as of March 23, 2021 (filed as Exhibit 10.2 to the Company’s Form 8-K filed on March 24, 2021, and incorporated herein by reference). | |
| 10.11 * | Employment Agreement between the Company and Bill Korn dated as of May 1, 2018 (filed as Exhibit 10.4 to the Company’s Form 8-K filed on May 7, 2018, and incorporated herein by reference). |
| 64 |
| 10.12 * | Employment Agreement and Bonus Agreement between the Company and Larry Steenvoorden each dated as of July 6, 2023 (filed as Exhibit 10.1 and 10.2, respectively, to the Company’s Form 8-K filed on July 11, 2023 and incorporated herein by reference). | |
| 10.13 * | Employment Agreement between the Company and A. Hadi Chaudhry dated December 16, 2024 (filed as Exhibit 10.1 to the Company’s Form 8-K filed on December 16, 2024 and incorporated herein by reference). | |
| 10.14 * | Employment Agreement between the Company and Stephen Snyder dated December 16, 2024 (filed as Exhibit 10.2 to the Company’s Form 8-K filed on December 16, 2024 and incorporated herein by reference). | |
| 10.15 * | Employment Agreement between the Company and Crystal Williams dated December 16, 2024 (filed as Exhibit 10.3 to the Company’s Form 8-K filed on December 16, 2024 and incorporated herein by reference). | |
| 10.16 * | Employment Agreement between the Company and Mahmud Haq dated as of December 26, 2025 (filed as Exhibit 10.1 to the Company’s Form 8-K filed on December 29, 2025 and incorporated herein by reference). | |
| 10.17 * | Employment Agreement between the Company and A. Hadi Chaudhry dated December 26, 2025 (filed as Exhibit 10.2 to the Company’s Form 8-K filed on December 29, 2025 and incorporated herein by reference). | |
| 10.18 * | Employment Agreement between the Company and Stephen Snyder dated December 26, 2025 (filed as Exhibit 10.3 to the Company’s Form 8-K filed on December 29, 2025 and incorporated herein by reference). | |
| 10.19 * | Employment Agreement between the Company and Crystal Williams dated December 26, 2025 (filed as Exhibit 10.1 to the Company’s Form 8-K filed on December 29, 2025 and incorporated herein by reference). | |
| 10.20 | Loan and Security Agreement dated as of October 13, 2017 between Medical Transcription Billing, Corp., MTBC Acquisition, Corp. and Silicon Valley Bank (filed as Exhibit 10.1 to the Company’s Form 8-K filed on October 16, 2017, and incorporated herein by reference). | |
| 10.21 | Joinder and First Loan Modification Agreement dated as of September 20, 2018 between Medical Transcription Billing, Corp., MTBC Acquisition, Corp., MTBC Health, Inc. and MTBC Practice Management, Corp. and Silicon Valley Bank (filed as Exhibit 10.1 to the Company’s Form 8-K filed on September 20, 2018, and incorporated herein by reference). | |
| 10.22 | Second Loan Modification Agreement dated November 15, 2019, by and between the Company and SVB (filed as Exhibit 1.1 to the Company’s Form 8-K filed on November 21, 2019, and incorporated herein by reference). | |
| 10.23 | Joinder and Third Loan Modification Agreement dated as of February 28, 2020 between MTBC, Inc., MTBC Acquisition Corp., MTBC Health, Inc. and MTBC Practice Management Corp., MTBC-Med, Inc., CareCloud Corporation and Silicon Valley Bank (filed as Exhibit 10.16 to the Company’s Form 10-K filed on February 28, 2020, and incorporated herein by reference). | |
| 10.24 | Joinder and Fourth Loan Modification Agreement dated September 21, 2020, by and between the Company and SVB (filed as Exhibit 1.1 to the Company’s Form 8-K filed on September 25, 2020, and incorporated herein by reference). | |
| 10.25 | Joinder and Fifth Loan Modification Agreement dated September 21, 2021, by and between the Company and SVB (filed as Exhibit 10.1 to the Company’s Form 8-K filed on September 22, 2021 and incorporated herein by reference). | |
| 10.26 | Sixth Loan Modification Agreement dated January 27, 2022, by and between the Company and SVB (filed as Exhibit 10.19 to the Company’s Form 10-Q filed on May 9, 2022 and incorporated herein by reference). |
| 65 |
| 10.27 | Seventh Loan Modification Agreement dated February 17, 2023, by and between the Company and SVB (filed as Exhibit 10.1 to the Company’s Form 8-K filed on February 21, 2023 and incorporated herein by reference). | |
| 10.28 | Eighth Loan Modification Agreement dated August 31, 2023, by and between the Company and SVB (filed as Exhibit 10.1 to the Company’s Form 8-K filed on September 1, 2023 and incorporated herein by reference). | |
| 10.29 | Ninth Loan Modification Agreement dated October 25, 2024, by and between the Company and SVB (filed as Exhibit 10.1 to the Company’s Form 8-K filed on October 28, 2024 and incorporated herein by reference). | |
| 10.30 | Underwriting Agreement dated January 28, 2022 by and between the Company and B. Riley FBR, Inc. as representative of several underwriters named therein (filed as Exhibit 1.1 to the Company’s Form 8-K filed on January 31, 2022, and incorporated herein by reference). | |
| 10.31 | At Market Issuance Sales Agreement dated February 14, 2022 by and between CareCloud, Inc. and B. Riley Securities, Inc. (filed as Exhibit 1.1 to the Company’s Form 8-K filed on February 14, 2022 and incorporated herein by reference). | |
| 10.32 | Agreement dated September 3, 2025 between the Company and Provident Bank. (filed as Exhibit 10.1 to the Company’s Form 8-K filed on September 9, 2025 and incorporated herein by reference). | |
| 10.33 | Commercial Line of Credit Note between the Company and Provident Bank (filed as Exhibit 10.2 to the Company’s Form 8-K filed on September 9, 2025 and incorporated herein by reference). | |
| 10.34 | Consulting Agreement dated June 3, 2022 by and between the Company and Hill City Advisors, LLC (filed as Exhibit 10.22 to the Company’s Form 10-K filed on March 2, 2023, and incorporated herein by reference). | |
| 10.35 | Amendment to Consulting Agreement dated February 16, 2023 by and between the Company and Hill City Advisors, LLC (filed as Exhibit 10.23 to the Company’s Form 10-K filed on March 2, 2023, and incorporated herein by reference). | |
| 10.36 | Additional Statement of Work dated January 29, 2024 added as Exhibit B to the Consulting Agreement between the Company and Hill City Advisors, LLC. (filed as Exhibit 10.26 to the Company’s Form 10-K filed on March 21, 2024, and incorporated herein by reference). | |
| 10.37 | Consulting Agreement dated January 9, 2024, and as amended February 12, 2024, by and between the Company and Korn Intellect, LLC (filed as Exhibit 10.27 to the Company’s Form 10-K filed on March 21, 2024, and incorporated herein by reference). | |
| 10.38 | Amendment to Consulting Agreement dated September 5, 2024 between the Company and Korn Intellect, LLC. (filed as Exhibit 10.32 to the Company’s Form 10-K filed on March 13, 2025, and incorporated herein by reference). | |
| 10.39 | Second Amendment to Consulting Agreement dated December 9, 2024 between the Company and Korn Intellect, LLC. (filed as Exhibit 10.33 to the Company’s Form 10-K filed on March 13, 2025, and incorporated herein by reference). | |
| 10.40 | Consulting Agreement dated July 28, 2025 between the Company and Stochastic Solutions, LLC. | |
| 19.1 | Insider Trading Policy dated December 1, 2024 (filed as Exhibit 19.1 to the Company’s Form 10-K filed on March 13, 2025, and incorporated herein by reference). | |
| 21.1 | List of subsidiaries. |
| 66 |
| 23.1 | Consent of Tanner LLP. | |
| 23.2 | Consent of Rosenberg Rich Baker Berman P.A. | |
| 31.1 | Certification of the Company’s Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), of the Securities Exchange Act of 1934, as amended. | |
| 31.2 | Certification of the Company’s Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), of the Securities Exchange Act of 1934, as amended. | |
| 32.1 | Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2 | Certification of the Company’s Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 97.1 | Policy relating to recovery of erroneously awarded compensation, as required by applicable listing standards adopted pursuant to 17 CFR 240.10D-1 (filed as Exhibit 97.1 to the Company’s Form 10-K filed on March 21, 2024, and incorporated herein by reference). | |
| 101.INS | XBRL Instance | |
| 101.SCH | XBRL Taxonomy Extension Schema | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Indicates management contract or compensatory plan or arrangement.
The certifications on Exhibit 32 hereto are deemed not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liability of that Section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
| 67 |
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CareCloud, Inc. | ||
| By: | /s/ Stephen Snyder | |
| Stephen Snyder | ||
| Chief Executive Officer | ||
| Date: | March 12, 2026 | |
| By: | /s/ Norman Roth | |
| Norman Roth | ||
| Interim Chief Financial Officer and Corporate Controller | ||
| Date: | March 12, 2026 | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
| Signature | Title | Date | ||
| /s/ Mahmud Haq | March 12, 2026 | |||
| Mahmud Haq | Executive Chairman and Director | |||
| /s/ Stephen Snyder | March 12, 2026 | |||
| Stephen Snyder | Chief Executive Officer (Principal Executive Officer) | |||
| /s/ Norman Roth | March 12, 2026 | |||
| Norman Roth | Interim Chief Financial Officer and Corporate Controller (Principal Financial and Accounting Officer) | |||
| /s/ Anne Busquet | March 12, 2026 | |||
| Anne Busquet | Director | |||
| /s/ Bill Korn | March 12, 2026 | |||
| Bill Korn | Director | |||
| /s/ Cameron Munter | March 12, 2026 | |||
| Cameron Munter | Director | |||
| /s/ Lawrence Sharnak | March 12, 2026 | |||
| Lawrence Sharnak | Director |
| 68 |
Index to Consolidated Financial Statements
| Report
of Independent Registered Public Accounting Firm |
F-2 |
| Report
of Independent Registered Public Accounting Firm Rosenberg Rich Baker Berman, P.A. (PCAOB ID Number |
F-3 |
| Consolidated Balance Sheets as of December 31, 2025 and 2024 | F-4 |
| Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 | F-5 |
| Consolidated Statements of Comprehensive Income for the years ended December 31, 2025 and 2024 | F-6 |
| Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2025 and 2024 | F-7 |
| Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 | F-8 |
| Notes to Consolidated Financial Statements | F-9 |
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
CareCloud, Inc.
Opinions on the Consolidated Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheet of CareCloud, Inc. and subsidiaries (the “Company”) as of December 31, 2025, the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of MAP App, Medsphere and RevNu, each a wholly-owned subsidiary. During the year ended December 31, 2025, the net revenue recorded by the Company for MAP App, Medsphere and RevNu was approximately $226,000, $10,500,000 and $882,000, respectively, and the net assets acquired were approximately $625,000, $16,500,000 and $565,000, respectively, including goodwill. As indicated in Management’s Report, MAP App, Medsphere and RevNu were acquired during 2025. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of MAP App, Medsphere and RevNu.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.
/s/
We have served as the Company’s auditors since 2025.
March 12, 2026
| F-2 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of CareCloud, Inc.
Opinion on the financial statements
We have audited the accompanying balance sheet of CareCloud, Inc. as of December 31, 2024, and the related statements of operations, comprehensive income, shareholders’ equity, cash flows, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters.
/s/
We served as the Company’s auditor for 2024.
March 13, 2025
| F-3 |
CARECLOUD, INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2025 AND 2024
($ in thousands, except share and per share amounts)
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable - net | ||||||||
| Contract asset | ||||||||
| Inventory | ||||||||
| Current assets - related party | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment - net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Intangible assets - net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued compensation | ||||||||
| Accrued expenses | ||||||||
| Operating lease liability (current portion) | ||||||||
| Deferred revenue (current portion) | ||||||||
| Notes payable (current portion) | ||||||||
| Contingent consideration (current portion) | ||||||||
| Dividend payable | ||||||||
| Total current liabilities | ||||||||
| Notes payable | ||||||||
| Contingent consideration | ||||||||
| Operating lease liability | ||||||||
| Deferred revenue | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 11) | ||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $ par value - authorized shares. Series A, issued and outstanding and shares at December 31, 2025 and December 31, 2024, respectively. Series B, issued and outstanding shares at December 31, 2025 and December 31, 2024. | ||||||||
| Common stock, $ par value - authorized and shares at December 2025 and 2024, respectively. Issued and shares at December 31, 2025 and December 31, 2024, respectively. Outstanding and shares at December 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Less: common shares held in treasury, at cost at December 31, 2025 and December 31, 2024 | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
See notes to consolidated financial statements.
| F-4 |
CARECLOUD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
($ in thousands, except share and per share amounts)
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| NET REVENUE | $ | $ | ||||||
| OPERATING EXPENSES: | ||||||||
| Direct operating costs | ||||||||
| Selling and marketing | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Depreciation and amortization | ||||||||
| Lease termination and restructuring costs | ||||||||
| Total operating expenses | ||||||||
| OPERATING INCOME | ||||||||
| OTHER: | ||||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Other expense - net | ( | ) | ( | ) | ||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | ||||||||
| Income tax provision | ||||||||
| NET INCOME | $ | $ | ||||||
| Preferred stock dividend | ||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | $ | ( | ) | ||||
| Net income (loss) per share: basic and diluted | $ | $ | ) | |||||
| Weighted-average common shares used to compute basic income (loss) per share | ||||||||
| Weighted-average common shares used to compute diluted income (loss) per share | ||||||||
See notes to consolidated financial statements.
| F-5 |
CARECLOUD, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands)
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| NET INCOME | $ | $ | ||||||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||
| Foreign currency translation adjustment (a) | ( | ) | ||||||
| COMPREHENSIVE INCOME | $ | $ | ||||||
| (a) |
See notes to consolidated financial statements.
| F-6 |
CARECLOUD, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
($ in thousands, except for number of shares)
| 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 | $ | $ | | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | | ||||||||||||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock and accrued dividends to common stock | ( | ) | ( | ) | - | |||||||||||||||||||||||||||||||||||||||
| Stock issued under the equity incentive plan | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net of cash settlements | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance - December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
| Balance - January 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
| Net Income | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Stock issued under the equity incentive plan | - | |||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation, net of cash settlements | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance - December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
For the year ended December 31, 2025, the Company declared twelve months of dividends and paid eleven months of dividends on the Preferred Shares.
For
the year ended December 31, 2024,
See notes to consolidated financial statements.
| F-7 |
CARECLOUD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
($ in thousands)
| 2025 | 2024 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Lease amortization | ||||||||
| Provision for expected credit losses | ||||||||
| Foreign exchange loss (gain) | ( | ) | ||||||
| Interest accretion | ||||||||
| Stock-based compensation expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Contract asset | ||||||||
| Inventory | ( | ) | ||||||
| Other assets | ( | ) | ||||||
| Accounts payable and other liabilities | ( | ) | ||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Net cash provided by operating activities | ||||||||
| INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Capitalized software and other intangible assets | ( | ) | ( | ) | ||||
| Payments for acquisitions | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| FINANCING ACTIVITIES: | ||||||||
| Preferred stock dividends paid | ( | ) | ||||||
| Payment of contingent obligations | ( | ) | ||||||
| Payment of tax withholding obligations on stock issued to employees | ( | ) | ( | ) | ||||
| Proceeds from term-loan borrowings | ||||||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Proceeds from line of credit | ||||||||
| Repayment of line of credit | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND RESTRICTED CASH | ( | ) | ||||||
| NET (DECREASE) INCREASE IN CASH AND RESTRICTED CASH | ( | ) | ||||||
| CASH - Beginning of the year | ||||||||
| CASH AND RESTRICTED CASH - End of the year | $ | $ | ||||||
| SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Conversion of preferred stock and accrued dividends to common stock | $ | $ | ||||||
| Dividends declared, not paid | $ | $ | ||||||
| Purchase of prepaid insurance with assumption of note | ||||||||
| Reclass of deposits for property and equipment placed in service | $ | $ | ||||||
| SUPPLEMENTAL INFORMATION - Cash paid during the year for: | ||||||||
| Income taxes | $ | $ | ||||||
| Interest | $ | $ | ||||||
See notes to consolidated financial statements.
| F-8 |
CARECLOUD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024
| 1. | ORGANIZATION AND BUSINESS |
CareCloud, Inc., (together with its consolidated subsidiaries, “CareCloud,” the “Company,” “we,” “us” and/or “our”) is a healthcare information technology company that provides a full suite of proprietary cloud-based solutions, related business services, to healthcare providers and hospitals throughout the United States. The Company’s integrated services are designed to help customers increase revenues, streamline workflows and make better business and clinical decisions, while reducing administrative burdens and operating costs. Our Software-as-a-Service (“SaaS”) platform includes revenue cycle management (“RCM”), practice management (“PM”), electronic health records (“EHR”), business intelligence, telehealth, patient experience management (“PXM”) solutions and complementary software tools and business services for high-performance medical groups and health systems. CareCloud has its corporate offices 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.
CareCloud
was founded in 1999 under the name Medical Transcription Billing, Corp. and incorporated under the laws of the State of Delaware in 2001.
In 2004, the Company formed MTBC Private Limited (“MTBC Pvt. Ltd.”), a
In January 2020, the Company purchased CareCloud Corporation, a company whose name we took. That company is now known as CareCloud Health, Inc. (“CCH”). In June 2020, the Company purchased Meridian Billing Management Co. and its affiliate Origin Holdings, Inc. (collectively “Meridian” and sometimes referred to as “Meridian Medical Management”). Both companies were subsequently merged and the surviving company was renamed Meridian Medical Management, Inc.
During March 2021, the Company formed a new wholly-owned subsidiary, CareCloud Acquisition, Corp. (“CAC”). In June 2021, CAC purchased certain assets and assumed certain liabilities of MedMatica Consulting Associates Inc. (“MedMatica”) and purchased the stock of Santa Rosa Staffing, Inc. (“SRS”). The assets and liabilities of MedMatica were merged into SRS and the company was renamed medSR, Inc. (“medSR”).
Effective
April 1, 2022, the Company formed MTBC Bagh Private Limited (“MTBC Bagh Pvt. Ltd.”), a
During the second quarter of 2023, the Company formed a wholly owned subsidiary, CareCloud ME Health Consultancy LLC, in the United Arab Emirates, which has not yet begun operations.
During August 2025, the Company formed CareCloud Holdings, Inc (“Holdings”), as an indirect subsidiary. Holdings purchased certain assets and assumed certain liabilities of Medsphere Systems Corporation (“Medsphere”). Medsphere was in the business of providing healthcare IT software and related services to the inpatient and ambulatory market. During October 2025, the Company formed N884AM Holdings, Inc. to acquire an aircraft which is used primarily for sales and marketing activities.
| F-9 |
| 2. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
Principles of Consolidation — The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the operating results and financial condition of CareCloud, and its wholly-owned subsidiaries including their wholly-owned subsidiaries and its majority-owned subsidiaries, MTBC Pvt. Ltd and MTBC Bagh Pvt. Ltd, CCH. The non-controlling interests of MTBC Pvt. Ltd. and MTBC Bagh Pvt. Ltd. are inconsequential to the consolidated financial statements. All intercompany accounts and transactions have been eliminated in consolidation.
Segment
Reporting — The Company views its operations as comprising
Use of Estimates — The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions made by management include, but are not limited to: (1) impairment of goodwill and long-lived assets, (2) depreciable lives of assets, (3) allowance for expected credit losses, (4) estimates of variable consideration related to the contract asset, (5) fair value of identifiable purchased tangible and intangible assets, including determination of expected customer life, (6) stock-based compensation, (7) contingent consideration and (8) estimating lease terms and incremental borrowing rates. Actual results could significantly differ from those estimates.
Revenue Recognition — We derive revenue from five primary sources: (1) technology-enabled business solutions including revenue cycle management, (2) professional services, (3) printing and mailing services, (4) group purchasing services and (5) medical practice management services. All of our revenue arrangements are based on contracts with customers. Most of our contracts with customers contain single performance obligations, although certain contracts do contain multiple performance obligations where we perform more than one service for the same customer. We account for individual performance obligations separately if they are distinct within the context of the contract. For contracts where we provide multiple services such as where we perform multiple ancillary services, each service represents its own performance obligation. Selling or transaction prices are based on the contractual prices for each service at its stand-alone selling price.
A five-step approach is applied in the recognition of revenue under ASC 606: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when we satisfy a performance obligation.
Although we believe that our approach to estimates and judgments is reasonable, actual results could differ, and we may be exposed to increases or decreases in revenue that could be material. Our estimates of variable consideration may prove to be inaccurate, in which case we may have understated or overstated the revenue recognized in a reporting period. The amount of variable consideration recognized to date that remains subject to estimation is included within the contract asset within the consolidated balance sheet.
Payment of invoices is due as specified in the underlying customer agreement, typically 30 days from the invoice date, which occurs on the date of transfer of control of the services to the customer. Since payment terms are less than a year, we have elected the practical expedient and do not assess whether a customer contract has a significant financing component.
The Company’s revenue arrangements generally do not include a general right of refund for services provided (See Note 9, Revenue, for additional information).
Direct Operating Costs — Direct operating costs consist primarily of salaries and benefits related to personnel who provide services to clients and at our managed medical practices, claims processing costs, medical supplies at our managed practices and other direct costs related to the Company’s services. Costs associated with the implementation of new clients are expensed as incurred. The reported amounts of direct operating costs include allocated amounts for rent expense and overhead costs.
Selling
and Marketing Expenses — Selling and marketing expenses consist primarily of compensation and benefits, travel and advertising
expenses and are expensed as incurred. The Company incurred approximately $
| F-10 |
Research and Development Expenses — Research and development expenses consist primarily of personnel-related costs incurred performing market research, analyzing proposed products and developing new products.
Internal-Use
Software Costs — The Company capitalizes certain development costs incurred in connection with its internal-use software. Costs
incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal
and external costs, if direct, are capitalized until the software is substantially complete and ready for its intended use. Capitalization
ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades and enhancements when
it is probable that the expenditures will result in additional functionality. Capitalized costs are recorded as part of intangible assets
in the accompanying consolidated balance sheets. Maintenance and training costs are expensed as incurred. Internal use software is amortized
on a straight line basis over its estimated useful life, generally three years. Management evaluates the useful lives of these assets
on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of
these assets. During the years ended December 31, 2025 and 2024, the Company capitalized approximately $
Accounts Receivable — Accounts receivable are stated at their net realizable value. Accounts receivable are presented in the consolidated balance sheets net of an allowance for expected credit losses, which is established based on a lifetime estimated credit loss expected to occur for trade accounts receivable.
Property
and Equipment — Property and equipment are
stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line basis over the estimated useful lives
of the assets ranging from three to
Intangible
Assets — Intangible assets include customer
relationships, covenants not-to-compete acquired in connection with acquisitions, software purchase and development costs and trademarks
acquired. Amortization for intangible assets related to revenue cycle management is recorded primarily using the 200% double declining
balance method over
three to
Evaluation
of Long-Lived Assets — The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate
that the carrying value of an asset may not be recoverable. If the sum of undiscounted expected future cash flows is less than the carrying
amount of the asset group, the Company will recognize an impairment loss based on the fair value of the asset. There was
Goodwill
— Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired.
The Company tests goodwill for impairment annually as of October 31st, referred to as the annual test date. The goodwill impairment
test for the Healthcare IT segment is performed using the discounted cash flow approach, the trading price of publicly traded stock and
the guideline public company method. Conditions that could trigger a more frequent impairment assessment include, but are not limited
to, a significant adverse change to the Company in certain agreements, significant underperformance relative to historical or projected
future operating results, loss of customer relationships, an economic downturn in customers’ industries, or increased competition.
Impairment testing for goodwill is performed at the reporting-unit level. The Company has determined that its business consists of
Treasury Stock — Treasury stock is recorded at cost and represents shares repurchased by the Company. shares were repurchased or issued from treasury stock during the years ended December 31, 2025 and 2024.
| F-11 |
Business Combinations — The Company accounts for business combinations under the provisions of ASC 805, Business Combinations, which requires that the acquisition method of accounting be used for all business combinations. Assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values. ASC 805 also specifies criteria that intangible assets acquired in a business combination must be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. If the business combination provides for contingent consideration, the Company records the contingent consideration at fair value at the acquisition date with changes in the fair value recorded through earnings.
Income Taxes — The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date.
The Company records net deferred tax assets to the extent that these assets will more likely than not be realized. All available positive and negative evidence is considered in making such a determination, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations. A valuation allowance would be recorded to reduce deferred income tax assets when it is determined that it is more likely than not that the Company would not be able to realize its deferred income tax assets in the future in excess of their net recorded amount.
The Company records uncertain tax positions on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority. At December 31, 2025 and 2024, the Company did not have any uncertain tax positions that required recognition. Interest and penalties related to uncertain tax positions are recognized in income tax expense. For the years ended December 31, 2025 and 2024, the Company did not recognize any penalties or interest related to unrecognized tax benefits in its consolidated financial statements.
Dividends — Dividends are recorded when declared by the Company’s Board of Directors. At December 31, 2023, the Board of Directors had declared monthly dividends on the Series A and Series B Preferred Stock through February 2024. However, in December 2023, the dividends on the Preferred Stock were suspended. The dividend scheduled for payment on December 15, 2023 together with the remaining dividends that were declared, were accrued in the consolidated balance sheet at December 31, 2024. Future monthly dividends continued to accrue in arrears but were not recorded as a liability until they were declared by the Board of Directors. The Company resumed paying monthly dividends in February 2025, paying one month of arrears each month for the remainder of the year. In March 2025, the Company converted the majority of the Series A Preferred Stock into the Company’s common stock which included payment of the dividends in arrears at that time for the shares that were converted. The dividend payments made for the remainder of 2025 included dividends for the Series A Preferred Stock that were not converted and dividends for the Series B Preferred Stock. Preferred stock dividends are charged against paid in capital because the Company does not have sufficient retained earnings. The dividend payable in the December 31, 2025 consolidated balance sheet represents dividends declared, but unpaid at that date.
Deferred Revenue — Deferred revenue primarily consists of payments received in advance of the revenue recognition criteria being met. Deferred revenue includes certain deferred implementation services fees that are recognized as revenue ratably over the longer of the life of the agreement or the estimated expected customer life, which is currently estimated to be three years. Deferred revenue that will be recognized during the succeeding 12-month period is recorded as current deferred revenue and the remaining portion is recorded as non-current. At the time of customer termination, any unrecognized service fees associated with implementation services are recognized as revenue.
| F-12 |
Fair Value Measurements — ASC 820, Fair Value Measurement, requires the disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. The Company follows a fair value measurement hierarchy to measure financial instruments. The fair value of the Company’s financial instruments is measured using inputs from the three levels of the fair value hierarchy as follows:
| Level 1 — | Inputs are unadjusted quoted market prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. | |
| Level 2 — | Inputs are directly or indirectly observable, which include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |
| Level 3 — | Inputs are unobservable inputs that are used to measure fair value to the extent observable inputs are not available. |
The Company has certain financial instruments that are not measured at fair value on a recurring basis. These financial instruments are subject to fair value adjustments only in certain circumstances and include cash, accounts receivable, accounts payable and accrued expenses, borrowings under term loans and line of credit, and notes payable. Due to the short term nature of these financial instruments and that the borrowings bear interest at prevailing market rates, the carrying value approximates the fair value.
Foreign
Currency Translation — The financial statements of the Company’s foreign subsidiaries are translated from their functional
currency into U.S. dollars, the Company’s functional currency. All foreign currency assets and liabilities are translated at the
period-end exchange rate, and all revenue and expenses are translated at transaction date exchange rates. The effects of translating
the financial statements of the foreign subsidiaries into U.S. dollars are reported as a cumulative translation adjustment, a separate
component of accumulated other comprehensive loss in the consolidated statements of shareholders’ equity, except for transactions
related to the intercompany receivable for which transaction adjustments are recorded in the consolidated statements of operations as
they are not deemed to be permanently reinvested. Foreign currency transaction gains/losses are reported as a component of other expense
– net in the consolidated statements of operations and amounted to a loss of approximately $
Restructuring Costs —Restructuring costs incurred in 2025 and 2024 primarily consist of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements. (See Note 14).
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 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 the fiscal years beginning after December 15, 2023. There was no impact on the 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 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.
| F-13 |
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 and has 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. The impact was only to the financial statement disclosures which has been adopted by the Company prospectively by adding such disclosures as income taxes paid by jurisdiction and effective income tax rate percentages in the rate reconciliation table.
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. There was no impact on the consolidated financial statements as a result of this standard.
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 September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). This update makes targeted improvements to Subtopic 350-40 to increase the operability of the recognition guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods, including methods that entities may use to develop software in the future. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The Company is in the process of determining if this update will have a significant impact on the consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270). This update improves the guidance in Topic 270, Interim Reporting, by improving the navigability of the required interim disclosures and clarifying when that guidance is applicable. The amendments in this update are effective for all entities that provide interim financial statements and notes in accordance with generally accepted accounting principles for interim reporting periods within annual reporting periods beginning after December 15, 2027. The amendments in this update can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The expected impact would only be to the financial statement disclosures.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements. This project facilitates Codification updates for a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications, and other minor improvements. The Board decided that the types of issues that it will consider through this project are improvements that are not expected to have a significant effect on current accounting practice or result in significant costs to most entities. The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The Company does not expect this update to have a material impact on the consolidated financial statements.
| F-14 |
| 3. | ACQUISITIONS |
Effective
October 1, 2025 (the “MAP App Closing Date”), the Company entered into an Asset Purchase Agreement (the “APA”)
with the Healthcare Financial Management Association (the “HFMA”), an Illinois not-for-profit corporation, to acquire MAP
App. The acquisition has been accounted for as a business combination. Under the APA, the Company paid $
MAP App is an industry-leading tool for benchmarking and measuring revenue cycle management performance, which was developed by the HFMA and is used by top hospitals and healthcare organizations nationwide.
The preliminary purchase price allocation of the MAP App acquisition is summarized as follows:
| ($ in thousands) | ||||
| Cash | $ | |||
| Contingent consideration | ||||
| Total purchase price | $ | |||
| ($ in thousands) | ||||
| Customer relationships | $ | |||
| Technology acquired | ||||
| Trademark | ||||
| Goodwill | ||||
| Deferred revenue | ( | ) | ||
| Total preliminary purchase price allocation | $ | |||
The
fair value of customer relationships was based on the estimated discounted cash flows generated by these intangibles. The goodwill represents
the Company’s ability to develop software relationships with hospitals to support RCM growth. The goodwill from this acquisition
is deductible ratably for income tax purposes over fifteen years. It was estimated that the probable future payments required under the
APA will be approximately $
The Company performed the valuation of the acquired assets and the contingent consideration. The purchase price allocation is preliminary and will be finalized by the end of the first quarter of 2026 when additional information is obtained regarding customer attrition. The weighted-average amortization period of the acquired intangible assets is approximately three years.
Revenue
earned from the clients obtained from the MAP App acquisition was approximately $
The acquisition reflects both the HFMA’s desire to partner with a leader in healthcare technology to expand MAP App’s core capabilities and CareCloud’s strategy to expand its SaaS-based ecosystem with best-in-class tools that complement its AI-powered revenue cycle platform.
On August 22, 2025 (the “Medsphere Closing Date”), Holdings, a newly created, indirect subsidiary of CareCloud, executed an Asset Purchase Agreement (the “Purchase Agreement”) with Medsphere Systems Corporation, a Delaware corporation (“Medsphere”). The acquisition was accounted for as a business combination. Pursuant to the Purchase Agreement, Holdings acquired certain assets and assumed certain liabilities of Medsphere, which was in the business of providing healthcare IT software and related services primarily to the U.S. inpatient and ambulatory market.
| F-15 |
The
aggregate purchase price for the acquisition was $
The purchase price allocation of the Medsphere acquisition is summarized as follows:
| ($ in thousands) | ||||
| Cash | $ | |||
| Notes payable | ||||
| Contingent escrow | ||||
| Total purchase price | $ | |||
| ($ in thousands) | ||||
| Accounts receivable | $ | |||
| Contract asset | ||||
| Property and equipment | ||||
| Customer relationships | ||||
| Technology acquired | ||||
| Trademarks | ||||
| Goodwill | ||||
| Accounts payable | ( | ) | ||
| Accrued compensation | ( | ) | ||
| Deferred revenue | ( | ) | ||
| Total purchase price allocation | $ | |||
The fair value of the contract asset was based on the expected revenue earned by Medsphere as of the Medsphere Closing Date. The fair value of customer relationships was based on the estimated discounted cash flows generated by these intangibles. The goodwill represents the Company’s ability to expand in the inpatient and ambulatory market and operational synergies that we expect to achieve that would not be available to other market participants. The goodwill from this acquisition is deductible ratable for income tax purposes over fifteen years. The acquired accounts receivable is recorded at fair value, which represents amounts that have been subsequently paid or are expected to be paid by clients. The fair value of the technology is based on the present value of the expected after-tax royalty savings. The fair value of the property and equipment, accounts payable, accrued compensation and deferred revenue were based on the acquisition date fair values.
The
Company engaged a third-party valuation specialist to determine the fair value of the intangible assets acquired in the Medsphere acquisition.
The fair value of the remaining assets and liabilities were determined by the Company. The weighted-average amortization period of the
acquired intangible assets is approximately
Revenue
earned from the clients obtained from the Medsphere acquisition was approximately $
The Medsphere acquisition added additional clients to the Company’s customer base, allowed access to additional inpatient clients and the clinical software market, expanded the Company’s ambulatory footprint and provided entry into certain managed services.
| F-16 |
On
April 1, 2025 (the “RevNu Closing Date”), the Company entered into an Asset Purchase Agreement (the “APA”) with
Gratius Enterprises, Inc., doing business as RevNu Medical Management (“RevNu”), pursuant to which the Company acquired certain
assets of RevNu. The acquisition has been accounted for as a business combination. Under the APA,
RevNu
is in the business of providing audiology and hearing aid billing/revenue cycle IT solutions and related services to hearing healthcare
providers/practices. The total consideration for this acquisition consisted of contingent consideration of approximately $
The purchase price allocation of RevNu is summarized as follows:
| ($ in thousands) | ||||
| Contract asset | $ | |||
| Customer relationships | ||||
| Goodwill | ||||
| Total purchase price allocation | $ | |||
The
fair value of the contract asset was based on the expected revenue earned by RevNu as of the RevNu Closing Date. The fair value of customer
relationships was based on the estimated discounted cash flows generated by these intangibles. The goodwill represents the Company’s
ability to expand in the audiology and hearing aid market. The goodwill from this acquisition is deductible ratably for income tax purposes
over fifteen years. It was estimated that the probable future payments required under the APA will be approximately $
The Company performed the valuation of the acquired assets and the contingent consideration. The weighted-average amortization period of the acquired intangible assets is approximately three years.
Revenue
earned from the clients obtained from the RevNu acquisition was approximately $
The RevNu acquisition added additional clients in the audiology market to the Company’s customer base and, similar to previous acquisitions, broadened the Company’s presence in the healthcare information technology industry through expansion of its customer base and by increasing available customer relationship resources and specialized trained staff.
Pro forma financial information (Unaudited)
The
unaudited pro forma information below represents the Company’s consolidated results of operations as if the MAP App, Medsphere,
RevNu and one other small acquisition occurred on January 1, 2024. The pro forma information has been included for comparative purposes
and is not indicative of results of operations the Company would have had if the acquisitions occurred on the above date, nor is it necessarily
indicative of future results. The unaudited pro forma information reflects material, non-recurring pro forma adjustments directly attributable
to the business combinations. The difference between the actual net revenue and the pro forma net revenue is approximately $
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands, except per share amounts) | ||||||||
| Net revenue | $ | $ | ||||||
| Net income | $ | $ | ||||||
| Net income (loss) attributable to common shareholders | $ | $ | ( | ) | ||||
| Net income (loss) per share - basic and fully diluted | $ | $ | ) | |||||
| F-17 |
| 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 December 31, 2025,
and 2024, approximately $
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Beginning gross balance | $ | $ | ||||||
| Additions | ||||||||
| Ending gross balance | $ | $ | ||||||
Below is a summary of intangible asset activity for the years ended December 31, 2025 and 2024:
| Customer | Capitalized | Other Intangible | ||||||||||||||
| Relationships | Software | Assets | Total | |||||||||||||
| COST | ($ in thousands) | |||||||||||||||
| Balance, January 1, 2025 | $ | $ | $ | $ | ||||||||||||
| Additions | ||||||||||||||||
| Translation loss | ( | ) | ( | ) | ||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | ||||||||||||
| Useful lives | ||||||||||||||||
| ACCUMULATED AMORTIZATION | ||||||||||||||||
| Balance, January 1, 2025 | $ | $ | $ | $ | ||||||||||||
| Amortization expense | ||||||||||||||||
| Translation loss | ( | ) | ( | ) | ||||||||||||
| Balance, December 31, 2025 | ||||||||||||||||
| Net book value | $ | $ | $ | $ | ||||||||||||
| COST | ||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | $ | ||||||||||||
| Additions | ||||||||||||||||
| Translation gain | ||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ||||||||||||
| Useful lives | ||||||||||||||||
| ACCUMULATED AMORTIZATION | ||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | $ | ||||||||||||
| Amortization expense | ||||||||||||||||
| Translation gain | ||||||||||||||||
| Balance, December 31, 2024 | ||||||||||||||||
| Net book value | $ | $ | $ | $ | ||||||||||||
We reviewed our other long-term assets for impairment. We determined that the fair value of these assets exceeded their carrying value and that there was no impairment. There were no triggering events during the year ended December 31, 2025.
The
amount for capitalized software represents payroll and development costs incurred for internally developed software. Other intangible
assets primarily represent non-compete agreements, purchased and acquired software and trademarks. Amortization expense was approximately
$
| F-18 |
As of December 31, 2025, future amortization expense scheduled to be expensed is as follows:
| Years ending December 31, | ($ in thousands) | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Total | $ | |||
| 5. | PROPERTY AND EQUIPMENT |
Property and equipment consisted of the following:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Computer equipment | $ | $ | ||||||
| Aircraft | ||||||||
| Office furniture and equipment | ||||||||
| Transportation equipment | ||||||||
| Leasehold improvements | ||||||||
| Assets not placed in service | ||||||||
| Total property and equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment – net | $ | $ | ||||||
Depreciation
expense was approximately $
We reviewed our property and equipment for impairment. We determined that the fair value of these assets exceeded their carrying value and that there was no impairment. There were no triggering events during the years ended December 31, 2025 and 2024.
6. CONCENTRATIONS
Financial
Risks — As of December 31, 2025 and 2024, the Company held cash of approximately $
Concentrations
of credit risk with respect to trade accounts receivable are managed by periodic credit evaluations of customers. The Company does not
require collateral for outstanding trade accounts receivable. As of December 31, 2025, two customers each individually accounted for
approximately
Geographical Risks — The Company’s offices in Islamabad, Karachi and Bagh, Pakistan, and Colombo, Sri Lanka conduct significant back-office operations for the Company. The Company has no revenue earned outside of the United States. The office in Bagh is located in a different territory of Pakistan from the Islamabad office known as Azad Jammu and Kashmir. The Bagh office was opened in 2009 for the purpose of providing operational support and operating as a backup to the Islamabad office. The Bagh office operates as the main operational center for the Company. The Company’s operations outside the United States are subject to special considerations and significant risks not typically associated with companies in the United States. The Company’s business, financial condition and results of operations may be influenced by the political, economic, and legal environment in the countries in which it operates and by the general state of these countries’ economies. The Company’s results may be adversely affected by, among other things, changes in governmental policies with respect to laws and regulations, changes in local countries’ telecommunications industries, regulatory rules and policies, anti-inflationary measures, currency conversion and remittance, and rates and methods of taxation.
| F-19 |
Carrying
amounts of net assets located outside the United States were approximately $
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Current assets | $ | $ | ||||||
| Non-current assets | ||||||||
| Current liabilities | ( | ) | ( | ) | ||||
| Non-current liabilities | ( | ) | ( | ) | ||||
| Net assets | $ | $ | ||||||
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands, except share and per share amounts) | ||||||||
| Basic and Diluted: | ||||||||
| Net income (loss) attributable to common shareholders | $ | $ | ( | ) | ||||
| Weighted-average common shares used to compute basic income (loss) per share | ||||||||
| Weighted-average common shares used to compute diluted income (loss) per share | ||||||||
| Net income (loss) attributable to common shareholders per share - basic and diluted | $ | $ | ) | |||||
The
net income (loss) attributable to common shareholders includes the preferred stock dividend amounts earned for the year ended December
31, 2025 of approximately $
At December 31, 2025, the unvested common stock restricted stock units (“RSUs”) as discussed in Note 16 were included in the above earnings per share calculation but did not change the amount. At December 31, 2024, the unvested equity RSUs were excluded from the above earnings per share calculation as they were anti-dilutive.
8. DEBT
Silicon
Valley Bank (“SVB”) — During October 2017, the Company opened a revolving line of credit from SVB under a three-year
agreement which replaced the previous credit facility.
| F-20 |
As
of December 31, 2024, there were borrowings under the credit facility. Interest on the revolving line of credit was charged at the
prime rate plus
The
SVB credit agreement contained various covenants and conditions governing the revolving line of credit including an annual fee of $
During
October 2024, the Company entered into a Ninth Loan Modification agreement with SVB whereby the Company decreased the amount available
on its revolving line of credit from $
On
September 3, 2025, the Company entered into an agreement (the “Agreement”) with Provident Bank (“Provident”)
whereby Provident provided the Company with an available line of credit of $
Upon
entering into the Agreement, the Company borrowed approximately $
On
November 7, 2025, the Company entered into a five-year loan agreement with Republic Bank & Trust Company
(“Republic”) for $
The
Company maintains cash balances at Provident in excess of the FDIC insurance coverage limits. The Company performs periodic evaluations
of the relative credit standing of Provident to ensure its credit worthiness. As of December 31, 2025 and December 31, 2024, the Company
held cash of approximately $
Vehicle
Financing Notes — The Company finances certain vehicle purchases both in the United States and in Pakistan. The vehicle financing
notes typically have three to
Aircraft
Financing Note — The Company financed an aircraft purchase with a note for $
| F-21 |
Maturities of the outstanding notes payable and other obligations as of December 31, 2025 are as follows:
| Financing Notes | ||||||||||||
| Years ending December 31, | Vehicle | Aircraft | Total | |||||||||
| ($ in thousands) | ||||||||||||
| 2026 | $ | $ | $ | |||||||||
| 2027 | ||||||||||||
| 2028 | ||||||||||||
| Total | $ | $ | $ | |||||||||
9. REVENUE
Introduction
The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. All revenue is recognized as our performance obligations are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under ASC 606. The Company recognizes revenue when the revenue cycle management services begin on the medical billing claims, which is generally upon receipt of the claim from the provider. For many services, the Company recognizes revenue as a percentage of the amount the customer collects on the medical billing claims. The Company’s software is utilized at the time the provider sees the patient, and the Company estimates the value of the consideration it will earn over the remaining contractual period as our services are provided and recognizes the fees over the term; this estimation involves predicting the amounts our clients will ultimately collect associated with the services they provided. Certain significant estimates, such as payment-to-charge ratios, effective billing rates and the estimated contractual payment periods are required to measure revenue cycle management revenue under the new standard.
Most of our current contracts with customers contain a single performance obligation. The Company accounts for individual performance obligations separately if they are distinct. For contracts where we provide multiple services, such as where we perform multiple ancillary services, each service represents its own performance obligation. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. The Company determines the SSP based on the Company’s overall pricing objectives by reviewing the Company’s significant pricing practices, including discounting practices, geographical locations, the size and volume of the Company’s transactions, the customer type, price lists, pricing strategy, and historical standalone sales. The SSP is analyzed on a periodic basis to identify if the Company has experienced significant changes in selling prices.
We apply the portfolio approach as permitted by ASC 606 as a practical expedient to contracts with similar characteristics and we use estimates and assumptions when accounting for those portfolios. Our contracts generally include standard commercial payment terms. We have no significant obligations for refunds, warranties or similar obligations and our revenue does not include taxes collected from our customers.
Disaggregation of Revenue from Contracts with Customers
We derive revenue from five primary sources: (1) Technology-enabled business solutions, (2) professional services, (3) printing and mailing services, (4) group purchasing services and (5) medical practice management services.
| F-22 |
The following table represents a disaggregation of revenue for the years ended December 31, 2025 and 2024:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Healthcare IT: | ||||||||
| Technology-enabled business solutions | $ | $ | ||||||
| Professional services | ||||||||
| Printing and mailing services | ||||||||
| Group purchasing services | ||||||||
| Medical Practice Management: | ||||||||
| Medical practice management services | ||||||||
| Total | $ | $ | ||||||
Technology-enabled business solutions:
Revenue derived on an on-going basis from our technology-enabled solutions, which typically includes revenue cycle management services, is billed as a percentage of payments collected by our customers. The fee for our services often includes the ability to use our EHR and practice management software as well as RCM as part of the bundled fee. The SaaS component is not a material portion of the contract compared to the stand-alone value of RCM.
Technology-assisted revenue cycle management services are the recurring process of submitting and following up on claims with health insurance companies in order for the healthcare providers to receive payment for the services they rendered. The Company typically invoices customers on a monthly basis based on the actual collections received by its customers and the agreed-upon rate in the sales contract. The fee for these services typically includes use of practice management software and related tools (on a SaaS basis), electronic health records (on a SaaS basis), medical billing services and use of mobile health solutions. We consider the services to be one performance obligation since the promises are not distinct in the context of the contract. The performance obligation consists of a series of distinct services that are substantially the same and have the same periodic pattern of transfer to our customers.
In many cases, our clients may terminate their agreements with 90 days’ notice without cause, thereby limiting the term in which we have enforceable rights and obligations, although this time period can vary between clients. Our payment terms are normally net 30 days. Although our contracts typically have stated terms of one or more years, under ASC 606 our contracts are considered month-to-month and accordingly, there is no financing component.
For the majority of our revenue cycle management contracts, the total transaction price is variable because our obligation is to process an unknown quantity of claims, as and when requested by our customers over the contract period. When a contract includes variable consideration, we evaluate the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, we include variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with variable consideration is subsequently resolved. Estimates to determine variable consideration such as payment to charge ratios, effective billing rates, and the estimated contractual payment periods are updated at each reporting date. Revenue is recognized over the performance period using the input method.
Our proprietary, cloud-based practice management application automates the labor-intensive workflow of a medical office in a unified and streamlined SaaS platform. The Company has a large number of clients who utilize the Company’s practice management, urgent care and clinical workflow software, electronic health records software, patient experience management solutions, business intelligence software, inventory management systems, and/or robotic process automation software on a SaaS basis, but who do not utilize the Company’s revenue cycle management services. SaaS fees may be fixed based on the number of providers, or may be variable.
Our
digital health services, which began generating revenue in 2022, include Chronic Care Management (“CCM”), where a care manager
has remote visits with patients with one or more chronic conditions under the supervision of a physician who is our client. The performance
obligation for CCM is satisfied at a point in time once the patient receives the remote visit. The digital health services also include
Remote Patient Monitoring (“RPM”) where our system monitors recordings from FDA approved internet connected devices. These
devices record patient trends and alerts the physician to changes which might trigger the need for additional follow-up visits. The performance
obligations for remote patient monitoring are satisfied over time as the recordings are received and the patient receives the remote
visit. The revenue for CCM for the years ended December 31, 2025 and 2024 was approximately $
| F-23 |
The medical billing clearinghouse service takes claim information from customers, checks the claims for errors and sends this information electronically to insurance companies. The Company invoices customers on a monthly basis based on the number of claims submitted and the agreed-upon rate in the agreement. This service is provided to medical practices and providers to medical practices who are not revenue cycle management customers. The performance obligation is satisfied once the relevant submissions are completed.
Additional services such as coding and transcription are rendered in connection with the delivery of revenue cycle management and related medical services. The Company invoices customers monthly, based on the actual amount of services performed at the agreed-upon rate in the contract. These services are only offered to revenue cycle management customers. These services do not represent a material right because the services are optional to the customer and customers electing these services are charged the same price for those services as if they were on a standalone basis. Each individual coding or transcription transaction processed represents a performance obligation, which is satisfied over time as that individual service is rendered.
Professional services:
Our
professional services include an extensive set of services including EHR vendor-agnostic optimization and activation, project management,
IT transformation consulting, process improvement, training, education and staffing for large healthcare organizations including health
systems and hospitals. Our professional services beginning in 2025 include managed IT services, government consulting and product development
services. The performance obligation is satisfied over time using the input method. The revenue is recorded on a monthly basis as the
professional services are rendered. Unbilled revenue at December 31, 2025 and 2024 was approximately $
Printing and mailing services:
The Company provides printing and mailing services for both revenue cycle management customers and a non- revenue cycle management customer, and invoices on a monthly basis based on the number of prints, the agreed-upon rate per print and the postage incurred. The performance obligation is satisfied once the printing and mailing is completed.
Group purchasing services:
The Company provides group purchasing services which enable medical providers to purchase various vaccines directly from selected pharmaceutical companies at a discounted price. Currently, there are approximately 4,000 medical providers who are members of the program. Revenue is recognized as the vaccine shipments are made to the medical providers. Fees from the pharmaceutical companies are paid either quarterly or annually and the Company adjusts its revenue accrual at the time of payment. The Company makes significant judgments regarding the variable consideration which we expect to be entitled to for the group purchasing services which includes the anticipated shipments to the members enrolled in the program, anticipated volumes of purchases made by the members, and the changes in the number of members. The amounts recorded are constrained by estimates of decreases in shipments and loss of members to avoid a significant revenue reversal in the subsequent period. The only performance obligation is to provide the pharmaceutical companies with the medical providers who want to become members in order to purchase vaccines. The performance obligation is satisfied once the medical provider agrees to purchase a specific quantity of vaccines and the medical provider’s information is forwarded to the vaccine suppliers. The Company records a contract asset for revenue earned and not paid as the ultimate payment is conditioned on achieving certain volume thresholds.
For all of the above revenue streams other than group purchasing services and CCM, revenue is recognized over time, which is typically one month or less, which closely matches the point in time that the customer simultaneously receives and consumes the benefits provided by the Company. For the group purchasing services, revenue is recognized at a point in time. Each service is substantially the same and has the same periodic pattern of transfer to the customer. Each of the services provided above is considered a separate performance obligation.
There were no unsatisfied performance obligations for contracts with an original duration greater than one year. The Company has elected to utilize the practical expedient available with the guidance for contracts with an expected duration of one year or less.
| F-24 |
Medical practice management services:
The Company also provides medical practice management services under long-term management service agreements to three medical practices. We provide the medical practices with the nurses, administrative support, facilities, supplies, equipment, marketing, RCM, accounting, and other non-clinical services needed to efficiently operate their practices. Revenue is recognized as the services are provided to the medical practices. Revenue recorded in the consolidated statements of operations represents the reimbursement of costs paid by the Company for the practices and the management fee earned each month for managing the practice. The management fee is based on either a fixed fee or a percentage of the net operating income.
The Company assumes all financial risk for the performance of the managed medical practices. Revenue is impacted by the amount of the costs incurred by the practices and their operating income. The gross billing of the practices is impacted by billing rates, changes in current procedural terminology code reimbursement and collection trends which in turn impacts the management fee that the Company is entitled to. Billing rates are reviewed at least annually and adjusted based on current insurer reimbursement practices. The performance obligation is satisfied as the management services are provided.
Our contracts for medical practice management services have approximately an additional 13 years remaining and are only cancellable under very limited circumstances. The Company receives a management fee each month for managing the day-to-day business operations of each medical group as a fixed fee or a percentage payment of the net operating income which is included in revenue in the consolidated statements of operations.
Our medical practice management services obligations consist of a series of distinct services that are substantially the same and have the same periodic pattern of transfer to our customers. Revenue is recognized over time, however for reporting and convenience purposes, the management fee is computed at each month end.
Information about contract balances:
As
of December 31, 2025, the estimated revenue expected to be recognized in the future related to the remaining revenue cycle management
performance obligations outstanding was approximately $
Amounts that we are entitled to collect under the applicable contract are recorded as accounts receivable. Invoicing is performed at the end of each month when the services have been provided. The contract asset includes our right to payment for services already transferred to a customer when the right to payment is conditional on something other than the passage of time. For example, contracts for revenue cycle management services where we recognize revenue over time but do not have a contractual right to payment until the customer receives payment of their claim from the insurance provider. The contract asset also includes the revenue accrued, not received, for the group purchasing services.
| F-25 |
Changes in the contract asset are recorded as adjustments to net revenue. The changes primarily result from providing services to revenue cycle management customers that result in additional consideration and are offset by our right to payment for services becoming unconditional and changes in the revenue accrued for the group purchasing services. The contract asset for our group purchasing services is reduced when we receive payments from vaccine manufacturers and is increased for revenue earned, not received. The opening and closing balances of the Company’s accounts receivable, contract asset and deferred revenue are as follows:
Accounts Receivable - Net | Contract Asset | Deferred Revenue (current) | Deferred Revenue (long term) | |||||||||||||
| ($ in thousands) | ||||||||||||||||
| Balance as of January 1, 2025 | $ | $ | $ | $ | ||||||||||||
| Acquisitions | ||||||||||||||||
| Increase (decrease), net | ( | ) | ( | ) | ||||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | $ | ||||||||||||
| Balance as of January 1, 2024 | $ | $ | $ | $ | ||||||||||||
| Increase (decrease), net | ( | ) | ( | ) | ||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | ||||||||||||
Deferred revenue:
The
amount of deferred revenue that was recorded at the beginning of the year and recognized during the years ended December 31, 2025 and
2024 was approximately $
Deferred commissions:
Our
sales incentive plans include commissions payable to employees and third parties at the time of the initial contract execution that are
capitalized as incremental costs to obtain a contract. The capitalized commissions are amortized over the period the related services
are transferred. As we do not offer commissions on contract renewals, we have determined the amortization period to be the estimated
client life, which is three years. Deferred commissions were approximately $
Trade Accounts Receivable – Estimate of Credit Losses:
ASU 2016-13 requires the recognition of lifetime estimated credit losses expected to occur for trade accounts receivable. The guidance also requires we pool assets with similar risk characteristics and consider current economic conditions when estimating losses.
At adoption, we segmented the accounts receivable population into pools based on their risk assessment. Risks related to trade accounts receivable are a customer’s inability to pay or bankruptcy. Each pool was defined by their internal credit assessment and business size. The pools are aligned with management’s review of financial performance. For the years ended December 31, 2025 and 2024, no adjustment to the pools was necessary.
We utilize a loss-rate method to measure the expected credit loss for each pool. The loss rate is calculated using a three-year lookback period of write-offs and adjustments, divided by the revenue for each pool by aging category, net of customer payments during that period. We consider current and future economic conditions, internal forecasts, customer collection experience and credit memos issued during the current period when assessing loss rates. We reviewed these factors and concluded that no adjustments should be made to the historical loss rate data for the current quarter. In addition, the Company uses specific account identification in determining the total allowance for expected credit losses. Trade receivables are written off only after the Company has exhausted all collection efforts.
Changes in the allowance for expected credit losses for trade accounts receivable are presented in the table below:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Beginning balance | $ | $ | ||||||
| Provision | ||||||||
| Recoveries/adjustments | ||||||||
| Write-offs | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
| F-26 |
10. SHAREHOLDERS’ EQUITY
On
September 11, 2024, a Certificate of Amendment (the “Amendment”) to the Certificate of Designations, Preferences and Rights
of
The
title of the Existing Certificate was amended to read “Amended and Restated Certificate of Designations, Preferences and Rights
of
Treasury stock
The
Board of Directors of the Company previously approved common stock repurchase programs. The last program expired in
Common stock
In January 2025, the Company’s common stock shareholders approved an increase in the number of authorized common shares from million to million. An amended certificate of incorporation was filed by the Company.
Preferred stock
The Company has authorized shares of preferred stock of which have been designated as Series A shares and the balance have been designated as Series B shares.
Since September 11, 2024, we have had the right, at our option, to convert the majority of the Series A Preferred Stock into common stock at any time. If we convert shares of the Series A Preferred Stock, then subsequent to the conversion date, dividends would cease to accrue on shares of the Series A Preferred Stock. The shares of the Series A Preferred Stock will then no longer be deemed outstanding and all rights as a holder of those shares will terminate, except the right to receive the shares of common stock plus accumulated and unpaid dividends, if any, payable upon the conversion.
On March 6, 2025, the Board of Directors elected to exercise its conversion rights, which provided for the conversion of each share of Series A Preferred Stock into shares of common stock, inclusive of all accumulated and unpaid dividends (the “Conversion”). Dividends on the converted shares of Series A Preferred Stock ceased to accrue as of the conversion date. Individual shareholders who, on the exchange date, owned at least shares of Series A Preferred Stock did not have their shares automatically converted to common stock so long as they were held by the Company’s transfer agent, unless they consented to the Conversion. There were shares of Series A Preferred Stock converted at that time and shares of Series A Preferred Stock continued to be outstanding at that time and through December 31, 2025. Due to the Conversion, the monthly cash dividends on Series A Preferred Stock were reduced to approximately $ per month. As a result of the Conversion, the Company delisted the Series A Preferred Stock from the Nasdaq Global Market.
Since
November 4, 2020, the Company has the right to redeem, at its option, the Series A Preferred Stock, in whole or in part, at a cash
redemption price of $
per share, plus all accrued and unpaid dividends to, but not including, the redemption date. This right continues for the remaining
shares of the Series A Preferred Stock still outstanding. The Series A Preferred Stock has no stated maturity, is not subject to any
sinking fund or other mandatory redemption, and is not convertible at the option of the holder into or exchangeable for any of the
Company’s other securities. Holders of the Series A Preferred Stock have no voting rights except for limited voting rights if
dividends payable on the Series A Preferred Stock are in arrears for eighteen or more consecutive or non-consecutive monthly
dividend periods, at which time they are entitled to appoint two additional directors to our Board of Directors. If the Company were
to liquidate, dissolve or wind up, the holders of the Series A Preferred Stock will have the right to receive $
Since February 15, 2025 and prior to February 15, 2026, we were able to redeem, at our option, the Series B Preferred Stock, in whole or in part, at a cash redemption price of $ per share, plus all accrued and unpaid dividends to, but not including, the redemption date. On or after February 15, 2026 and prior to February 15, 2027, we may redeem, at our option, the Series B Preferred Stock, in whole or in part, at a cash redemption price of $ per share, plus all accrued and unpaid dividends to, but not including, the redemption date. On or after February 15, 2027, we may redeem, at our option, the Series B Preferred Stock, in whole or in part, at a cash redemption price of $ per share, plus all accrued and unpaid dividends to, but not including, the redemption date. The Series B Preferred Stock is listed on the Nasdaq Global Market under the trading symbol “CCLDO.”
Dividends
on the Series A Preferred Stock of $ annually
per share (through September 11, 2024 and $ thereafter)
and the Series B Preferred Stock at $ annually
per share are cumulative from the date of issue and are payable each month when, as and if declared by the Company’s Board of
Directors. In October 2023, the Board of Directors declared monthly dividends on the Series A and Series B Preferred Stock payable
through February 2024. However, on December 11, 2023, the Board of Directors suspended the monthly cash dividends for Series A
Preferred Stock and Series B Preferred Stock beginning with the payment scheduled for December 15, 2023 together with the remaining
dividends that were declared. The suspension of these dividends deferred approximately $
| F-27 |
During the suspension, dividends continued to accrue in arrears on the Series A and Series B Preferred Stock. The Company’s Board of Directors declared payment of two months of dividends in January 2025 and the Company resumed payment of the dividends in February 2025, paying one month of dividends in arrears each month during the remainder of 2025.
During
the year ended December 31, 2024, no dividends were declared by the Board of Directors. At December 31, 2024, the Company owed approximately
$million for dividends that had previously been declared through February 2024 (but whose payment was suspended), and also had total
undeclared dividends of approximately $
In February 2025, the Company resumed monthly payment of the dividends on the Series A and B Preferred Stock, paying one month of dividends in arrears and continuing through the remainder of the year and applying these amounts to the earliest payments in arrears. The payments made starting in March 2025, which occurred after the Conversion included dividends for the shares of Series A Preferred Stock that were not converted and dividends for the Series B Preferred Stock.
At
December 31, 2025, the Company had total undeclared dividends of approximately $
Warrants
There
were
11. 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 $
| F-28 |
In
March 2019, 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 $
In
connection with a prior acquisition, the seller had alleged that the Company owed approximately $
A
former customer had a dispute with the Company that was based on services before and after the account was acquired in an acquisition.
A complaint was filed 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 $
A
dispute occurred with a former customer regarding previous services rendered and they filed a complaint in New York Supreme Court, Onondaga
County in January 2024. During settlement communications, Plaintiff’s initial settlement demand was over $
A
dispute arose with a current customer utilizing the Company’s system and they filed a complaint in Connecticut Superior Court,
Judicial District of Middlesex in April 2025. The parties agreed to settle the claim for $
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.
12. 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 ROU assets, current operating lease liability and non-current operating lease liability in our consolidated balance sheets as of December 31, 2025 and 2024. The Company does not have any finance leases.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of the lease payments over the lease term.
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.
| F-29 |
Our
lease terms include options to extend the lease when it is reasonably certain that we will exercise that option.
If a lease is modified after the effective date, the operating lease ROU asset and liability is re-measured using the current incremental borrowing rate. There was one lease modification during both the years ended December 31, 2025 and 2024. We review our incremental borrowing rate for our portfolio of leases on a quarterly basis.
There
were
Lease
expense is included in direct operating costs, general and administrative expense, selling and marketing expense and research and development
expense in the consolidated statements of operations based on the nature of the expense. As of December 31, 2025,
The components of lease expense were as follows:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Operating lease cost | $ | $ | ||||||
| Short-term lease cost | ||||||||
| Variable lease cost | ||||||||
| Total - net lease cost | $ | $ | ||||||
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 was as follows:
| December 31, 2025 | December 31, 2024 | |||||||
| ($ in thousands) | ||||||||
| Operating leases: | ||||||||
| Operating lease ROU assets, net | $ | $ | ||||||
| Current operating lease liabilities | $ | $ | ||||||
| Non-current operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Operating leases: | ||||||||
| ROU assets | $ | $ | ||||||
| Asset lease expense | ( | ) | ( | ) | ||||
| Foreign exchange (loss)/gain | ( | ) | ||||||
| ROU assets, net | $ | $ | ||||||
| Weighted average remaining lease term (in years): | ||||||||
| Operating leases | ||||||||
| Weighted average discount rate: | ||||||||
| Operating leases | % | % | ||||||
| F-30 |
Supplemental cash flow and other information related to leases was as follows:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| ROU assets obtained in exchange for lease liabilities: | ||||||||
| Operating leases, excluding terminations | $ | $ | ||||||
Maturities of lease liabilities are as follows:
| Operating leases - Years ending December 31, | ($ in thousands) | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total lease obligations | ||||
| Less: current obligations | ||||
| Long-term lease obligations | $ | |||
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 years ended December 31, 2025 and 2024, the Company received sublease income of
approximately $
13. RELATED PARTIES
The
Company had sales to a related party, a physician who is the wife of the Executive Chairman. Revenues from this customer were approximately
$
The
Company leases its corporate offices in New Jersey, its temporary housing for its foreign visitors, a storage facility, its operations
center in Bagh, Pakistan and an apartment for temporary housing in Dubai, the UAE, from the Executive Chairman. The related party rent
expense for the years ended December 31, 2025 and 2024 was approximately $
Included
in the ROU asset at December 31, 2025 is approximately $
| F-31 |
During
2025, the Company employed the son of the current Chief Executive Officer. For the year ended December 31, 2025, the Company
recorded approximately $
Effective
January 9, 2024, and as amended February 12, 2024, the Company entered into a consulting agreement with an entity owned and controlled
by a member of its Board of Directors to provide investor relations and other services as requested for $
During
June 2022, the Company entered into a one-year consulting agreement with an entity owned and controlled by one of its former non-independent
directors whereby that director received shares of the Company’s
During
2020, a New Jersey corporation, talkMD Clinicians, PA (“talkMD”), was formed by the wife of the Executive Chairman, who is
a licensed physician, to provide telehealth services. talkMD was determined to be a variable interest entity (“VIE”) for
financial reporting purposes because the entity will be controlled by the Company. As of December 31, 2025, talkMD had not yet commenced
operations. Cumulatively, the Company has paid approximately $
14. RESTRUCTURING COSTS
During October 2023, the Company committed to effectively align resources with business priorities and improve profitability through a reduction in the workforce for the Healthcare IT segment. The Company identified opportunities for improvements in its workforce realignment, strategy and staffing, and increased its focus on performance management, to ensure it has the right skillsets and number of employees to execute its long-term vision. In addition, the Company instituted certain other expense reductions.
A
majority of the impacted employees exited in the fourth quarter of 2023. The Company incurred expenses of approximately $
| F-32 |
The following table summarizes restructuring costs for 2025 and 2024:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Severance and separation costs | $ | $ | ||||||
| Equity awards acceleration costs associated with severance | ||||||||
| Other exit related costs | ||||||||
| Total restructuring and other costs | $ | $ | ||||||
The expense associated with the restructuring is included in restructuring costs in the consolidated statement of operations for the years ended December 31, 2025 and 2024. The liabilities associated with restructuring costs are included in accrued expenses in the consolidated balance sheet. The following table summarizes activity related to liabilities associated with restructuring costs:
| Severance
and separation costs | Other exit related costs | Total
restructuring and other costs | ||||||||||
| ($ in thousands) | ||||||||||||
| Balance as of January 1, 2025 | $ | $ | $ | |||||||||
| Additions | ||||||||||||
| Payments and other adjustments | ( | ) | ( | ) | ||||||||
| Balance as of December 31, 2025 | $ | $ | $ | |||||||||
| Balance as of January 1, 2024 | $ | $ | $ | |||||||||
| Additions | ||||||||||||
| Payments and other adjustments | ( | ) | ( | ) | ( | ) | ||||||
| Balance as of December 31, 2024 | $ | $ | $ | |||||||||
15. EMPLOYEE BENEFIT PLANS
The
Company has qualified 401(k) plans covering all U.S. employees who have completed one month of service. The plans provide for matching
contributions by the Company for employees of the Company and most U.S. subsidiaries, although there is no match for CPM employees. Employer
contributions to the plans for the years ended December 31, 2025 and 2024 were approximately $
Additionally,
the Company has a defined contribution retirement plan covering all employees located in our Pakistan Offices who have completed three
months of service.
The
Company maintains a defined contribution retirement plan covering all employees in Sri Lanka. The employee and employer contribute
In April 2014, the Company adopted the Medical Transcription Billing, Corp. 2014 Equity Incentive Plan (the “Original Plan”), reserving a total of shares of common stock for grants to employees, officers, directors and consultants. On April 14, 2017, the Original Plan was amended and restated whereby an additional shares of common stock and shares of Series A Preferred Stock were added to the plan for future issuance (the “A&R Plan”). During 2018, an additional shares of Series A Preferred Stock were added to the A&R Plan for future issuance. In May 2020, an additional shares of common stock and an additional shares of Series A Preferred Stock were added to the A&R Plan for future issuance. During 2022, an additional shares of common stock and shares of Series B Preferred Stock were added to the A&R Plan for future issuance. As of December 31, 2025, shares of common stock and shares of Series B Preferred Stock are available for grant. Permissible awards include incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, RSUs, performance stock and cash-settled awards and other stock-based awards in the discretion of the Compensation Committee of the Board of Directors including unrestricted stock grants.
| F-33 |
The equity based RSUs contain a provision in which the units shall immediately vest and become converted into common shares at the rate of one common share per RSU, immediately after a change in control, as defined in the award agreement.
Common stock
During 2025, RSUs of common stock were granted to each of the five outside members of the Board of Directors with % of the shares vesting every six months. During 2024, RSUs of common stock were granted to employees and independent contractors to vest at different dates during the years 2024 through 2026. Included therein were RSUs of common stock granted over two years to each of the five outside members of the Board of Directors with of the shares vesting every six months. In connection with the death of one director during 2025, all such director’s unvested RSUs fully vested in accordance with the terms of the Company’s equity incentive plan.
| Common Stock | Series A Preferred Stock | Series B Preferred Stock | ||||||||||
| Outstanding and unvested shares at January 1, 2025 | ||||||||||||
| Granted | ||||||||||||
| Vested | ( | ) | ||||||||||
| Forfeited | ||||||||||||
| Outstanding and unvested shares at December 31, 2025 | ||||||||||||
| Outstanding and unvested shares at January 1, 2024 | ||||||||||||
| Granted | ||||||||||||
| Vested | ( | ) | ( | ) | ||||||||
| Forfeited | ( | ) | ( | ) | ||||||||
| Outstanding and unvested shares at December 31, 2024 | ||||||||||||
As of December 31, 2025 and 2024, there was approximately $ and $, respectively, of total unrecognized compensation cost related to the common stock RSUs classified as equity that will be expensed through 2027. As of December 31, 2025 and 2024, there were unrecognized compensation costs related to the Series A and Series B Preferred Stock RSUs.
Of the total outstanding and unvested common stock RSUs at December 31, 2025 and 2024, all of and , respectively, are classified as equity. For both 2025 and 2024, all of the Series B Preferred Stock RSUs are classified as equity.
| F-34 |
The following table summarizes the share activity during the years ended December 31, 2025 and 2024 and the amount of common and preferred shares available for grant at December 31, 2025 and 2024:
| Common Stock | Series A Preferred Stock | Series B Preferred Stock | ||||||||||
| Shares available for grant at January 1, 2025 | ||||||||||||
| RSUs granted | ( | ) | ||||||||||
| RSUs cancelled | ( | ) | ||||||||||
| Shares available for grant at December 31, 2025 | ||||||||||||
| Shares available for grant at January 1, 2024 | ||||||||||||
| RSUs granted | ( | ) | ( | ) | ||||||||
| RSUs forfeited | ||||||||||||
| Shares available for grant at December 31, 2024 | ||||||||||||
At
December 31, 2025, there was no liability for taxes withheld in connection with the equity awards. The liability for the cash-settled
awards and accrued payroll taxes on equity awards was approximately $
Preferred Stock
In February 2023, the Compensation Committee granted executive bonuses to be paid in shares of Series B Preferred Stock, with the number of shares and the amount based on specified criteria being achieved during the year 2023. During October 2023, the Compensation Committee approved for issuance of the above shares to one of the executives who retired. The remaining shares were not issued and previously accrued amounts were reversed during 2024.
In March 2024, the Compensation Committee approved executive bonuses to be paid in shares of Series B Preferred Stock with the number of shares and the amount based on specified criteria being achieved for the year 2024. There were shares awarded. During May 2024, an additional executive bonus with similar terms was approved and shares were awarded. During December 2024, the Compensation Committee determined that the financial objectives were attained and all of the performance bonus shares were issued.
Stock-based compensation expense
The Company recognizes compensation expense on a straight-line basis over the total requisite service period for the entire award. For stock awards classified as equity, the market price of our common stock or Preferred Stock on the date of grant is used to record the fair value of the award and includes the related taxes. For stock awards classified as a liability, the earned amount is marked to market based on the end of period common stock price. The weighted average grant date fair value of the common stock price in connection with the RSUs classified as equity was $ and $ for the years ended December 31, 2025 and 2024, respectively. For the Series B Preferred Stock, the weighted average grant date fair value was $ for the year ended December 31, 2024.
The following table summarizes the components of stock-based compensation expense for the years ended December 31, 2025 and 2024:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Direct operating costs (benefit) | $ | $ | ( | ) | ||||
| General and administrative | ||||||||
| Research and development | ( | ) | ||||||
| Selling and marketing | ||||||||
| Total stock-based compensation expense | $ | $ | ||||||
| F-35 |
17. INCOME TAXES
For the years ended December 31, 2025 and 2024, the Company estimated its income tax provision based upon the annual pre-tax income. Although the Company reported GAAP earnings in 2025 and 2024, it incurred tax losses historically and there is uncertainty regarding future U.S. taxable income, to which the Company believes makes realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against all federal and state deferred tax assets as of December 31, 2025 and 2024.
The annual adjusted earnings and profits of our foreign affiliates pass through to the U.S. as federal and state taxable income under the Global Intangible Low-Taxed Income (“GILTI”) regime now referred to as Net Controlled Foreign Corporation Tested Income (“NCTI”). For the tax years ended December 31, 2025 and 2024, the net NCTI from our foreign affiliates was absorbed against our current year U.S. consolidated loss. For state tax purposes, the Company’s foreign earnings may be taxable depending on each individual state’s legislative stance on the recent tax reform legislation. The activity in the deferred tax valuation allowance was as follows for the years ended December 31, 2025 and 2024:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Beginning balance | $ | $ | ||||||
| Current year valuation allowance increase | ||||||||
| Ending balance | $ | $ | ||||||
The income before provision for income taxes for financial reporting purposes during the years ended December 31, 2025 and 2024 consisted of the following:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| United States | $ | $ | ||||||
| International | ||||||||
| Total | $ | $ | ||||||
The provision for income taxes for the years ended December 31, 2025 and 2024 consisted of the following:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| International | ||||||||
| Deferred: | ||||||||
| Federal | ||||||||
| State | ||||||||
| International | ||||||||
| Total income tax provision | $ | $ | ||||||
| F-36 |
The components of the Company’s deferred income taxes as of December 31, 2025 and 2024 are as follows:
| December 31, | December 31, | |||||||
| 2025 | 2024 (a) | |||||||
| ($ in thousands) | ||||||||
| Deferred tax assets: | ||||||||
| Allowance for expected credit losses | $ | $ | ||||||
| Deferred revenue | ||||||||
| Property and intangible assets | ||||||||
| State net operating loss (“NOL”) carryforwards | ||||||||
| Federal net operating loss (“NOL”) carryforwards | ||||||||
| Section 163(j) interest limitation | ||||||||
| Stock based compensation | ( | ) | ||||||
| Cumulative balance translation adjustment | ||||||||
| Section 267 limitation | ||||||||
| Credit carryovers | ||||||||
| ASC 842 - Lease liability | ||||||||
| Accrued compensation | ||||||||
| Section 174 costs | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Total deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Prepaid commissions | ( | ) | ( | ) | ||||
| Right-of-use assets | ( | ) | ( | ) | ||||
| Other | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | $ | ( | ) | $ | ( | ) | ||
| (a) |
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss carryforwards. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Deferred income tax liabilities represent amounts that will increase income taxes payable in future years.
The
Company has recorded goodwill as a result of its acquisitions. Goodwill is generally not amortized for financial reporting purposes.
However, in 2023 the Company recorded a $
The income tax paid, net of refunds received, for the years ended December 31, 2025 and 2024 consisted of the following:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Federal | $ | $ | ||||||
| State | ||||||||
| Local | ||||||||
| International | ||||||||
| Total | $ | $ | ||||||
| F-37 |
A
reconciliation of the provision for income taxes to the amount computed by applying the
| Year Ended December 31, 2025 | ||||||||
| Amount | Percent | |||||||
| ($ in thousands) | ||||||||
| Provision at U.S. federal statutory rate | $ | % | ||||||
| State and local income tax, net of federal income tax effect (a) | % | |||||||
| Foreign tax effects: | ||||||||
| Pakistan | ||||||||
| Impact of foreign operations | ( | ) | ( | )% | ||||
| Effect of cross-border tax laws: | ||||||||
| Subpart F GILTI inclusion | % | |||||||
| Nontaxable or nondeductible items | ( | ) | ( | )% | ||||
| Changes in valuation allowance | ( | ) | ( | )% | ||||
| Deferred tax adjustment | % | |||||||
| Provision for income taxes | $ | % | ||||||
(a) The states and local jurisdictions that contribute to the majority (greater than 50%) of the effect in this category include New Jersey, California, Texas and Ohio.
A reconciliation of the provision
for income taxes to the amount computed by applying the
| Year Ended December 31, 2024 | ||||||||
| ($ in thousands) | ||||||||
| Provision at U.S. federal statutory rate | $ | |||||||
| Increase (decrease) in income taxes resulting from: | ||||||||
| State tax expense, net of federal benefit | ||||||||
| Non-deductible items | ||||||||
| Impact of foreign operations | ( | ) | ||||||
| Subpart F GILTI inclusion | ||||||||
| Stock based compensation | ( | ) | ||||||
| Deferred tax adjustment | ( | ) | ||||||
| Changes in valuation allowance | ||||||||
| Provision for income taxes | $ | |||||||
At
December 31, 2025 and 2024, the Company did not record any uncertain tax positions based on the technical merits. Therefore, a
tabular roll forward was excluded and there has been no accrued interest and penalties for the years ended December 31, 2025 and
2024. The Company is subject to taxation in the United States, various states, Pakistan and Sri Lanka. As of December 31, 2025, all
tax years since 2014 remain open to examination due to the carryover of unused net operating losses and tax credits in the United
States by major taxing jurisdictions in which
The
Pakistan foreign receipts tax does not have a significant impact on the Company’s effective tax rate as all of its earnings in
Pakistan have been fully included in the U.S. federal tax rate reconciliation at
As
of December 31, 2025, the Company has a total federal NOL carry forward of approximately $
The Company has a full valuation allowance on its deferred tax assets in the U.S. which results in there being no U.S. deferred tax assets or liabilities recorded in the consolidated balance sheets at December 31, 2025 and 2024, respectively.
On July 4, 2025, the One Big Beautiful Act (“OBBBA”) was enacted into law. The OBBBA contained several tax changes to certain U.S. corporate tax provisions, including foreign-related tax reporting items. The Company carefully assessed all aspects of the OBBBA and has determined that its impacts are immaterial to its income tax position.
18. OTHER EXPENSE – NET
Other expense - net for the years ended December 31, 2025 and 2024 consisted of the following:
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Foreign exchange (losses) gains | $ | ( | ) | $ | ||||
| Other expense | ( | ) | ( | ) | ||||
| Other expense - net | $ | ( | ) | $ | ( | ) | ||
Foreign currency transaction gains and losses primarily result from transactions in foreign currencies other than the functional currency. These transaction gains and losses are recorded in the consolidated statements of operations related to the recurring measurement and settlement of such transactions. Other expense primarily represents legal settlements made by the Company.
| F-38 |
| 19. | SEGMENT REPORTING |
From January 1, 2024 through April 30, 2024, the Chief Executive Officer (“CEO”) and Executive Chairman served as the Chief Decision Maker (“CODM”), organizing the Company, managing resource allocations and measuring performance among two operating and reportable segments: (i) Healthcare IT and (ii) Medical Practice Management. As of May 1, 2024, the Company’s President, CEO and Executive Chairman served as the CODM. Effective January 1, 2025, the Executive Chairman and the two Co-CEOs served as the CODM. We report our segment information based on the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments.
The CODM evaluates the financial performance of the business units on the basis of revenue, certain individual and total operating expenses and operating income (loss), as shown below, excluding unallocated amounts, which are mainly corporate overhead costs, for assessing operating results and the allocation of resources. Our CODM does not evaluate operating segments using asset or liability information. The CODM uses segment revenue, certain segment operating expenses and segment operating income (loss), as shown below, to manage the segments, comparing actual results to forecasted amounts and investigating the reasons for significant variances. Currently, a focus is being placed on reducing costs and managing global headcount. The segment revenue and segment operating income (loss) is also used to assess the performance of personnel and in establishing their compensation.
The Healthcare IT segment includes technology-assisted revenue cycle management, SaaS solutions and professional and other services. The Medical Practice Management segment includes the management of three medical practices. Each segment is considered a reporting unit. The Company does not have intra-entity sales or asset transfers, however, there are intracompany bank transfers. The accounting policies of the segments are the same as those disclosed in the summary of significant accounting policies. The following tables present revenues, operating expenses and operating income (loss) by reportable segment for the years ended December 31, 2025 and 2024:
| Year Ended December 31, 2025 | ||||||||||||
| ($ in thousands) | ||||||||||||
| Healthcare IT | Medical Practice Management | Total | ||||||||||
| Net revenue | $ | $ | (a) | $ | ||||||||
| Operating expenses: | ||||||||||||
| Direct operating costs | ||||||||||||
| Selling and marketing | ||||||||||||
| General and administrative | ||||||||||||
| Research and development | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Restructuring costs | ||||||||||||
| Total operating expenses | ||||||||||||
| Segment operating income (loss) | $ | $ | ( | ) | ||||||||
| Reconciliation of profit or loss (segment profit/loss): | ||||||||||||
| Unallocated corporate expenses | ( | ) | ||||||||||
| Net interest expense | ( | ) | ||||||||||
| Other expense | ( | ) | ||||||||||
| Income before income taxes | $ | |||||||||||
| F-39 |
| Year Ended December 31, 2024 | ||||||||||||
| ($ in thousands) | ||||||||||||
| Healthcare IT | Medical Practice Management | Total | ||||||||||
| Net revenue | $ | $ | (a) | $ | ||||||||
| Operating expenses: | ||||||||||||
| Direct operating costs | ||||||||||||
| Selling and marketing | ||||||||||||
| General and administrative | ||||||||||||
| Research and development | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Lease termination and restructuring costs | ||||||||||||
| Total operating expenses | ||||||||||||
| Segment operating income | $ | $ | ||||||||||
| Reconciliation of profit or loss (segment profit/loss): | ||||||||||||
| Unallocated corporate expenses | ( | ) | ||||||||||
| Net interest expense | ( | ) | ||||||||||
| Other expense | ( | ) | ||||||||||
| Income before income taxes | $ | |||||||||||
| (a) |
| 20. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The fair values of assets and liabilities required to be measured at fair value are categorized based upon the level of judgement associated with the inputs used to measure their value in one of the following three categories:
Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. We held no Level 1 financial instruments at December 31, 2025 or 2024.
Level 2: Quoted prices for similar instruments in active markets with inputs that are observable, either directly or indirectly. Our Level 2 financial instruments include notes payable which are carried at cost and approximate fair value since the interest rates being charged approximate market rates.
Level 3: Unobservable inputs are significant to the fair value of the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Our Level 3 instruments include the fair value of contingent consideration related to completed acquisitions. The fair value at December 31, 2025 is based on a discounted cash flow analysis reflecting the likelihood of achieving specified performance measure or events and captures the contractual nature of the contingencies, the passage of time and the associated discount rate. There was no contingent consideration recorded at December 31, 2024.
| F-40 |
The following table provides the assets and liabilities carried at fair value measured on a non-recurring basis as of December 31, 2025 and 2024. Refer to Note 2 - Basis of Presentation and Significant Accounting Policies, for a description of the valuation techniques used to determine the fair value of the assets measured on a non-recurring basis in the table below:
| Fair Value Measurements at December 31, 2025 | Expense for the year ended | |||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | December 31, 2025 | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Goodwill - Healthcare IT | $ | $ | $ | $ | $ | |||||||||||||||
| Fair Value Measurements at December 31, 2024 | Expense for the year ended | |||||||||||||||||||
| Carrying Value | Level 1 | Level 2 | Level 3 | December 31, 2024 | ||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||
| Goodwill - Healthcare IT | $ | $ | $ | $ | $ | |||||||||||||||
The following table provides a reconciliation of the beginning and ending balances for the contingent consideration measured at fair value using significant unobservable inputs (Level 3):
| Fair Value Measurement at Reporting Date Using Significant Unobservable Inputs, Level 3 | ||||||||
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| ($ in thousands) | ||||||||
| Balance - January 1, | $ | $ | ||||||
| Acquisitions | ||||||||
| Change in fair value | ||||||||
| Payments | ( | ) | ||||||
| Balance - December 31, | $ | $ | ||||||
| F-41 |
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