CareCloud, Inc.

Previous wording

The following is a discussion of our condensed consolidated financial condition and results of operations for the three and six months ended June 30, 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 Condensed Consolidated Financial Statements and related notes beginning on page 4 of this Quarterly Report on Form 10-Qand our Annual Report on Form 10-K/A for the year ended December 31, 2024, filed with the SEC on April 3, 2025.

Current wording

The following is a discussion of our condensed consolidated financial condition and results of operations for the three and nine months ended September 30, 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 Condensed Consolidated Financial Statements and related notes beginning on page 4 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K/A for the year ended December 31, 2024, filed with the SEC on April 3, 2025.

Previous wording

The Company maintains cash balances at Silicon Valley Bank (“SVB”), a division of First Citizens Bank & Trust Company in excess of the FDIC insurance coverage limits. The Company performs periodic evaluations of the relative credit standing of this financial institution to ensure its credit worthiness. As of June 30, 2025 and December 31, 2024, the Company held cash of approximately$1.2 millionand $119,000, respectively, in the name of its subsidiaries at banks in Pakistan and Sri Lanka. The banking systems in these countries do not provide deposit insurance coverage. The Company has not experienced any losses on its cash accounts.

Current wording

The Company maintains cash balances at Silicon Valley Bank (“SVB”), a division of First Citizens Bank & Trust Company and Provident Bank (“Provident”) in excess of the FDIC insurance coverage limits. The Company performs periodic evaluations of the relative credit standing of these financial institutions to ensure their credit worthiness. As of September 30, 2025 and December 31, 2024, the Company held cash of approximately $1.2 million and $119,000, respectively, in the name of its subsidiaries at banks in Pakistan and Sri Lanka. The banking systems in these countries do not provide deposit insurance coverage. The Company has not experienced any losses on its cash accounts.

Previous wording

We are able to deliver our industry-leading solutions at very competitive prices because we leverage a combination of our proprietary software, which automates our workflows and increases efficiency, together with our team of approximately 300 experienced health industry experts throughout the United States. These experts are supported by our highly educated and specialized offshore workforce of approximately 3,600 team members thatare approximately 18% of the cost of comparably educated and skilled workers in the U.S. Our unique business model also allowed us to become a leading consolidator in our industry sector, gaining us a reputation for acquiring and positively transforming distressed competitors into profitable operations of CareCloud.

Current wording

We are able to deliver our industry-leading solutions at very competitive prices because we leverage a combination of our proprietary software, which automates our workflows and increases efficiency, together with our team of approximately 350 experienced health industry experts throughout the United States. These experts are supported by our highly educated and specialized offshore workforce of approximately 3,500 team members that are approximately 17% of the cost of comparably educated and skilled workers in the U.S. Our unique business model also allowed us to become a leading consolidator in our industry sector, gaining us a reputation for acquiring and positively transforming distressed competitors into profitable operations of CareCloud.

Previous wording

Our offshore operations in the Pakistan Offices and Sri Lanka together accounted for approximately 18% and 14% of total expenses for the six months ended June 30, 2025 and 2024, respectively. A significant portion of those foreign expenses were personnel-related costs (approximately 77% and 76% for the six months ended June 30, 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. We are able to achieve significant cost reductions and leverage technology to reduce manual work and strategically transition a portion of the remaining manual tasks to our highly-specialized, cost-efficient team in the U.S., the Pakistan Offices and Sri Lanka.

Current wording

Our offshore operations in the Pakistan Offices and Sri Lanka together accounted for approximately 17% and 15% of total expenses for the nine months ended September 30, 2025 and 2024, respectively. A significant portion of those foreign expenses were personnel-related costs (approximately 77% and 75% for the nine months ended September 30, 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. We are able to achieve significant cost reductions and leverage technology to reduce manual work and strategically transition a portion of the remaining manual tasks to our highly-specialized, cost-efficient team in the U.S., the Pakistan Offices and Sri Lanka.

Previous wording

Set forth below is a presentation of our adjusted EBITDA for the three and six months ended June 30, 2025 and 2024:

Current wording

Set forth below is a presentation of our adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024:

Previous wording

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 three and six months ended June 30, 2025 and 2024:

Current wording

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 three and nine months ended September 30, 2025 and 2024:

Previous wording

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 three and six months ended June 30, 2025 and 2024:

Current wording

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 three and nine months ended September 30, 2025 and 2024:

Previous wording

Providers and Practices Served: As of both June 30, 2025 and 2024, we provided services to approximately 40,000 providers (which we define as physicians, nurses, nurse practitioners, physician assistants and other clinical staff that render bills for their services), representing approximately 2,600 independent medical practices and hospitals. In addition, we served approximately 150 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.

Current wording

Providers and Practices Served: As of both September 30, 2025 and 2024, we provided services to approximately 45,000 providers (which we define as physicians, nurses, nurse practitioners, physician assistants and other clinical staff that render bills for their services), representing approximately 3,400 independent medical practices and hospitals. 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.

Previous wording

Revenue: We primarily derive our revenues from subscription-based technology-enabled business solutions, reported in our Healthcare IT segment, which are typically billed as a percentage of payments collected by our customers. This fee includes technology-enabled RCM, as well as the ability to use our EHR, practice management system and other software as part of the bundled fee. These solutions accounted for approximately 69% and 68% for the three months ended June 30, 2025 and 2024, respectively, and 67% for both the six months ended June 30, 2025 and 2024. Other healthcare IT services, including printing and mailing operations, group purchasing and professional services, represented approximately 19% and 20% of revenues for the three months ended June 30, 2025 and 2024, respectively, and 22% and 21% for the six months ended June 30, 2025 and 2024, respectively.

Current wording

Revenue: We primarily derive our revenue from subscription-based technology-enabled business solutions, reported in our Healthcare IT segment, which are typically billed as a percentage of payments collected by our customers. This fee includes technology-enabled RCM, as well as the ability to use our EHR, practice management system and other software as part of the bundled fee. These solutions accounted for approximately 69% and 63% of revenue for the three months ended September 30, 2025 and 2024, respectively, and 68% and 66% of revenue for the nine months ended September 30, 2025 and 2024. Other healthcare IT services, including printing and mailing operations, group purchasing and professional services, represented approximately 17% and 22% of revenue for the three months ended September 30, 2025 and 2024, respectively, and 20% and 21% of revenue for the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

We earned approximately 12% of our revenue from medical practice management services during the three and six months ended June 30, 2025 and 2024. 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.

Current wording

We earned approximately 14% and 12% of our revenue from medical practice management services during the three and nine months ended September 30, 2025, respectively, and approximately 15% and 13% of revenue during the three and nine months ended September 30, 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.

Previous wording

As of June 30, 2025 and December 31, 2024, the carrying amounts of internally-developed capitalized software in use was$8.7 million and $12.3 million, respectively. The decrease was due to the amortization exceeding the amounts being capitalized.

Current wording

As of September 30, 2025 and December 31, 2024, the carrying amounts of internally-developed capitalized software in use was $6.9 million and $12.3 million, respectively. The decrease was due to the amortization exceeding the amounts being capitalized.

Previous wording

Comparison of the three and six months ended June 30, 2025 and 2024:

Current wording

Comparison of the three and nine months ended September 30, 2025 and 2024:

Previous wording

*Net Revenue.*Net revenue of $27.4 million and $55.0 million for the three and six months ended June 30, 2025, respectively, decreased by $713,000 or 3% and increased by $957,000 or 2% from net revenue of$28.1 millionand$54.1 millionfor the three and six months ended June 30, 2024, respectively. Revenue for the three and six months ended June 30, 2025 includes $19.0 million and $36.7 million relating to technology-enabled business solutions, $4.1 millionand $10.0 million related to professional services and $3.3 million and $6.3 million for medical practice management services, respectively.

Current wording

*Net Revenue.*Net revenue of $31.1 million and $86.1 million for the three and nine months ended September 30, 2025, respectively, increased by $2.5 million or 9% and $3.5 million or 4% from net revenue of $28.5 million and $82.6 million for the three and nine months ended September 30, 2024, respectively. Revenue for the three and nine months ended September 30, 2025 includes $21.6 million and $58.3 million relating to technology-enabled business solutions, $4.1 million and $14.1 million related to professional services and $4.2 million and $10.5 million for medical practice management services, respectively.

Previous wording

*Direct Operating Costs.*Direct operating costs of$14.5 millionand$29.9 millionfor the three and six months ended June 30, 2025, respectively, decreased by $762,000 or 5%and $475,000 or 2%compared to direct operating costs of$15.2 millionand$30.4 millionfor the three and six months ended June 30, 2024, respectively. During the three and six months ended June 30, 2025, salary costs decreased by$341,000 and increased by$18,000, outsourcing and processing costs decreased by $383,000 and $405,000 and billable expenses decreased by $274,000 and $258,000, respectively. The decrease in the salary costs primarily relates to professional services salaries due to the decreased professional services revenue.

Current wording

*Direct Operating Costs.*Direct operating costs of $16.2 million and $46.2 million for the three and nine months ended September 30, 2025, respectively, increased by $804,000 or 5% and $329,000 or 1% compared to direct operating costs of $15.4 million and $45.8 million for the three and nine months ended September 30, 2024, respectively. During the three and nine months ended September 30, 2025, salary costs increased by $236,000 and $254,000, and outsourcing and processing costs increased by $652,000 and $248,000, respectively.

Previous wording

*Selling and Marketing Expense.*Selling and marketing expense of $1.1 million and $2.2 million for the three and six months ended June 30, 2025, respectively, decreased by $546,000 or 33% and $1.2 million or 35% from selling and marketing expense of $1.7 million and $3.4 million for the three and six months ended June 30, 2024, respectively. The decrease for the three and six months ended June 30, 2025 was due to a reduction in headcount and lower spending on selling and marketing activities.

Current wording

*Selling and Marketing Expense.*Selling and marketing expense of $1.1 million and $3.4 million for the three and nine months ended September 30, 2025, respectively, decreased by $252,000 or 18% and $1.4 million or 30% from selling and marketing expense of $1.4 million and $4.8 million for the three and nine months ended September 30, 2024, respectively. The decrease for the three and nine months ended September 30, 2025 was due to a reduction in headcount and lower spending on selling and marketing activities.

Previous wording

*General and Administrative Expense.*General and administrative expense of $4.4 million and $8.7 million for the three and six months ended June 30, 2025, respectively, increased by$330,000 or 8% and$941,000 or 12% compared to general and administrative expense of $4.0 million and $7.7 million for the three and six months ended June 30, 2024, respectively. During the three and six months ended June 30, 2025, salary costs increased by $385,000 and $1.4 million, respectively and legal and professional fees decreased by $170,000 and $459,000, respectively.

Current wording

*General and Administrative Expense.*General and administrative expense of $4.9 million and $13.6 million for the three and nine months ended September 30, 2025, respectively, increased by $509,000 or 12% and $1.5 million or 12% compared to general and administrative expense of $4.4 million and $12.1 million for the three and nine months ended September 30, 2024, respectively. During the three and nine months ended September 30, 2025, salary costs increased by $553,000 and $2.0 million, respectively and legal and professional fees decreased by $165,000 and $624,000, respectively.

Previous wording

Research and Development Expense. Research and development expense of $1.0 million and $2.3 million for the three and six months ended June 30, 2025, respectively, decreased by approximately $35,000 or 3% and increased by $287,000 or 15% from research and development expense of $1.1 million and $2.0 million for the three and six months ended June 30, 2024, respectively. During the six months ended June 30, 2025 and 2024, the Company capitalized approximately $1.7 million and $3.0 million, respectively, of development costs in connection with its internal-use software. The increase in expense was primarily due to a shift in the nature of development activities, with fewer costs qualifying for capitalization as internal-use software, resulting in a greater portion of costs being recognized as operating expenses in the current period.

Current wording

Research and Development Expense. Research and development expense of $1.6 million and $3.8 million for the three and nine months ended September 30, 2025, respectively, increased by approximately $784,000 or 98% and by $1.1 million or 39% from research and development expense of $800,000 and $2.8 million for the three and nine months ended September 30, 2024, respectively. During the nine months ended September 30, 2025 and 2024, the Company capitalized approximately $2.5 million and $4.4 million, respectively, of development costs in connection with its internal-use software. The increase in expense was primarily due to a shift in the nature of development activities, with fewer costs qualifying for capitalization as internal-use software, resulting in a greater portion of costs being recognized as operating expenses in the current period.

Previous wording

*Depreciation Expense.*Depreciation expense of$594,000 and$1.2 millionfor the three and six months ended June 30, 2025, respectively, increased by$91,000 and$149,000 from depreciation of $503,000 and $1.1 million for the three and six months ended June 30, 2024, respectively.

Current wording

*Depreciation Expense.*Depreciation expense of $652,000 and $1.8 million for the three and nine months ended September 30, 2025, respectively, increased by $148,000 and $297,000 from depreciation of $504,000 and $1.5 million for the three and nine months ended September 30, 2024, respectively.

Previous wording

*Amortization Expense.*Amortization expense of $2.8 million and $5.6 million for the three and six months ended June 30, 2025, respectively, decreased by $423,000 or 13% and $1.1 million or 16% from amortization expense of $3.2 million and $6.6 million for the three and six months ended June 30, 2024, respectively. The decrease for the three and six months ended June 30, 2025, was due to previously acquired customer relationships becoming fully amortized.

Current wording

*Amortization Expense.*Amortization expense of $3.4 million and $8.9 million for the three and nine months ended September 30, 2025, respectively, increased by $633,000 or 23% and decreased by $441,000 or 5% from amortization expense of $2.7 million and $9.4 million for the three and nine months ended September 30, 2024, respectively. The increase for the three months ended September 30, 2025 relates to the amortization of the intangible assets acquired as a result of the Medsphere acquisition and the decrease for the nine months ended September 30, 2025 was due to previously acquired customer relationships becoming fully amortized.

Previous wording

*Restructuring Costs.*Restructuring costs of $23,000 and $137,000 for the three and six months ended June 30, 2025, respectively primarily consists of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements. There were $116,000 and $438,000 of restructuring costs for the three and six months ended June 30, 2024, respectively.

Current wording

*Restructuring Costs.*Restructuring costs of $17,000 and $154,000 for the three and nine months ended September 30, 2025, respectively primarily consists of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements. There were $67,000 and $505,000 of restructuring costs for the three and nine months ended September 30, 2024, respectively.

Previous wording

*Interest Income.*Interest income of$51,000 and$93,000 for the three and six months ended June 30, 2025, respectively, increased by$27,000 and$42,000 from interest income of $24,000 and $51,000 for the three and six months ended June 30, 2024, respectively. The interest income represents late fees from customers and interest earned on temporary cash investments, which increased due to additional funds being temporarily invested.

Current wording

*Interest Income.*Interest income of $95,000 and $188,000 for the three and nine months ended September 30, 2025, respectively, increased by $78,000 and $120,000 from interest income of $17,000 and $68,000 for the three and nine months ended September 30, 2024, respectively. The interest income represents late fees from customers and interest earned on temporary cash investments, which increased due to additional funds being temporarily invested.

Previous wording

Interest Expense. Interest expense of $68,000 and $126,000 for the three and six months ended June 30, 2025, respectively, decreased by $220,000 and $527,000 from interest expense of $288,000 and $653,000 for the three and six months ended June 30, 2024, respectively. The interest expense decrease was due to no borrowings on the line of credit during 2025. Interest expense on the line of credit was $25,000 and $518,000 during the six months ended June 30, 2025 and 2024, respectively and includes fee related to the line of credit.

Current wording

Interest Expense. Interest expense of $147,000 and $273,000 for the three and nine months ended September 30, 2025, respectively, decreased by $32,000 and $559,000 from interest expense of $179,000 and $832,000 for the three and nine months ended September 30, 2024, respectively. The interest expense decrease was due to no borrowings on the line of credit through August 2025. During September 2025, the Company borrowed $8.3 million on the line of credit. Interest expense on the line of credit was $83,000 and $624,000 during the nine months ended September 30, 2025 and 2024, respectively and includes fees related to the line of credit. During September 2025, the Company settled the note payable assumed as part of the acquisition of Medsphere on which it paid $33,000 of interest to Wells Fargo.

Previous wording

*Other (Expense) – net.*Other Expense – net was $35,000 and $49,000 for the three and six months ended June 30, 2025, respectively, compared to other expense – net of $294,000 and $287,000 for the three and six months ended June 30, 2024, respectively. Other expense or income primarily represents foreign currency transaction losses or gains. These transaction losses or gains result from revaluing intercompany accounts which are denominated in U.S. dollars that represent amounts payable/receivable between the entities. Whenever the exchange rate varies, the losses or gains are recorded in the condensed consolidated statements of operations.

Current wording

*Other (Expense) Income – net.*Other Expense – net was $55,000 and $104,000 for the three and nine months ended September 30, 2025, respectively, compared to other income – net of $60,000 and other expense – net $227,000 for the three and nine months ended September 30, 2024, respectively. Other expense or income primarily represents foreign currency transaction losses or gains. These transaction losses or gains result from revaluing intercompany accounts which are denominated in U.S. dollars that represent amounts payable/receivable between the entities. Whenever the exchange rate varies, the losses or gains are recorded in the condensed consolidated statements of operations.

Previous wording

*Income Tax Provision.*The provision for income taxes was$42,000 and$83,000 for the three and six months ended June 30, 2025, respectively, compared to the provision for income taxes of $39,000 and $78,000 for the three and six months ended June 30, 2024, respectively. In 2023, there was a goodwill impairment charge of $42 million, a portion of which was allocated to the tax deductible portion of the goodwill balance. The impairment charge resulted in the reversal of the entire deferred tax liability at December 31, 2023. There was no deferred tax liability recorded at December 31, 2024 or June 30, 2025. There were no deferred income taxes for the three and six months ended June 30, 2025 and 2024.

Current wording

*Income Tax Provision.*The provision for income taxes was $43,000 and $126,000 for the three and nine months ended September 30, 2025, respectively, compared to the provision for income taxes of $41,000 and $119,000 for the three and nine months ended September 30, 2024, respectively. In 2023, there was a goodwill impairment charge of $42 million, a portion of which was allocated to the tax deductible portion of the goodwill balance. The impairment charge resulted in the reversal of the entire deferred tax liability at December 31, 2023. There was no deferred tax liability recorded at December 31, 2024 or September 30, 2025. There were no deferred income taxes for the three and nine months ended September 30, 2025 and 2024.

Previous wording

The current income tax expense for the three and six months ended June 30, 2025 was approximately $42,000 and $83,000, respectively, which represents state minimum taxes and foreign income taxes. Although the Company has returned to profitability, it incurred losses historically and there is uncertainty regarding sufficient future U.S. taxable income, which makes realization of a deferred tax losses difficult to support in accordance with ASC 740. Accordingly, a valuation allowance was recorded against all deferred tax assets at June 30, 2025 and December 31, 2024.

Current wording

The current income tax expense for the three and nine months ended September 30, 2025 was approximately $43,000 and $126,000, respectively, which represents state minimum taxes and foreign income taxes. Although the Company has returned to profitability, it incurred losses historically and there is uncertainty regarding sufficient future U.S. taxable income, which makes realization of deferred tax losses difficult to support in accordance with ASC 740. Accordingly, a valuation allowance was recorded against all deferred tax assets at September 30, 2025 and December 31, 2024.

Previous wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, extending key provisions of the 2017 Tax Cuts and Jobs Act including, but not limited to, federal bonus depreciation and deductions for domestic research and development expenditures. The Company is currently evaluating OBBBA, however, it is not expected to have a material impact on the Company’s consolidated financial statements.

Current wording

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, extending key provisions of the 2017 Tax Cuts and Jobs Act including, but not limited to, federal bonus depreciation and deductions for domestic research and development expenditures. OBBBA is not expected to have a material impact on the Company’s consolidated financial statements.

Previous wording

The Company has a revolving line of credit, and as of June 30, 2025, there were no borrowings under the credit facility. During October 2024, the credit line was reduced to $10 million at the Company’s request. The current unused borrowing base is approximately $9.5 million. The credit line expires in October 2025 and the Company is in the process of renewing the credit line.

Current wording

During August 2025, the Company voluntarily terminated its agreement with Silicon Valley Bank. During September 2025, the Company entered into a two year, $10 million revolving line of credit with Provident Bank. As of September 30, 2025, there was $6.5 million of borrowings under the credit facility. The current unused borrowing base is approximately $3.5 million. The credit line expires in September 2027.

Previous wording

As of June 30, 2025, the Company had total cash of$10.4 millionand net working capital of $14.9 million. For the six months ended June 30, 2025, cash provided by operations was $12.5 million offset by cash used in investing and financing activities of $7.2 million resulting in an increase in cash of $5.3 million after accounting for the effect of $29,000 of exchange rate changes. As of June 30, 2025, there were no borrowings under the credit facility as compared to $5.0 million outstanding on the line of credit as of June 30, 2024.

Current wording

As of September 30, 2025, the Company had total cash of $5.1 million and net working capital of $6.1 million. For the nine months ended September 30, 2025, cash provided by operations was $19.9 million offset by cash used in investing and financing activities of $20 million resulting in an decrease in cash of $72,000 after accounting for the effect of $16,000 of exchange rate changes. There were no borrowings outstanding on the line of credit as of September 30, 2024.

Previous wording

For the three and six months ended June 30, 2025, the Company recorded net income of $2.9 million and $4.9 million, respectively. Management developed a plan that was substantially implemented during fiscal 2023 and 2024 to improve liquidity in its operations through reductions in payroll and operating expenses. The Company suspended its Preferred Stock dividends in December 2023, which was resumed in February 2025. Further cost reductions will continue throughout 2025.

Current wording

For the three and nine months ended September 30, 2025, the Company recorded net income of $3.1 million and $7.9 million, respectively. Management developed a plan that was substantially implemented during fiscal 2023 and 2024 to improve liquidity in its operations through reductions in payroll and operating expenses. The Company suspended its Preferred Stock dividends in December 2023, which was resumed in February 2025. Further cost reductions continued throughout 2025.

Previous wording

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 line of credit is based on the prime rate which decreased slightly in 2024 and has remained consistent during 2025.

Current wording

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 line of credit is based on a published interest rate which decreased slightly in 2024 and 2025.

Previous wording

The income before income taxes was$2.9 millionand$4.9 millionfor the three and six months ended June 30, 2025, respectively, which included$3.4 millionand$6.7 millionof non-cash depreciation and amortization, respectively. The income before income taxes was$1.7 millionand$1.5 millionfor the three and six months ended June 30, 2024, respectively, which included$3.7 millionand$7.6 millionof non-cash depreciation and amortization, respectively.

Current wording

The income before income taxes was $3.1 million and $8.0 million for the three and nine months ended September 30, 2025, respectively, which included $4.0 million and $10.7 million of non-cash depreciation and amortization, respectively. The income before income taxes was $3.2 million and $4.7 million for the three and nine months ended September 30, 2024, respectively, which included $3.2 million and $10.9 million of non-cash depreciation and amortization, respectively.

Previous wording

Net cash provided by operating activitieswas $12.5 millionand $8.3 million during the six months ended June 30, 2025 and 2024, respectively. This increase was primarily the result of the increase in the net income of$3.4 million which included the following changes in non-cash items: a decrease in depreciation and amortization of$963,000 offset by a netincrease in stock-based compensationof $662,000. Accounts receivable increased$958,000 for the six months ended June 30, 2025, compared with an increase of $1.3 million for the six months ended June 30, 2024. Accounts payable, accrued compensation and accrued expenses increased by$377,000 and $41,000 during the six months ended June 30, 2025 and 2024, respectively. The contract asset decreased by $411,000 during the six months ended June 30, 2025 compared to a decrease of $729,000 in the prior period.

Current wording

Net cash provided by operating activities was $19.9 million and $15.4 million during the nine months ended September 30, 2025 and 2024, respectively. This increase was primarily the result of the increase in the net income of $3.4 million which included the following changes in non-cash items: a decrease in depreciation and amortization of $202,000 offset by an increase in stock-based compensation of $498,000. Accounts receivable increased $796,000 and $388,000 for the nine months ended September 30, 2025 and 2024, respectively. Accounts payable, accrued compensation and accrued expenses increased by $2.1 million and decreased $2.2 million during the nine months ended September 30, 2025 and 2024, respectively. Other assets increased by $2.6 million and $63,000 during the nine months ended September 30, 2025 and 2024, respectively.

Previous wording

Net cash used in investing activities was$3.5 millionfor both the six months ended June 30, 2025 and 2024. Capital expenditures were$1.8 millionand $425,000 for the six months ended June 30, 2025 and 2024, respectively. The capital expenditures for the six months ended June 30, 2025 and 2024 primarily represented computer equipment purchased and leasehold improvements for the Pakistan Offices. Software development costs of$1.7 millionand $3.0 million for the six months ended June 30, 2025 and 2024, respectively, were capitalized in connection with the development of software for providing technology-enabled business solutions.

Current wording

Net cash used in investing activities was $21.2 million and $5.1 million for the nine months ended September 30, 2025 and 2024, respectively. Capital expenditures were $2.7 million and $759,000 for the nine months ended September 30, 2025 and 2024, respectively. The capital expenditures for the nine months ended September 30, 2025 and 2024 primarily represented computer equipment purchased and leasehold improvements for the Pakistan Offices. Software development costs of $2.5 million and $4.4 million for the nine months ended September 30, 2025 and 2024, respectively, were capitalized in connection with the development of software for providing technology-enabled business solutions. Payments for acquisitions were $16 million during the nine months ended September 30, 2025.

Previous wording

Net cash used in financing activities was $3.7 million and $5.5 million during the six months ended June 30, 2025 and 2024, respectively. Cash used in financing activities during the six months ended June 30, 2025 included $3.3 million of preferred stock dividends, $355,000 of repayments for debt obligations and $22,000 of tax withholding obligations paid in connection with stock awards issued to employees. Cash used in financing activities during the six months ended June 30, 2024 included $328,000 of repayments for debt obligations and $184,000 of tax withholding obligations paid in connection with stock awards issued to employees. Repayments on the line of credit were $5.0 million for the six months ended June 30, 2024.

Current wording

Net cash provided by and used in financing activities was $1.2 million and $10.7 million during the nine months ended September 30, 2025 and 2024, respectively. Cash used in financing activities during the nine months ended September 30, 2025 included $4.8 million of preferred stock dividends, $378,000 of repayments for debt obligations, $53,000 of payment for contingent obligation and $22,000 of tax withholding obligations paid in connection with stock awards issued to employees. Cash used in financing activities during the nine months ended September 30, 2024 included $478,000 of repayments for debt obligations and $200,000 of tax withholding obligations paid in connection with stock awards issued to employees. Net proceeds and repayments on the line of credit were $6.5 million and $10.0 million for the nine months ended September 30, 2025 and 2024, respectively.