CareCloud, Inc.

AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2026

AND 2025 (UNAUDITED)

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. We provide technology-enabled revenue cycle management and a full suite of proprietary cloud-based solutions to healthcare providers, from small practices to enterprise medical groups, hospitals, and health systems throughout the United States. Healthcare organizations today operate in highly complex and regulated environments. Our suite of technology-enabled solutions helps our clients increase financial and operational performance, streamline clinical workflows, and improve the patient experience.

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

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 (“MSC”). MSC 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 maintaining key client relationships as well as for sales and marketing activities. During May 2026, the Company formed Empower Healthcare & Compliance, Inc. (“Empower”), as an indirect subsidiary. Empower purchased certain assets of Empower Healthcare & Compliance Partners, LLC (“EHCP”). EHCP was a full-service healthcare compliance and advisory firm. (See Note 4.)

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

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 8-03. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the Company’s financial position as of September 30, 2026, the results of operations for the three and nine months ended September 30, 2026 and 2025 and cash flows for the nine months ended September 30, 2026 and 2025. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2025, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 12, 2026.

Significant Accounting Policies — During the nine months ended September 30, 2026, there were no changes to the Company’s significant accounting policies from its disclosures in the Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 12, 2026.

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

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

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

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

In July 2025, the FASB issued ASU 2025-05,*Financial Instruments – Credit Losses (Topic 326).*The amendments in this update introduce a practical expedient for all entities that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. This update did not have a material impact on the consolidated financial statements.

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 whether 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 FASB 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.

Prepaid expenses and other current assets as of September 30, 2026 and December 31, 2025 consist of the following:

Effective May 15, 2026, the Company entered into an Asset Purchase Agreement (the “APA”) with EHCP, a New Jersey LLC, to acquire certain assets. The acquisition has been accounted for as a business combination. Under the APA, the purchase price was $1 million, subject to deductions for the deferred revenue obligations assumed. The Company paid $681,000 upon closing and the remaining purchase price was subsequently paid during the current quarter, net of the deferred revenue assumed. Empower provides full-service healthcare compliance and advisory services. Empower helps medical practices and health systems navigate the complex regulatory landscape through services spanning compliance and ethics, privacy and security, revenue integrity, and merger and acquisition support. Empower also provides audit defense, risk mitigation, and regulatory readiness, and operates an educational marketplace of training, webinars, and workshops for healthcare professionals.

The purchase price allocation of the Empower acquisition is summarized as follows:

The fair value of customer relationships was based on the estimated discounted cash flows generated by these intangibles. The goodwill from this acquisition is deductible ratably for income tax purposes over fifteen years.

The Company performed the valuation of the acquired assets. The weighted-average amortization period of the acquired intangible asset is approximately three years.

Revenue earned from the clients obtained from the Empower acquisition was approximately$782,000 and$1.0 million during the three and nine months ended September 30, 2026, respectively.

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 $467,817 (the “Closing Payment”) as consideration plus potential earnouts. The Company will pay an additional cash payment (the “Earnout Payment”) equal to the aggregate net revenue earned by the Company during the twelve-month period beginning ninety days from the MAP App Closing Date (the “Initial Earnout Period”) from (i) customers who were MAP App subscribers as of the MAP App Closing Date and remain active subscribers, in good standing, throughout the Initial Earnout Period (“Acquired MAP Accounts”), (ii) prospective customers included in the MAP App pipeline as of the MAP App Closing Date (“Pipeline MAP Accounts”) and (iii) new customers resulting from the HFMA’s efforts that are neither Acquired MAP Accounts nor Pipeline MAP Accounts (“Ramp-up Customers”). Additionally, during the thirty-six month period beginning immediately after the Initial Earnout Period, the Company will make additional quarterly payments to the HFMA in amounts equal to 5% of the aggregate net revenue earned during the preceding quarter from all Acquired MAP Accounts, Pipeline MAP Accounts and Ramp-up Customers and 20% of the aggregate net revenue earned during the preceding quarter from all newly signed Pipeline MAP Accounts procured in connection with the agreement. The Earnout Payment will be reduced by the sum of the Closing Payment and $353,000, the deferred revenue amount assumed as part of the acquisition.

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 purchase price allocation of the MAP App acquisition is summarized as follows:

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 Revenue Cycle Management (“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 $150,000 which has been recorded as part of the purchase price allocation as contingent consideration.

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 MAP App acquisition was approximately $87,000 and $445,000 during the three and nine months ended September 30, 2026, respectively.

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 Software-as-a-Service (“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 entered into and closed on an APA with MSC. The acquisition was accounted for as a business combination. Pursuant to the APA, Holdings acquired certain assets and assumed certain liabilities of MSC, which is in the business of providing healthcare IT software and related services primarily to the U.S. inpatient and ambulatory market.

The aggregate purchase price for the acquisition was $16,500,000, plus the assumption of certain liabilities. The purchase price was comprised of: (i) $8,250,000 in cash, subject to provisions as set forth in the agreement and (ii) $8,250,000 payable by Holdings to MSC’s secured bank lender Wells Fargo Bank, N.A. (“Wells Fargo”) pursuant to a Deferred Payment Agreement, bearing interest at a rate of 12% per year with a maturity date of February 20, 2026. The Company and its subsidiaries were also party to the Deferred Payment Agreement as guarantors. The obligations of the Company and its subsidiaries under the Deferred Payment Agreement were secured by their assets pursuant to security documents executed by the Company and its subsidiaries in favor of Wells Fargo. The obligation to Wells Fargo was satisfied on September 3, 2025. (See Note 7.)

The purchase price allocation of the Medsphere acquisition is summarized as follows:

The fair value of the accounts receivable was based on actual collections subsequent to the acquisition. 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 ratably for income tax purposes over fifteen years. The acquired accounts receivable are 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 was based on the present value of the expected after-tax royalty savings. The fair value of the liabilities assumed was based on actual amounts owed.

The Company engaged a third-party valuation specialist to determine the fair value of the intangible assets acquired in the Medsphere acquisition. The weighted-average amortization period of the acquired intangible assets is approximately three years.

Revenue earned from the clients obtained from the Medsphere acquisition wasapproximately $6.3 million and $19.9 million during the three and nine months ended September 30, 2026, respectively, and $3.4 million during the three and nine months ended September 30, 2025. The 2025 revenue reflects the period from the acquisition date of August 22, 2025, through September 30, 2025. The contingent escrow was included in the restricted cash balance at December 31, 2025 and was subsequently paid.

The Medsphere acquisition added additional clients to the Company’s customer base, allowed access to certain inpatient clients and the clinical software market, expanded the Company’s ambulatory footprint and provided entry into managed services.

On April 1, 2025 (the “RevNu Closing Date”), the Company entered into an 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, the Company is obligated to make quarterly payments equal to twenty percent (20%) of the revenue generated from the acquired RevNu client accounts for a period of forty-two (42) months following the RevNu Closing Date (the “RevNu Quarterly Payments”). The total purchase price is contingent upon future revenue performance and includes the estimated fair value of the RevNu Quarterly Payments. In the event that the service agreement with a specified customer is terminated, the Company will have no further obligation to make additional payments under the APA. For the quarter ended September 30, 2026, the quarterly payment due to RevNu was approximately $44,000.

RevNu was 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 $565,000.

The purchase price allocation of RevNu is summarized as follows:

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 payments required under the APA will be approximately$565,000 which has been recorded as part of the purchase price allocation as contingent consideration.

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$335,000 and $951,000 during the three and nine months ended September 30, 2026, respectively, and was approximately $281,000 and $613,000 during the three and nine months ended September 30, 2025, respectively.

The RevNu acquisition added additional clients 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 condensed consolidated results of operations as if the Empower, MAP App, Medsphere, RevNu and one other small acquisition occurred on January 1, 2025. The pro forma information has been included for comparative purposes and is not indicative of the 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 isapproximately $5.6 million and $24.8 millionfor the three and nine months ended September 30, 2025, and is reflected as a pro forma adjustment below. This difference primarily represents revenue recorded by Empower, MAP App, Medsphere, RevNu and one other acquisition. The difference between the actual net revenue and the pro forma net revenue is approximately $1.5 million for the nine months ended September 30, 2026. Other differences arise primarily from amortizing purchased intangibles using the double declining balance method, depreciating acquired fixed assets, adjusting the interest expense and reversing debt exit fees and the goodwill impairment.

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. At September 30, 2026 and December 31, 2025, $31.5 million and $31.4 million, respectively, of goodwill was allocated to the Healthcare IT segment and$90,000 was allocated to the Medical Practice Management segment.

The following is the summary of the carrying amount of goodwill for the nine months ended September 30, 2026 and the year ended December 31, 2025:

Intangible assets – net as of September 30, 2026 and December 31, 2025 consist of the following:

Capitalized software represents payroll and development costs incurred for internally developed software and externally marketed software. Other intangible assets primarily represent purchased intangibles. Amortization expense for the three months ended September 30, 2026 and 2025 was approximately$2.4 million and $3.4 million, respectively, and for the nine months ended September 30, 2026 and 2025 was approximately$8.7 million and $8.9 million, respectively. The weighted-average amortization period remaining is approximatelytwo years.

As of September 30, 2026, future amortization is scheduled to be expensed as follows:

The following table reconciles the weighted-average shares outstanding for basic and diluted net income per share for the three and nine months ended September 30, 2026 and 2025:

The net income attributable to common shareholders includes the preferred stock dividend amounts earned and declared for the three and nine months ended September 30, 2026 of approximately $538,000 and $2.8 million, respectively, and the preferred stock dividend amounts earned and declared for the three and nine months ended September 30, 2025 of approximately $1.4 million and $5.5 million, respectively. The dividend payable at September 30, 2026 and December 31, 2025 in the condensed consolidated balance sheets represents dividends declared but not paid.

For the three and nine months ended September 30, 2026,150,000 unvested restricted stock units (“RSUs”), as discussed in Note 14, were included in the computation of diluted earnings per share; however, their inclusion did not affect diluted earnings per share. For the three and nine months ended September 30, 2026, the warrant issued to the Executive Chairman to purchase 4.3 million shares of common stock was excluded from the computation of diluted earnings per share because its exercise price of $5.00 per share exceeded the average market price of the company's common stock during the periods. For the three and nine months ended September 30, 2025, unvested RSUs were also included in the computation of earnings per share in the above calculation but did not affect diluted earnings per share.

Accrued expenses as of September 30, 2026 and December 31, 2025 consist of the following:

Bank Debt — The Company had a revolving line of credit with Silicon Valley Bank, a division of First Citizens Bank & Trust Company (“SVB”) which the Company voluntarily terminated on August 18, 2025. The SVB credit facility was a secured revolving line of credit with interest at the prime rate plus 1.5%. The debt was secured by all of the Company’s domestic assets and 65% of the shares in its offshore subsidiaries. Interest costs on the line of credit, which are included in interest expense, were approximately $58,000 and $83,000 for the three and nine months ended September 30, 2025.

On August 22, 2025, the Company entered into a Deferred Payment Agreement with Wells Fargo for $8,250,000 pursuant to the Purchase Agreement with Medsphere. The Deferred Payment Agreement had an interest rate of 12% per year with a maturity date of February 20, 2026 and was secured by substantially all of the Company’s assets. The Deferred Payment Agreement was paid on September 3, 2025. (See Note 4.)

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 $10 million. The facility was secured by, among other things, a first lien security interest in substantially all of the assets and other property of the Company. The interest rate of the facility was an adjustable rate equal to the margin (300 basis points) over an independent index which is equal to the Secured Overnight Financing Rate (“SOFR”). The cost of the line of credit, which is included in interest expense, is approximately $47,000 for the three and nine months ended September 30, 2025. The Agreement contained various covenants and conditions governing the revolving line of credit including an initial commitment fee of $35,000 and an annual fee of $35,000 thereafter. Upon entering into the Agreement, the Company borrowed approximately $8.3 million on its line of credit with Provident to satisfy the obligation to Wells Fargo incurred in connection with the Medsphere acquisition. These funds were repaid to Provident by December 31, 2025. The Agreement was terminated by the Company in April 2026.

On November 7, 2025, the Company entered into a five-year loan agreement with Republic Bank & Trust Company for $1,032,000 for the purchase of an aircraft, which serves as security for the loan. The interest rate on the loan is fixed at 6.75% and is guaranteed by the Company. The Company plans to repay the remaining loan within a year.

On April 13, 2026, the Company entered into a credit agreement providing for a $40 million term loan and a $10 million revolving line of credit (the “Credit Facility”) with Citizens Bank, N.A. (“Citizens”) and Provident. The Credit Facility is secured by all of the Company’s assets and 65% of the shares in its offshore subsidiaries. It is also secured by a pledge of Company common stock held by the Company’s Executive Chairman. The pledge was made in consideration of the warrant and the were two additional trusts that pledged their shares, one owned by the Executive Chairman and the other by his wife. The amortization of the warrant for the three and nine month ended September 30, 2026 was approximately $934,000 and is included in interest expense in the condensed consolidated statement of operations. The term loan facility and the revolving line of credit each mature on the fourth anniversary of the closing date. The term loan amortizes in equal monthly principal installments beginning June 1, 2026. Borrowings under the Credit Facility bear interest at rates based on SOFR plus 3.5% for the term loan and SOFR plus 2.5% for the line of credit. The Credit Facility contains customary affirmative and negative covenants, including financial covenants, and customary events of default. Proceeds from the Credit Facility are being used for general corporate purposes, including the redemption of the Company’s outstanding Series B Preferred Stock which occurred on May 15, 2026. At the time of closing, the Company borrowed approximately $49 million under the Credit Facility. Approximately $41.6 million of the funds borrowed under the Credit Facility were used to fund the Series B Preferred Stock redemption, including the $3.4 million of unpaid dividends. As of September 30, 2026, the outstanding balance of the term loan was approximately $36.7 million and nothing was drawn on the line of credit. The Company was in compliance with all covenants.

On June 25, 2026, the Company entered into a First Amendment to Credit Agreement (the “Amendment”) with Citizens which is effective as of May 6, 2026. Among other things, the Amendment (i) amends the Credit Facility relating to certain post-closing obligations, (ii) modifies the information and notice requirements applicable to permitted acquisitions, and (iii) revises the liquidity condition applicable to permitted acquisitions.

The outstanding term loan payable and other obligations as of September 30, 2026 and December 31, 2025 are as follows:

The Company maintains cash balances at Provident and Citizens in excess of the FDIC insurance coverage limits. The Company performs periodic evaluations of the relative credit standing of Provident and Citizens to ensure their credit worthiness. As of September 30, 2026 and December 31, 2025, the Company held cash of approximately $1.4 million and $1.1 million, 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.

We determine if an arrangement is a lease at inception. We have operating leases for office and temporary living space as well as for some office equipment. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liability and non-current operating lease liability in our condensed consolidated balance sheets as of September 30, 2026 and December 31, 2025. The Company does not have any finance leases.

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

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

Lease expense is included in direct operating costs, general and administrative expense, selling and marketing expense and research and development expense in the condensed consolidated statements of operations based on the nature of the expense. Our lease terms are determined taking into account lease renewal options, the Company’s anticipated operating plans and leases that are on a month-to-month basis. The Company also has some related party leases. (See Note 10.)

The components of lease expense were as follows:

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

Supplemental balance sheet information related to leases is as follows:

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

Maturities of lease liabilities are as follows:

The Company leases certain apartments which are either subleased to others or serve as temporary housing for visiting employees. The sublease agreements are currently on a month-to-month basis and are considered operating leases. For the three and nine months ended September 30, 2026, the Company received approximately $9,000 and $27,000, respectively, in sublease income. For the three and nine months ended September 30, 2025, the Company received sublease income of approximately $9,000 and $22,000, respectively.

**Legal Proceedings —**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 condensed consolidated balance sheet. A settlement agreement with mutual releases was signed by the parties in January 2025 and payment was made in February 2025.

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.

Cybersecurity Incident — On March 16, 2026, the Company detected a security incident in its CareCloud Health division that affected functionality and data access in one of its six electronic health record environments for approximately eight hours, after which all functionality and data access were fully restored. Upon discovery, the Company notified its cybersecurity carrier and engaged a leading cyber response advisory team within a Big Four accounting firm to secure the environment and conduct a comprehensive forensic investigation.

The forensic investigation determined that an unauthorized third party gained access to one cloud account supporting the previously identified electronic health record environment and exfiltrated certain patient-related information from the affected environment associated with a substantial number of individuals, including personally identifiable information and protected health information. The investigation found no evidence of unauthorized activity related to the incident after March 16, 2026 and all affected systems remain fully operational. The Company has notified affected healthcare-provider customers, and the Company is providing required notifications to potentially affected individuals and applicable regulatory agencies, pursuant to the agreements with those customers. To date, no regulatory agency has asserted a claim against the Company in connection with the incident.

To date, multiple putative class action complaints were filed against the Company alleging personal information was compromised in connection with the security incident. In June 2026, the United States District Court for the Southern District of Florida consolidated the actions filed in that Jurisdiction, and the plaintiffs filed a consolidated amended complaint shortly thereafter. A related putative class action was also filed in San Diego Superior Court, which CareCloud removed to the United States District Court for the Southern District of California. The parties are in ongoing settlement discussions. Any resulting settlement of the claims asserted on behalf of a putative class would be subject to a definitive settlement agreement, and preliminary and final court approval, and there can be no assurance that these discussions will result in a settlement or that any settlement would be approved. The Company currently believes that its available cybersecurity insurance coverage is likely to be sufficient to cover the losses it currently anticipates in connection with the putative class actions, subject to applicable policy terms, limits, retention, exclusions and coverage determinations including any anticipated settlement. The Company expects that costs incurred in connection with the incident, including the forensic investigation, remediation, notification, litigation, and legal costs, will be reimbursed by the Company’s cybersecurity insurance carrier, other than the Company’s $100,000 retention which was accrued by the Company.

In addition, the Company has received other individual complaints in connection with the security incident, which would be encompassed by the potential settlement. If any of these complaints are resolved individually rather than through the potential settlement, the Company believes they would be resolved for amounts that are not material to the Company; however, there can be no assurance as to the timing or outcome of these matters. Subject to applicable policy terms, limits, retention, exclusions and coverage determinations, the Company currently believes its available cybersecurity insurance coverage is likely to be sufficient to cover the losses it currently anticipates in connection with these matters.

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

The Company had sales to a related party, a physician who is the wife of the Executive Chairman. Revenues from this customer were approximately $65,000 and $32,000 for the three months ended September 30, 2026 and 2025, respectively, and approximately $185,000 and $83,000 for the nine months ended September 30, 2026 and 2025, respectively. As of September 30, 2026 and December 31, 2025, the accounts receivable balance due from this customer was approximately $24,000 and $15,000, respectively, and is included in accounts receivable - net in the condensed consolidated balance sheets.

The Company leases its corporate office in New Jersey, 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 three months ended September 30, 2026 and 2025 was approximately $72,000 and $71,000, respectively, and was approximately $217,000 and $213,000 for the nine months ended September 30, 2026 and 2025, respectively, and is included in direct operating costs, general and administrative expense, selling and marketing expense and research and development expense in the condensed consolidated statements of operations. During the nine months ended September 30, 2026 and 2025, the Company spent approximately $906,000 and $1.3 million, respectively, to upgrade the related party leased facilities. These expenditures were primarily related to the expansion of the Company’s AI Center. Current assets-related party in the condensed consolidated balance sheets includes security deposits related to the leases of the Company’s corporate offices in the amount of approximately $16,000 as of both September 30, 2026 and December 31, 2025. The Company also leases two facilities used for temporary housing from a management employee for approximately $6,900 per month.

Included in the ROU assets at September 30, 2026 is approximately $319,000 applicable to the related party leases. Included in the current and non-current operating lease liabilityat September 30, 2026 isapproximately $237,000 and $78,000, respectively, applicable to the related party leases. Included in the ROU assets at December 31, 2025 is approximately $430,000 applicable to the related party leases. Included in the current and non-current operating lease liability at December 31, 2025 is approximately $202,000 and $226,000, respectively, applicable to the related party leases.

On July 22, 2026, the Company issued a warrant to the Executive Chairman to purchase 4,300,000 shares of common stock at an exercise price of $5.00 per share. The warrant was issued in consideration of the Executive Chairman’s pledge of shares of the Company’s common stock owned by him as additional collateral under the Credit Facility (see Note 7). The warrant expires on July 21, 2031 and vests in monthly installments over a twelve-month period. The grant-date fair value of the warrant was approximately $2.1 million. Expense related to the warrant was approximately $934,000 for the three and nine months ended September 30, 2026 and is included in interest expense.

During July 2025, the Company entered into a month-to-month consulting agreement with an entity owned and controlled by the son of the Executive Chairman to provide consulting services to the Company in artificial intelligence technology for $15,000 per month plus travel expenses. During the three and nine months ended September 30, 2026, the Company incurred $45,000 and $135,000 of costs under this agreement, respectively, of which $45,000 and $90,000, respectively, was capitalized as internally developed software.

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. The consulting agreement was cancelable with ten days’ notice. This agreement was terminated by the Company effective February 22, 2026. No expense was recorded under this agreement for the nine months ended September 30, 2026. The expense under this agreement was approximately $1,000 and $12,000 for the three and nine months ended September 30, 2025, respectively.

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 September 30, 2026, talkMD had not yet commenced operations. Cumulatively, the Company has paid approximately$8,500 on behalf of talkMD for income taxes.

In 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. In addition, the Company instituted certain other expense reductions. There wereno restructuring costs during the nine months ended September 30, 2026 and approximately $17,000 and $154,000 was incurred during the three and nine months ended September 30, 2025, respectively. The expense associated with the restructuring is included in restructuring costs in the 2025 condensed consolidated statement of operations. These restructuring expenses primarily consisted of one-time termination benefits, including, but not limited to, severance payments and healthcare benefits.

On September 11, 2024, a Certificate of Amendment (the “Amendment”) to the Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Preferred Stock (the “Existing Certificate”) became effective, amending certain provisions of the 11% Series A Cumulative Redeemable Preferred Stock. Due to the above Amendment, effective September 12, 2024, the monthly dividends were reduced to approximately $1.1 million per month. The title of the Existing Certificate was amended to read “Amended and Restated Certificate of Designations, Preferences and Rights of 8.75% Series A Cumulative Redeemable Perpetual Preferred Stock.” Holders of Series A Preferred Stock will now receive similar change of control protections to those afforded to holders of the Company’s Series B Preferred Stock. The dividend of Series A Preferred Stock was amended from 11% to 8.75% per annum and the per annum dividend amount per share was amended from $2.75 to $2.1875 per share per annum.

In January 2025, the Company’s common stock shareholders approved an increase in the number of authorized common shares from 35 million to 85 million. An amended certificate of incorporation was filed by the Company.

Also, in January 2025, the Company’s Board of Directors declared the resumption of suspended Preferred Stock dividends beginning with two months of payments. 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 in both February and March 2025 and applying these amounts to the earliest payments in arrears. The March 2025 payment, which occurred after the conversion as discussed below, included dividends for the shares of Series A Preferred Stock that were not converted and dividends for the Series B Preferred Stock.

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 7.3358 shares of common stock, inclusive of all accumulated and unpaid dividends. 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 100,000 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 3,541,701 shares of Series A Preferred Stock converted at that time and 984,530 shares of Series A Preferred Stock remain outstanding. Due to the Conversion, the monthly cash dividends were reduced to approximately $455,000 per month. As a result of the Conversion, the Company delisted the Series A Preferred Stock from the Nasdaq Global Market.

On April 13, 2026, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with Citizens JMP Securities, LLC, (“JMP”) pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering value of up to $60 million from time to time. The shares may be issued pursuant to the Company’s effective shelf registration statement on Form S-3 and a related prospectus supplement filed on April 14, 2026. Under the terms of the ATM Agreement, JMP is entitled to a commission of up to 3.0% of the gross proceeds from any shares sold under the ATM program. The Company is not obligated to sell any shares under the ATM Agreement. Proceeds, if any, are expected to be used for general corporate purposes, which may include funding potential acquisitions, repayment of indebtedness, capital expenditures, investments, general working capital and the redemption of preferred stock. There have not been any sales under the ATM.

On April 14, 2026, the Company announced the redemption of all issued and outstanding shares of its Series B Preferred Stock in accordance with the applicable certificate of designation. The Company redeemed the shares on May 15, 2026 (the “Redemption Date”), following the required notice period. The redemption price included accrued and unpaid dividends through the Redemption Date. The redemption price paid to each holder of record of the Series B Preferred Stock was $27.52 per share, representing $25.25 per share liquidation value plus all accumulated and unpaid dividends through but not including the Redemption Date. As a result of the redemption, the Series B Preferred Stock was delisted from the Nasdaq Global Market as of the close of business on May 14, 2026.

At September 30, 2026, cumulative dividends in arrears on the Series A Preferred stock totaled approximately $2.7 million, of which approximately $392,000 had been declared and was recorded as a dividend payable. For the three months ended September 30, 2026, the Company declared and paid three months of dividends on the Series A Preferred Stock ($0.182 per share monthly and $0.547 per share for the quarter). For the nine months ended September 30, 2026, the Company declared and paid nine months of dividends on the Series A Preferred Stock. The dividend payable at September 30, 2026 and December 31, 2025 in the condensed consolidated balance sheets represents dividends declared. The Company plans to continue declaring monthly dividends on the Series A Preferred Stock.

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 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 standard.

Most of our current 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. The standalone selling prices are based on the contractual price for the service.

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.

The following table represents a disaggregation of revenue for the three and nine months ended September 30, 2026 and 2025:

Technology-enabled business solutions:

Revenue derived on an on-going basis from our technology-enabled solutions, which typically include 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 electronic health records (“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 software, electronic health records software, patient experience management solutions, business intelligence software 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 include chronic care management, 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 chronic care management is satisfied at a point in time once the patient receives the remote visit. The digital health services also include remote patient monitoring where our system monitors recordings from FDA approved internet connected devices. These devices record patient trends and alert 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 chronic care management for the three months ended September 30, 2026 and 2025, was approximately$504,000 and $669,000, respectively and for the nine months ended September 30, 2026 and 2025, was approximately $1.6 million and $2.0 million, respectively. The revenue for remote patient monitoring for the three months ended September 30, 2026 and 2025, was approximately $204,000 and $213,000, respectively and for the nine months ended September 30, 2026 and 2025, was approximately $656,000 and $589,000, respectively.

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. Professional services also include audit defense, risk mitigation and regulatory readiness. 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 September 30, 2026 and 2025 was approximately $115,000 and $46,000, respectively.

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, printing and mailing and chronic care management 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.

At September 30, 2026, there were no unsatisfied performance obligations for contracts with an original duration greater than one year. The Company elected to utilize the practical expedient available in the guidance for contracts with an expected duration of one year or less.

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 condensed 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 impact the management fee that the Company is entitled to. Billing rates are reviewed at least annually and adjusted based on current insurer reimbursement practices. Theperformance obligation is satisfied as the management services are provided.

Our contracts for medical practice management services have approximately an additional 12 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 condensed 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 September 30, 2026, the contract asset of approximately $3.1 million included approximately $2.4 million related to revenue cycle management services performed and recognized as revenue that had not yet been billed. Because our fees are based on a percentage of amounts collected from insurance payers, we do not have an unconditional right to bill until the related claims are paid, at which point the amount is invoiced and transferred to accounts receivable. Approximately $213,000 and $496,000 of the contract asset represents revenue earned, not paid, from the group purchasing services and referral fees, respectively. We expect to bill substantially all of the revenue cycle management contract asset over the next three months.

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 and referral fees earned.

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:

Deferred commissions:

Our sales incentive plans include commissions payable to employees and third parties at the time of 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 $183,000 and $204,000 at September 30, 2026 and 2025, respectively, and are included in prepaid expenses and other current assets and other assets amounts in the condensed consolidated balance sheets. The amortization of deferred sales commissions during the three months ended September 30, 2026 and 2025 was approximately$37,000 and$59,000, respectively, and approximately$127,000 and $195,000 for the nine months ended September 30, 2026 and 2025, respectively.

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. We segment 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 is defined by an internal credit assessment and business size. The pools are aligned with management’s review of financial performance. For the three months ended September 30, 2026 and 2025, 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. 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:

In June 2026, the Company adopted the CareCloud, Inc. 2026 Equity Incentive Plan (the “2026 Plan”), reserving a total of 1,000,000 shares of common stock for grants to employees, officers, directors and consultants. Following the shareholder approval of the 2026 Plan, no additional awards may be granted under the Amended and Restated 2014 Equity Incentive Plan, and the 900,000 shares of common stock and 16,000 shares of Series B Preferred Stock that remained available for future grants under that plan were canceled and are no longer available for issuance. Outstanding awards previously granted under the Amended and Restated 2014 Equity Incentive Plan will remain outstanding. 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.

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 and preferred stock RSUs

For the three and nine months ended September 30, 2026, stock compensation expense ofapproximately $65,000 and$193,000, respectively, and for the three and nine months ended September 30, 2025 of approximately $88,000 and $307,000, respectively, was recorded. Stock compensation expense recorded is based on the value of the shares at the grant date and recognized over the service period. The portion of the stock compensation expense to be used for the payment of withholding and payroll taxes is included in accrued compensation in the condensed consolidated balance sheets. The balance of the stock compensation expense has been recorded as additional paid-in capital.

The following table summarizes the RSU transactions related to the common and preferred stock under the Company’s Equity Incentive Plan for the nine months ended September 30, 2026 and 2025:

At September 30, 2026 and December 31, 2025 there was no liability for taxes withheld in connection with the equity awards. No amounts were paid in connection with cash-settled awards during the three and nine months ended September 30, 2026 and 2025.

Stock-based compensation expense

The following table summarizes the components of share-based compensation expense for the three and nine months ended September 30, 2026 and 2025:

The income tax expense for the three months ended September 30, 2026 was approximately $127,000 comprised of current state tax expense of $69,000, foreign tax expense of $13,000 and deferred tax expense of $45,000. The income tax expense for the nine months ended September 30, 2026 was approximately$281,000 comprised of a current state tax expense of$147,000, foreign tax expense of$39,000 and deferred tax expense of $95,000.

The income tax expense for the three months ended September 30, 2025 was approximately $43,000 comprised of current state tax expense of $31,000 and foreign tax expense of $12,000. The income tax expense for the nine months ended September 30, 2025 was approximately $126,000 comprised of current state tax expense of $91,000 and foreign tax expense of $35,000. There wasno deferred tax expense for the three and nine months ended September 30, 2025.

The current income tax provision for the three and nine months ended September 30, 2026 and 2025 primarily relates to state income and minimum taxes and foreign income taxes. The deferred tax provision for the three and nine months ended September 30, 2026 relates to the book and tax difference of amortization of goodwill, an indefinite-lived intangible. To the extent allowable, the federal and state deferred tax provisions have been offset by the indefinite life net operating loss.

The Company previously incurred losses, which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against the federal and state deferred tax assets as of September 30, 2026 and December 31, 2025.

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 did not have a material impact on the Company’s condensed consolidated financial statements.

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 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 September 30, 2026 or December 31, 2025.

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 September 30, 2026 is based on a discounted cash flow analysis reflecting the likelihood of achieving specified performance measures or events and captures the contractual nature of the contingencies, the passage of time and the associated discount rate.

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):

Effective January 1, 2026, the Chief Executive Officer (“CEO”) and Executive Chairman serve as the Chief Operating Decision Maker (“CODM”), organizing the Company, managing resource allocations and measuring performance amongtwo operating and reportable segments: (i) Healthcare IT and (ii) Medical Practice Management. From January 1, 2025, through December 31, 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 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) 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) 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 revenue cycle management, SaaS solutions and other services. The Medical Practice Management segment includes the management of three medical practices. Each segment is considered a reporting unit. The accounting policies of the segments are the same as those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 12, 2026. The following table presents revenues, operating expenses and operating income by reportable segment: