CareCloud, Inc.
For the period ended Mar 31, 2025. Filed May 6, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 6, 2025
CCLD$2.30+6.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0001493152-24-044794
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-06.
0001641172-25-008857
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 84 previous paragraphs and 78 current paragraphs.
39 unchanged; 35 reworded; 3 added; 10 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 38 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (3)
Current report
There was a $1.5 million increase in project-based professional services revenue and a $422,000 increase in technology-enabled business solutions offset by a decrease of $252,000 in medical practice management services for the three months ended March 31, 2025 compared to the same period in the prior year.
Current report
*Direct Operating Costs.*Direct operating costs of$15.5 millionfor the three months ended March 31, 2025 increased by $287,000 or 2%compared to direct operating costs of$15.2 millionfor the three months ended March 31, 2024. During the three months ended March 31, 2025, salary costs increased by$359,000 and medical supplies and vaccines costs decreased by $128,000. The increase in the salary costs primarily relates to professional services salaries due to the increased professional services revenue.
Current report
Research and Development Expense. Research and development expense of $1.2 million for the three months ended March 31, 2025, respectively, increased by $322,000 or 35% from research and development expense of $913,000 for the three months ended March 31, 2024. During the three months ended March 31, 2025 and 2024, the Company capitalized approximately $846,000 and $1.6 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.
Removed paragraphs (10)
Previous report
During December 2023, the Company suspended its Preferred Stock dividend and experienced a decline in its market capitalization as a result of a sustained decrease in the Company’s stock price for its common and preferred shares. This was considered a triggering event and resulted in a goodwill impairment charge. As of September 30, 2024, the Company’s stock price for its common and preferred shares increased from their year-end values. Accordingly, the Company determined there was no impact on the valuation of goodwill. If the stock prices were to decline, it could result in another triggering event that could impact the valuation of goodwill.
Previous report
*Loss on Lease Terminations, Unoccupied Lease Charges and Restructuring Costs.*Loss on lease terminations represents the write-off of leasehold improvements and gains or losses as the result of lease terminations. Unoccupied lease charges represent the portion of the lease and related costs for that portion of the space that is vacant and not being utilized by the Company. Two of the leases that had unoccupied space ended in February 2023. Restructuring costs consists of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements.
Previous report
There was an $800,000 and $4.0 million decrease in project-based professional services revenue for the three and nine months ended September 30, 2024 compared to the same periods in the prior year. The 2024 revenue was also negatively impacted by two large accounts that had each been previously acquired prior to our beginning to serve them after a 2020 acquisition. The services provided to them were each winding down at the time of our acquisition and they both transitioned to the systems of their acquirers during 2022. There was no revenue from these two customers for the three months ended September 30, 2024, compared to $700,000 for the same period in 2023. Revenue from these customers for the nine months ended September 30, 2024 and 2023 was $300,000 and $2.7 million, respectively, accounting for approximately $2.4 million of the decline in revenue.
Previous report
*Direct Operating Costs.*Direct operating costs of $15.4 million and $45.8 million for the three and nine months ended September 30, 2024, respectively, decreased by $2.8 million or 16% and $8.0 million or 15% compared to direct operating costs of $18.3 million and $53.8 million for the three and nine months ended September 30, 2023, respectively. During the three and nine months ended September 30, 2024, salary costs decreased by $1.7 million and $5.1 million, outsourcing and processing costs decreased by $813,000 and $1.7 million and billable expenses decreased by $400,000 and $1.1 million, respectively. The decrease in the salary costs was due to a decrease in the U.S. and Pakistan headcount, lower revenue and the redeployment of employees performing functions that were previously classified as direct operating costs to functions classified as research and development expense for the nine months ended September 30, 2024.
Previous report
Research and Development Expense. Research and development expense of $800,000 and $2.8 million for the three and nine months ended September 30, 2024, respectively, decreased by $460,000 or 37% and $755,000 or 21% from research and development expense of $1.3 million and $3.5 million for the three and nine months ended September 30, 2023, respectively. During the nine months ended September 30, 2024 and 2023, the Company capitalized approximately $4.4 million and $6.6 million, respectively, of development costs in connection with its internal-use software.
Previous report
In fiscal year 2023, the Company incurred a net loss of $48.7 million compared to $5.4 million of net income in fiscal year 2022, and at December 31, 2023, had cash of $3.3 million and a working capital deficit of $57,000. The decrease in cash for fiscal 2023 was $9.0 million compared to an increase in cash of $2.0 million in fiscal 2022. The Company also had $10.0 million drawn on its line of credit. Together, at December 31, 2023 these factors raised substantial doubt regarding the Company’s ability to continue as a going concern.
Previous report
The Company has begun realizing the effect of these plans and expects continued effects to be realized during the remainder of 2024 and beyond, including further decrease in the Company’s operating costs and an improvement in the Company’s monthly cash flow from operations.
Previous report
Change Healthcare, a subsidiary of UnitedHealth Group, experienced an incident on February 21, 2024, in which a cybersecurity threat actor gained access to some of its information technology systems (“Change Healthcare Cybersecurity Incident”). The Company used Change Healthcare to submit patient claims to Medicare and other payors for reimbursement. Since the time of the system disruption, the Company found alternative processes to maintain overall operations.
Previous report
As of September 30, 2024, the Company has not identified any compromise or unauthorized access of its systems or networks due to this third party incident. As of the end of the third quarter of 2024, the Company reconnected to many of the applications previously maintained by Change Healthcare. The Company resumed claims submission to payors and utilized alternative platforms for its claims.
Previous report
During the nine months ended September 30, 2024, the Company did not experience a material financial impact from the Change Healthcare Cybersecurity Incident on the financial results as reported. The impact to the first quarter financial results was primarily related to decreased cash flows from operations, which were recognized during the second and third quarters. The Company resumed submission of claims to payors and determined that the Change Healthcare Cybersecurity Incident did not materially impact the Company, including its business operations, financial condition or results of operations.
Reworded paragraphs (35)
Previous 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, 2024 and 2023, 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 for the year ended December 31, 2023, filed with the SEC on March 21, 2024.
Current wording
The following is a discussion of our condensed consolidated financial condition and results of operations for the three months ended March 31, 2025 and 2024, and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read together with our 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.
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 September 30, 2024 and December 31, 2023, the Company held cash of approximately $100,000 and $255,000, 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 in excess of the FDIC insurance coverage limits. The Company performs periodic evaluations of the relative credit standing of this financial institution to ensure its credit worthiness. As of March 31, 2025 and December 31, 2024, the Company held cash of approximately$790,000 and $119,000, respectively, in the name of its subsidiaries at banks in Pakistan and Sri Lanka. The banking systems in these countries do not provide deposit insurance coverage. The Company has not experienced any losses on its cash accounts.
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 330 experienced health industry experts throughout the United States. These experts are supported by our highly educated and specialized offshore workforce of approximately 3,300 team members that are approximately 15% 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 290 experienced health industry experts throughout the United States. These experts are supported by our highly educated and specialized offshore workforce of approximately 3,400 team members thatare 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 15% and 13% of total expenses for the nine months ended September 30, 2024 and 2023, respectively. A significant portion of those foreign expenses were personnel-related costs (approximately 75% and 77% for the nine months ended September 30, 2024 and 2023, 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 three months ended March 31, 2025 and 2024, respectively. A significant portion of those foreign expenses were personnel-related costs (approximately 78% and 75% for the three months ended March 31, 2025 and 2024, respectively). Because personnel-related costs are significantly lower in Pakistan and Sri Lanka than in the U.S. and many other offshore locations, we believe our offshore operations give us a competitive advantage over many industry participants. 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 nine months ended September 30, 2024 and 2023:
Current wording
Set forth below is a presentation of our adjusted EBITDA for the three months ended March 31, 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 nine months ended September 30, 2024 and 2023:
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 months ended March 31, 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 (loss) to non-GAAP adjusted net income for the three and nine months ended September 30, 2024 and 2023:
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 (loss) to non-GAAP adjusted net income for the three months ended March 31, 2025 and 2024:
Previous wording
For purposes of determining non-GAAP adjusted earnings per share, the Company used the number of common shares outstanding at the end of September 30, 2024 and 2023. Non-GAAP adjusted diluted earnings per share was computed using an as-converted method and includes outstanding unvested RSUs. Non-GAAP adjusted earnings per share and non-GAAP adjusted diluted earnings per share does not take into account dividends paid on preferred stock. No tax effect has been provided in computing non-GAAP adjusted earnings per share and non-GAAP adjusted diluted earnings per share as the Company has sufficient carry forward net operating losses to offset the applicable income taxes.
Current wording
For purposes of determining non-GAAP adjusted earnings per share, the Company used the number of common shares outstanding at the end of March 31, 2025 and 2024. Non-GAAP adjusted earnings per share does not take into account dividends paid or accrued on preferred stock.
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 63% and 64% for the three months ended September 30, 2024 and 2023, respectively, and 66% and 65% for the nine months ended September 30, 2024 and 2023, respectively. Other healthcare IT services, including printing and mailing operations, group purchasing and professional services, represented approximately 22% and 23% of revenues for the three months ended September 30, 2024 and 2023, respectively, and 21% and 23% for the nine months ended September 30, 2024 and 2023, respectively.
Current 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 64% and 67% for the three months ended March 31, 2025 and 2024, respectively. Other healthcare IT services, including printing and mailing operations, group purchasing and professional services, represented approximately 25% and 21% for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
We earned approximately 15% and 13% of our revenue from medical practice management services during the three and nine months ended September 30, 2024, respectively, and approximately 13% and 12% during the three and nine months ended September 30, 2023, 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.
Current wording
We earned approximately 11% and 12% of our revenue from medical practice management services during the three months ended March 31, 2025 and 2024, respectively. This revenue represents fees based on our actual costs plus a percentage of the operating profit and is reported in our Medical Practice Management segment.
Previous wording
*General and Administrative Expense.*General and administrative expense consists primarily of personnel-related expense for administrative employees, including compensation, benefits, travel, facility lease costs and insurance, software license fees and outside professional fees.
Current wording
*General and Administrative Expense.*General and administrative expense consists primarily of personnel-related expense for administrative employees, including compensation, benefits, travel, facility lease costs, insurance, software license fees and outside professional fees.
Previous wording
*Loss on Lease Terminations, Unoccupied Lease Charges and Restructuring Costs.*Loss on lease terminations represents the write-off of leasehold improvements and gains or losses as the result of lease terminations. During the nine months ended September 30, 2023, the Miami office lease that we assumed in connection with an acquisition ended and we entered into a new lease arrangement with the landlord for significantly less space. Charges of $2,000 and $73,000 for the three and nine months ended September 30, 2023, respectively, were incurred as a result of vacating the former premises. In addition, during the nine months ended September 30, 2023, the Company paid approximately $27,000 to settle a claim regarding a lease termination in India. During the year ended December 31, 2022, a facility lease was terminated in conjunction with the Company ceasing its document storage services resulting in additional costs for the three and nine months ended September 30, 2023, of approximately $1,000 and $162,000, respectively. During the three and nine months ended September 30, 2023, there were $5,000 and $168,000 of unoccupied lease charges, respectively. There were $67,000 and $505,000 of restructuring costs being recorded for the three and nine months ended September 30, 2024, respectively, whereas in the same periods for 2023, there were no restructuring costs. Restructuring costs consists of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements. There were no losses on lease terminations or unoccupied lease charges during the nine months ended September 30, 2024.
Current wording
*Restructuring Costs.*Restructuring costs primarily consists of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements.
Previous wording
The critical accounting policies and estimates used in the preparation of our condensed consolidated financial statements that we believe affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements presented in this Report are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the condensed consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Current wording
The critical accounting policies and estimates used in the preparation of our condensed consolidated financial statements that we believe affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements presented in this Report are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the condensed consolidated financial statements included in our Annual Report on Form 10-K/A for the year ended December 31, 2024.
Previous wording
As of September 30, 2024 and December 31, 2023, the carrying amounts of internally-developed capitalized software in use was $13.7 million and $17.1 million, respectively. The decrease was due to the current year amortization exceeding the amounts being capitalized.
Current wording
As of March 31, 2025 and December 31, 2024, the carrying amounts of internally-developed capitalized software in use was$10.5 million and $12.3 million, respectively. The decrease was due to the amortization exceeding the amounts being capitalized.
Previous wording
There have been no material changes in our critical accounting policies and estimates from those described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 21, 2024.
Current wording
There have been no material changes in our critical accounting policies and estimates from those described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in 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
Comparison of the three and nine months ended September 30, 2024 and 2023:
Current wording
Comparison of the three months ended March 31, 2025 and 2024:
Previous wording
*Net Revenue.*Net revenue of $28.5 million and $82.6 million for the three and nine months ended September 30, 2024, respectively, decreased by $734,000 or 3% and $6.0 million or 7% from net revenue of $29.3 million and $88.6 million for the three and nine months ended September 30, 2023, respectively. Revenue for the three and nine months ended September 30, 2024 includes $17.9 million and $54.2 million relating to technology-enabled business solutions, $4.9 million and $13.8 million related to professional services and $4.2 million and $11.0 million for medical practice management services, respectively.
Current wording
*Net Revenue.*Net revenue of $27.6 million for the three months ended March 31, 2025 increased by $1.7 millionor 6% from net revenue of$26.0 millionfor the three months ended March 31, 2024. Revenue for the three months ended March 31, 2025 includes $17.7 million relating to technology-enabled business solutions, $5.9 million related to professional services and $3.0 million for medical practice management services, respectively.
Previous wording
*Selling and Marketing Expense.*Selling and marketing expense of $1.4 million and $4.8 million for the three and nine months ended September 30, 2024, respectively, decreased by $962,000 or 41% and $2.7 million or 36% from selling and marketing expense of $2.3 million and $7.5 million for the three and nine months ended September 30, 2023, respectively. The decrease for the three and nine months ended September 30, 2024 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 for the three months ended March 31, 2025 decreased by $639,000 or 36% from selling and marketing expense of $1.8 million for the three months ended March 31, 2024. The decrease for the three months ended March 31, 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 $12.1 million for the three and nine months ended September 30, 2024, respectively, decreased by $1.1 million or 20% and $4.4 million or 27% compared to general and administrative expense of $5.5 million and $16.5 million for the three and nine months ended September 30, 2023, respectively. During the three and nine months ended September 30, 2024, salary costs decreased by $823,000 and $3.0 million, respectively and legal and professional fees decreased by $105,000 and $564,000, respectively. The decrease in salary costs was due to lower headcount. Also, there was a decrease in the Company’s contributions to community-based projects in Pakistan.
Current wording
*General and Administrative Expense.*General and administrative expense of $4.3 million for the three months ended March 31, 2025 increased by$611,000 or 16% compared to general and administrative expense of $3.7 million for the three months ended March 31, 2024. During the three months ended March 31, 2025, salary costs increased by $1.0 millionand legal and professional fees decreased by $418,000, respectively.
Previous wording
*Depreciation Expense.*Depreciation expense of $504,000 and $1.5 million for the three and nine months ended September 30, 2024, respectively, increased by $11,000 and $14,000 from depreciation of $493,000 and $1.5 million for the three and nine months ended September 30, 2023, respectively.
Current wording
*Depreciation Expense.*Depreciation expense of$561,000 for the three months ended March 31, 2025 increased by$58,000 or 12% from depreciation of $503,000 for the three months ended March 31, 2024.
Previous wording
*Amortization Expense.*Amortization expense of $2.7 million and $9.4 million for the three and nine months ended September 30, 2024, respectively, decreased by $673,000 or 20% and increased by $589,000 or 7% from amortization expense of $3.4 million and $8.8 million for the three and nine months ended September 30, 2023, respectively. The increase for the nine months ended September 30, 2024 was due to the placement of additional internal-use software into production and beginning the related amortization. The decrease for the quarter was due to previously acquired customer relationships becoming fully amortized.
Current wording
*Amortization Expense.*Amortization expense of $2.8 million for the three months ended March 31, 2025 decreased by $651,000 or 19% from amortization expense of $3.4 million for the three months ended March 31, 2024. The decrease for the quarter was due to previously acquired customer relationships becoming fully amortized.
Previous wording
*Interest Income.*Interest income of $17,000 and $68,000 for the three and nine months ended September 30, 2024, respectively, decreased by $35,000 and $56,000 from interest income of $52,000 and $124,000 for the three and nine months ended September 30, 2023, respectively. The interest income represents late fees from customers and interest earned on temporary cash investments, which decreased due to less funds being temporarily invested.
Current wording
*Interest Income.*Interest income of$42,000 for the three months ended March 31, 2025 increased by$15,000 from interest income of $27,000 for the three months ended March 31, 2024. 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 $179,000 and $832,000 for the three and nine months ended September 30, 2024, respectively, decreased by $173,000 and increased by $3,000 from interest expense of $352,000 and $829,000 for the three and nine months ended September 30, 2023, respectively. Interest expense on the line of credit was $624,000 and $618,000 during the nine months ended September 30, 2024 and 2023, respectively.
Current wording
*Interest Expense.*Interest expense of $58,000 for the three months ended March 31, 2025 decreased by $307,000 from interest expense of $365,000 for the three months ended March 31, 2024. Interest expense on the line of credit was $13,000 and $289,000 during the three months ended March 31, 2025 and 2024, respectively.
Previous wording
*Other Income (Expense) – net.*Other income – net was $60,000 and other expense – net was $227,000 for the three and nine months ended September 30, 2024, respectively, compared to other expense – net of $422,000 and $591,000 for the three and nine months ended September 30, 2023, 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 $14,000 for the three months ended March 31, 2025 compared to other income – net of $7,000 for the three months ended March 31, 2024. 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 $41,000 and $119,000 for the three and nine months ended September 30, 2024, respectively, compared to the provision for income taxes of $57,000 and $204,000 for the three and nine months ended September 30, 2023, respectively. As a result of the Company having certain net operating losses with an indefinite life under the federal and state tax rules, the federal and state deferred tax liability was offset against the net operating loss to the extent allowable in 2023. There were no deferred income taxes for the nine months ended September 30, 2024.
Current wording
*Income Tax Provision.*The provision for income taxes was$41,000 for the three months ended March 31, 2025 compared to the provision for income taxes of $39,000 for the three months ended March 31, 2024. As a result of the Company having certain net operating losses with an indefinite life under the federal and state tax rules, the federal and state deferred tax liability was offset against the net operating loss to the extent allowable in 2023. There were no deferred income taxes for the three months ended March 31, 2025 and 2024.
Previous wording
The current income tax expense for the three and nine months ended September 30, 2024 was approximately $41,000 and $119,000, respectively, which represents state minimum taxes and foreign income taxes. The Company has incurred cumulative losses historically and there is uncertainty regarding 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 September 30, 2024 and December 31, 2023.
Current wording
The current income tax expense for the three months ended March 31, 2025 of $41,000 represents state minimum taxes and foreign income taxes. The Company has incurred cumulative losses historically and there is uncertainty regarding 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 March 31, 2025 and December 31, 2024.
Previous wording
As of September 30, 2024, the Company had total cash of $2.8 million and net working capital of $732,000. For the nine months ended September 30, 2024, cash provided by operations was $15.4 million offset by cash used in investing and financing activities of $15.8 million resulting in a decrease in cash of $549,000 after accounting for the effect of $140,000 of exchange rate changes. As of September 30, 2024, there were no borrowings under the credit facility as the Company fully repaid the outstanding $10.0 million balance during the nine months ended September 30, 2024.
Current wording
As of March 31, 2025, the Company had total cash of$6.8 millionand net working capital of $11.7 million. For the three months ended March 31, 2025, cash provided by operations was $5.1 million offset by cash used in investing and financing activities of $3.4 million resulting in an increase in cash of $1.7 million after accounting for the effect of $11,000 of exchange rate changes. As of March 31, 2025, there were no borrowings under the credit facility as compared to $9.0 million outstanding on the line of credit as of March 31, 2024.
Previous wording
However, management has considered its plans to continue the Company as a going concern and believes substantial doubt was alleviated by focusing on cost-control. Management developed a plan that was substantially implemented during fiscal 2023 to improve liquidity in its operations through reductions in payroll and operating expenses. After the reductions are implemented and through employee attrition, the Company expects an improvement of approximately $22.0 million in annualized cost savings, of which approximately $16.0 million will be realized during 2024. The Company also suspended its Preferred Stock dividends in December 2023 resulting in cash savings of $1.3 million per month through September 11, 2024 and approximately $1.1 million per month thereafter. Additional headcount reductions occurred in 2024 and further cost reductions will continue throughout the year. As of September 30, 2024, the Company’s outstanding line of credit was fully repaid. The Company continues to be focused on reducing costs, returning to profitability, generating positive cash flow and maintaining compliance with its debt covenants. Although there are no guarantees that the Company will be successful, it believes that such initiatives will enable it to continue as a going concern through at least the next twelve months.
Current wording
In fiscal year 2024, the Company recorded net income of $7.9 million compared to $48.7 million of net loss in fiscal year 2023. 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.
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 had been increasing through 2023 but has decreased slightly in 2024.
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 the prime rate which had been increasing through 2023, decreased slightly in 2024 and has remained consistent during 2025.
Previous wording
The Company has a revolving line of credit, and as of September 30, 2024, there were no borrowings under the credit facility. During October 2024, the credit line was reduced to $10 million, which is the current unused borrowing base.
Current wording
The Company has a revolving line of credit, and as of March 31, 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 $10 million.
Previous wording
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. The loss before income taxes was $2.7 million and $4.8 million for the three and nine months ended September 30, 2023, respectively, which included $3.9 million and $10.3 million of non-cash depreciation and amortization, respectively.
Current wording
The income before income taxes was$2.0 millionfor the three months ended March 31, 2025 which included$3.3 millionof non-cash depreciation and amortization. The loss before income taxes was $202,000 for the three months ended March 31, 2024 which included $3.9 million of non-cash depreciation and amortization.
Previous wording
Net cash provided by operating activities was $15.4 million and $11.7 million during the nine months ended September 30, 2024 and 2023, respectively. This increase was primarily the result of the decrease in the net loss of $9.5 million which included the following changes in non-cash items: an increase in depreciation and amortization of $466,000 offset by a net decrease in stock-based compensation of $4.0 million. Accounts receivable increased $388,000 for the nine months ended September 30, 2024, compared with a decrease of $1.9 million for the nine months ended September 30, 2023. Accounts payable, accrued compensation and accrued expenses decreased by $2.2 million and $2.3 million during the nine months ended September 30, 2024 and 2023, respectively. The contract asset decreased by $477,000 during the nine months ended September 30, 2024 compared to an increase of $549,000 in the prior period.
Current wording
Net cash provided by operating activitieswas $5.1 millionand $4.1 million during the three months ended March 31, 2025 and 2024, respectively. This increase was primarily the result of the increase in the net income of$2.2 million which included the following changes in non-cash items: a decrease in depreciation and amortization of$613,000 offset by a netincrease in stock-based compensationof $816,000. Accounts receivable increased$1.2 million for the three months ended March 31, 2025, compared with an increase of $111,000 for the three months ended March 31, 2024. Accounts payable, accrued compensation and accrued expenses increased by$956,000 and $721,000 during the three months ended March 31, 2025 and 2024, respectively. The contract asset increased by $105,000 during the three months ended March 31, 2025 compared to an increase of$361,000 in the prior period.
Previous wording
Net cash used in investing activities was $5.1 million and $9.3 million for the nine months ended September 30, 2024 and 2023, respectively. Capital expenditures were $759,000 and $2.7 million for the nine months ended September 30, 2024 and 2023, respectively. The capital expenditures for the nine months ended September 30, 2024 and 2023 primarily represented computer equipment purchased and leasehold improvements for the Pakistan Offices. Software development costs of $4.4 million and $6.6 million for the nine months ended September 30, 2024 and 2023, 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$1.5 millionand$1.9 millionfor the three months ended March 31, 2025 and 2024, respectively. Capital expenditures were$624,000 and $298,000 for the three months ended March 31, 2025 and 2024, respectively. The capital expenditures for the three months ended March 31, 2025 and 2024 primarily represented computer equipment purchased and leasehold improvements for the Pakistan Offices. Software development costs of$846,000 and $1.6 million for the three months ended March 31, 2025 and 2024, respectively, were capitalized in connection with the development of software for providing technology-enabled business solutions.
Previous wording
Net cash used in financing activities was $10.7 million and $8.4 million during the nine months ended September 30, 2024 and 2023, respectively. 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. Cash used in financing activities during the nine months ended September 30, 2023 included $11.7 million of preferred stock dividends, $717,000 of repayments for debt obligations and $1.4 million of tax withholding obligations paid in connection with stock awards issued to employees offset by $1.4 million of proceeds from the issuance of Series B Preferred Stock. Repayments and net proceeds on the line of credit were $10.0 million and $4.0 million for the nine months ended September 30, 2024 and 2023, respectively.
Current wording
Net cash used in financing activities was $1.9 million and $1.4 million during the three months ended March 31, 2025 and 2024, respectively. Cash used in financing activities during the three months ended March 31, 2025 included $1.7 million of preferred stock dividends, $181,000 of repayments for debt obligations and $21,000 of tax withholding obligations paid in connection with stock awards issued to employees. Cash used in financing activities during the three months ended March 31, 2024 included $223,000 of repayments for debt obligations and $151,000 of tax withholding obligations paid in connection with stock awards issued to employees. Repayments on the line of credit were $1.0 million for the three months ended March 31, 2024.
Previous wording
We have contractual obligations under our line of credit. We were in compliance with all covenants as of September 30, 2024. We also maintain operating leases for property and certain office equipment. For additional information, see Contractual Obligations and Commitments under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 21, 2024.
Current wording
We have contractual obligations under our line of credit. We were in compliance with all covenants as of March 31, 2025. We also maintain operating leases for property and certain office equipment. For additional information, see Contractual Obligations and Commitments under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2024, filed with the SEC on April 3, 2025.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
*Restructuring Costs.*There were $114,000 and $322,000 of restructuring costs for the three months ended March 31, 2025 and 2024, respectively. Restructuring costs primarily consists of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements.