CareCloud, Inc.: Form 10-Q for the period ended Sep 30, 2025

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

Some of the statements set forth in this section are forward-looking statements relating to our future results of operations. Our actual results may vary from the results anticipated by these statements. Please see “Forward-Looking Statements” on page 2 of this Quarterly Report on Form 10-Q.

Financial Risks

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

Overview

The Company is a healthcare information technology company that provides 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. Our integrated Software-as-a-Service (“SaaS”) platform includes revenue cycle management (“RCM”), practice management (“PM”), electronic health records (“EHR”), business intelligence, telehealth, patient experience management (“PXM”) solutions and complementary software tools and business services for high-performance medical groups and health systems. The Company also offers printing and mailing and group purchasing services.

Our technology-enabled business solutions can be categorized as follows:

• Technology-enabled revenue cycle management:
• Revenue Cycle Management services including end-to-end medical billing, eligibility, analytics, and related services, all of which can be provided utilizing our technology platform and robotic process automation tools or leveraging a third-party system;
• Medical coding and credentialing services to improve provider collections, back-end cost containment, and drive total revenue realization for our healthcare clients; and
• Healthcare claims clearinghouse which enables our clients to electronically scrub and submit claims and process payments from insurance companies.
• Cloud-based software:
• Electronic Health Records designed for ambulatory and inpatient care environments, which are user-friendly and integrated with our business services, and enable our healthcare provider clients to enhance patient care delivery, optimize clinical workflows, reduce documentation errors and potentially qualify for government incentives;
• Practice Management software and related capabilities for both ambulatory and inpatient care settings, which support our clients' day-to-day business operations and financial workflows, including automated insurance eligibility verification, a robust billing and claims rules engine and other automated tools designed to maximize reimbursement;
• Healthline, which is a medical inventory management system built for healthcare settings that enables real-time tracking of supplies, equipment and consumables across multiple locations such as exam rooms, ambulances and storage closets;
• Marketware, which offers a comprehensive physician strategy suite designed to support healthcare organizations in optimizing physician relationship management, streamlining recruitment and onboarding processes, and leveraging performance analytics. The platform consolidates critical data to enhance referral volume, strengthen provider engagement and drive strategic organizational growth;
• Artificial intelligence (“AI”):
• CareCloud cirrusAI is designed to serve as a digital healthcare assistant, helping to enhance clinical decision-making, streamline workflows, reduce administrative burdens, optimize revenue management, and promote patient-centered care. The functions include:
• AI-Powered Ambient Listening: cirrusAI Notes seamlessly captures natural patient-provider conversations in the exam room in real-time, automatically generating and integrating clinical encounter documentation directly into the EHR. Powered by cutting-edge Healthcare Generative AI, it alleviates documentation burdens, saving providers 20% more time per day to focus on delivering exceptional patient care.
• AI-Powered Call Auditing: cirrusAI Voice listens to recorded calls in healthcare facilities, evaluates agents’ performance against pre-defined KPIs, and assigns scores to each agent. With detailed insights into agent performance, healthcare managers can identify strengths and areas for improvement, enabling targeted training and development. By ensuring higher-quality interactions, this service empowers healthcare call centers to deliver superior patient care, enhance operational efficiency, and drive continuous improvement in service delivery.
• AI-Powered Clinical Decision Support: CareCloud cirrusAI Guide automates clinical data input, and assists clinicians in workflow tasks, providing real-time, evidence-based recommendations and personalized suggestions via Vertex AI’s generative AI tools for providers to consider. This innovation can lead to enhanced diagnosis accuracy and treatment planning.
• AI-Powered Virtual Support Assistant: CareCloud cirrusAI Chat facilitates natural language conversations with practice staff members, offering valuable assistance in navigating CareCloud Electronic Health Records workflows. This tool streamlines post-training and onboarding for new staff, reducing response times and providing real-time assistance, ultimately saving time.
• AI-Driven Appeals: CareCloud cirrusAI Appeals generates customized appeal letters by analyzing patient claim details, the appeal’s reason, and the specific payor involved for healthcare workers to review, edit, and send. This functionality supports CareCloud’s RCM teams in optimizing providers’ RCM and securing proper reimbursement.
• CareCloud cirrusAI integrates with CareCloud’s EHR solutions, talkEHR and CareCloud Charts, making it easily accessible to providers of all sizes.
• Patient Experience Management solutions designed to transform interactions between patients and their clinicians, including smartphone applications that assist patients and healthcare providers in the provision of healthcare services, contactless digital check-in solutions, messaging, and online appointment scheduling tools;
• Business Intelligence (“BI”) and healthcare analytics platforms that allow our clients to derive actionable insights from their vast amount of data; and
• Customized applications, interfaces, and a variety of other technology solutions that support our healthcare clients.
• Digital health:
• Chronic care management is a program that supports care for patients with chronic conditions by certified care managers that operate under the supervision of the patient’s regular physician;
• Remote patient monitoring enables patient data collected outside the clinical setting through remote devices to be fed into their provider’s EHR to enable proactive patient care; and
• Telemedicine solutions which allow healthcare providers to conduct remote patient visits and extend the timely delivery of care to patients unable to travel to a provider’s office.
• Healthcare IT professional services & staffing:
• Professional services consisting of a broad range of consulting services including full software implementations and activation, revenue cycle optimization, data analytic services, and educational training services;
• Strategic advisory services to manage system evaluations and selection, provide interim management, and operational assessments; and
• Workforce augmentation and on-demand staffing to support our clients as they expand their businesses, seek highly trained personnel, or struggle to address staffing shortages.

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Our medical practice management solutions include:

• Medical practice management:
• Medical practice management services for medical providers, including facilities, equipment, supplies, support services, nurses, and administrative support staff.

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

Our offshore operations in the Pakistan Offices and Sri Lanka together accounted for approximately 17% and 15% of total expenses for the nine months ended September 30, 2025 and 2024, respectively. A significant portion of those foreign expenses were personnel-related costs (approximately 77% and 75% for the nine months ended September 30, 2025 and 2024, respectively). Because personnel-related costs are significantly lower in Pakistan and Sri Lanka than in the U.S. and many other offshore locations, we believe our offshore operations give us a competitive advantage over many industry participants. We are able to achieve significant cost reductions and leverage technology to reduce manual work and strategically transition a portion of the remaining manual tasks to our highly-specialized, cost-efficient team in the U.S., the Pakistan Offices and Sri Lanka.

Key Performance Measures

We consider numerous factors in assessing our performance. Key performance measures used by management, including adjusted EBITDA, adjusted operating income, adjusted operating margin, adjusted net income and adjusted net income per share, are non-GAAP financial measures, which we believe better enable management and investors to analyze and compare the underlying business results from period to period.

These non-GAAP financial measures should not be considered in isolation, or as a substitute for or superior to, financial measures calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of our business as determined in accordance with GAAP. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis, and we provide reconciliations from the most directly comparable GAAP financial measures to the non-GAAP financial measures. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

Adjusted EBITDA, adjusted operating income, adjusted operating margin, adjusted net income and adjusted net income per share provide an alternative view of performance used by management and we believe that an investor’s understanding of our performance is enhanced by disclosing these adjusted performance measures.

Adjusted EBITDA excludes the following elements which are included in GAAP net income:

• Income tax provision or the cash requirements to pay our taxes;
• Interest expense, or the cash requirements necessary to service interest on principal payments, on our debt;
• Foreign currency gains and losses and other non-operating expenditures;
• Stock-based compensation expense (benefit) which includes cash-settled awards and the related taxes;
• Depreciation and amortization charges;
• Integration costs, such as severance amounts paid to employees from acquired businesses, and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; and
• Restructuring costs.

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

($ in thousands)

Adjusted operating income and adjusted operating margin exclude the following elements that are included in GAAP operating income:

• Stock-based compensation expense (benefit) which includes cash-settled awards and the related taxes;
• Amortization of purchased intangible assets;
• Integration costs, such as severance amounts paid to employees from acquired businesses, and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; and
• Restructuring costs.

Set forth below is a presentation of our adjusted operating income and adjusted operating margin, which represents adjusted operating income as a percentage of net revenue for the three and nine months ended September 30, 2025 and 2024:

($ in thousands)

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Adjusted net income and adjusted net income per share exclude the following elements which are included in GAAP net income:

• Foreign currency gains and losses and other non-operating expenditures;
• Stock-based compensation expense (benefit) which includes cash-settled awards and the related taxes;
• Amortization of purchased intangible assets;
• Integration costs, such as severance amounts paid to employees from acquired businesses, and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; and
• Restructuring costs.

No tax effect has been provided in computing non-GAAP adjusted net income and non-GAAP adjusted net income per share as the Company has sufficient carry forward net operating losses to offset the applicable income taxes. The following table shows our reconciliation of GAAP net income to non-GAAP adjusted net income for the three and nine months ended September 30, 2025 and 2024:

($ in thousands)

Set forth below is a reconciliation of our GAAP net income attributable to common shareholders, per share to our non-GAAP adjusted net income per share:

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, 2025 and 2024. Non-GAAP adjusted earnings per share does not take into account dividends declared or earned on preferred stock.

Key Metrics

In addition to the line items in our condensed consolidated financial statements, we regularly review the following metrics. We believe information on these metrics is useful for investors to understand the underlying trends in our business.

Providers and Practices Served: As of both September 30, 2025 and 2024, we provided services to approximately 45,000 providers (which we define as physicians, nurses, nurse practitioners, physician assistants and other clinical staff that render bills for their services), representing approximately 3,400 independent medical practices and hospitals. The foregoing numbers include clients leveraging any of our products or services and are based in part upon estimates in cases where the precise number of practices or providers is unknown.

Sources of Revenue

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

We earned approximately 14% and 12% of our revenue from medical practice management services during the three and nine months ended September 30, 2025, respectively, and approximately 15% and 13% of revenue during the three and nine months ended September 30, 2024, respectively. This revenue represents fees based on our actual costs plus a percentage of the operating profit and is reported in our Medical Practice Management segment.

Operating Expenses

Direct Operating Costs. Direct operating cost consists primarily of salaries and benefits related to personnel who provide services to our customers, claims processing costs, costs to operate the three managed practices, including facility lease costs, supplies, insurance and other direct costs related to our services. Costs associated with the implementation of new customers are expensed as incurred. The reported amounts of direct operating costs do not include depreciation and amortization, which are broken out separately in the condensed consolidated statements of operations.

Selling and Marketing Expense. Selling and marketing expense consists primarily of compensation and benefits, commissions, travel and advertising expenses.

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.

Research and Development Expense. Research and development expense consists primarily of personnel-related costs, software expense and third-party contractor costs.

Depreciation and Amortization Expense. Depreciation expense is charged using the straight-line method over the estimated lives of the assets ranging from three to five years. Amortization expense is charged on either an accelerated or on a straight-line basis over a period of three or four years for most intangible assets acquired in connection with acquisitions including those intangibles related to the group purchasing services. Amortization expense related to the value of our medical practice management clients is amortized on a straight-line basis over a period of twelve years.

Restructuring Costs. Restructuring costs primarily consists of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements.

Interest and Other Income (Expense) - net. Interest income represents interest earned on temporary cash investments and late fees from customers. Interest expense consists primarily of interest costs related to our line of credit, term loans and the amortization of deferred financing costs. Other income (expense) - net results primarily from foreign currency transaction gains/(losses).

Income Taxes. In preparing our condensed consolidated financial statements, we estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred income tax assets and liabilities. Although the Company has returned to profitability, it incurred losses historically and there is uncertainty regarding sufficient future U.S. taxable income, which makes realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against all deferred tax assets as of September 30, 2025 and December 31, 2024.

Critical Accounting Policies and Estimates

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 Consolidated Financial Statements included in our Annual Report on Form 10-K/A for the year ended December 31, 2024.

Capitalized Software Costs:

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

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.

Results of Operations

The following table sets forth our consolidated results of operations as a percentage of total revenue for the periods shown:

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

($ in thousands)

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

During the three and nine month ended September 30, 2025 there was approximately $3.4 million revenue related to the Medsphere acquisition. There was approximately a $711,000 decrease and a $343,000 increase in professional services revenue for the three and nine months ended September 30, 2025, respectively, compared to the same period in the prior year.

($ in thousands)

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

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

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

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

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

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

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

($ in thousands)

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

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

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

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

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

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

Liquidity and Capital Resources

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

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

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

Management continues to focus on the Company’s overall profitability, including managing expenses, and to the extent possible growing revenue, and expects that these efforts will continue to enhance our liquidity and financial position. Based on management’s forecasts, the Company will have sufficient liquidity to meet its obligations as they become due for the next twelve months from the date of the financial statements’ issuance.

We have not been adversely affected by inflation as typically we receive a percentage of the fees our clients collect from our revenue cycle management services. Additionally, our medical practice management contracts are based on our costs plus a percentage of the medical practice’s operating income. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. In the event of inflation, we believe that we will be able to pass on any price increases for fixed rate contracts to our customers, as the prices that we charge are not governed by long-term contracts. The interest rate on our line of credit is based on a published interest rate which decreased slightly in 2024 and 2025.

The following table summarizes our cash flows for the periods presented:

($ in thousands)

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

Operating Activities

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

Investing Activities

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

Financing Activities

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

Contractual Obligations and Commitments

We have contractual obligations under our line of credit. We were in compliance with all covenants as of September 30, 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.

Off-Balance Sheet Arrangements

As of September 30, 2025, and 2024, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special-purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

On December 11, 2023, the Board of Directors suspended the monthly cash dividends for Series A Preferred Stock and Series B Preferred Stock beginning with the payment scheduled for December 15, 2023 together with the remaining dividends that were declared. Effective in September 2024, there was a change in the dividend rate on the Series A Preferred Stock from 11.00% to 8.75%. Due to the conversion of the majority of the Series A Preferred Stock in March 2025, the dividend amount due on the converted shares resulting from the suspension was settled. During February 2025 and continuing monthly thereafter, the Company resumed payment of the dividends, paying one month of dividends in arrears each month based on the oldest dividend amount outstanding. As a result of such suspension, as of the filing date of this Quarterly Report, the Company has approximately $7.0 million of dividends in arrears. During this suspension, dividends continued to accumulate in arrears on the remaining Series A and Series B Preferred Stock. See discussion of preferred stock dividend suspension in “Note 12, Shareholders’ Equity” of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Co-Chief Executive Officers and Interim Chief Financial Officer, based on the Internal Control-Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2025 as required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures, as of September 30, 2025, our Co-Chief Executive Officers and Interim Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective. We will continue to improve the controls to ensure that information required to be disclosed by the Company in reports that it files under the Exchange Act is reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and l5d-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

For the year ending December 31, 2025, the Company will be required to have an attestation by its independent registered public accounting firm regarding the effectiveness of its internal controls over financial reporting. Additionally, for the year ending December 31, 2025, the Company will become an accelerated filer.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I—Item 1A. “Risk Factors” in our Annual Report on Form 10-K/A filed with the SEC on April 3, 2025, which could materially affect our business, financial condition and/or future results. The risks described in our Annual Report on Form 10-K/A are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, cash flows and/or future results.

We Maintain Our Cash at Financial Institutions, Often in Balances That Exceed Federally Insured Limits.

The financial markets recently have encountered volatility associated with concerns about the balance sheets of banks, especially small and regional banks who may have significant losses associated with investments that make it difficult to fund demands to withdraw deposits and other liquidity needs. Although the federal government has announced measures to assist these banks and protect depositors, some banks have already been impacted and others may be materially and adversely impacted. Our business is dependent on bank relationships and we are proactively monitoring the financial health of such bank relationships. Continued strain on the banking system may adversely impact our business, financial condition and results of operations.